Stock market leaps on China rate-cut surprise

SOUTH African share prices soared more than 3% on Friday, led by mining and tracking global markets after China, a major commodity consumer, cut interest rates to spur growth.

The main listed indices had their highest jump in almost three years after China surprised markets with its first rate cut in two years.

Iron-ore producer Assore rose 10.8%, despite a struggling price for its commodity, while larger rival Kumba Iron Ore rose 8%.

“The resource sector is rallying quite a bit on the news. The industry is very dependent on demand out of the east, especially out of China,” said Bernhard Grobler, Investec stockbroking head.

The benchmark Top 40 index rose 3.51% to 45 210, with all shares ending in the blue.

The broader All Share index climbed 3.15% to 50 821.

The index of mining companies rose 5.7%, while the platinum index shot up 6.9%. Impala Platinum gained 9% and larger rival Anglo American Platinum 6.25%.

Drug maker Adcock Ingram rose 7% to R53 after it reported a R50-million after-tax profit in the September quarter.

Trade was active with 252 million shares changing hands, according to preliminary bourse data, outpacing last year’s daily average of 176 million shares.

World stock markets and oil prices also rallied, fuelled by hopes for global growth after China’s surprise rate cut and as the European Central Bank indicated it would step up its asset purchases to boost the eurozone economy. The jump in oil prices took Brent above $80 a barrel. US interest rates were little changed as the dollar gained, and the euro declined.

“To the extent that you [have] duelling positive monetary policy statements in two places that we were concerned about a slowdown in economic growth, that’s very good,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

In early trade, the Dow Jones industrial average rose 0.97% to 17 890.81, the S&P 500 gained 0.91% to 2 071.39 and the Nasdaq Composite added 0.87%, to 4 742.84.

European shares, oil and other growth-sensitive commodities all leapt on China’s move to cut rates to 5.6% after a recent string of figures that showed its giant economy was heading for its worst year in almost quarter of a century.

Its rate reduction came as ECB head Mario Draghi spoke of his determination to take more aggressive steps to ensure the eurozone does not slump into a new crisis.

Germany’s DAX, France’s CAC and the FTSE Eurofirst 300 were all up 2%-3% by 2.30pm GMT.

The MSCI World Equity index, which tracks shares in 45 countries, was up 0.85%.

Brent was last up $1.03 to $80.38 a barrel as it surged towards its first weekly rise since mid-September.

Copper and gold also got a lift, with the copper up 1% and spot gold climbing back over $1 200 to $1 204.20/oz as traders cheered the prospect for more global stimulus. —