/ 5 August 2008

JSE in the black as resources recover

After a weaker start to the session, the JSE turned around and was in positive territory by noon on Tuesday. Traders said that the JSE was volatile, but had turned around after resources started to look oversold and global markets started moving higher.

By noon, the all share index was 1,53% higher, with resources up 1,04% and platinum miners 1,75% better. However, gold miners still lagged, with the index off 0,53% as the bullion price remained under pressure.

Industrials were 2,29% better and financials advanced 1,41%, but banks were off 0,55%.

The rand was bid at 7,35 to the US dollar from 7,24 when the JSE closed on Monday, while gold was quoted at $883,87 a troy ounce from $905,50/oz at the JSE’s last close. Platinum was last at $1 542/oz, down $13,50/oz from its overnight close.

”The JSE has been extremely volatile. We were driven over the past couple of days by the resources, and already they are looking oversold. What we saw was a major pullback in resources, and at current levels you are bound to see support coming in, even if it just means a short-term rally for now,” said a local equities trader.

He added there was a ”hint of support” coming from global markets, with Dow futures up around 70 points. ”Lower oil prices actually means good news for the markets, although it may reflect a slowdown in growth. But the fact is the oil price is coming back into a more normal area.

”We might see a bit of support from overseas markets starting to move up, then we will follow,” he added.

The weaker rand was also lending support to resources and mining stocks. The local unit has moved back above the 7,30 level after its recent strong run.

Dow Jones Newswires reports that crude oil futures fell more than $3 in early London trade on Tuesday as concerns that demand is eroding amid an economic slowdown fuelled increasingly bearish market sentiment.

Any support gleaned from the presence of Tropical Storm Edouard in the Gulf of Mexico faltered on Tuesday as the weather pattern looked set to exert minimal disruption on the region’s oil and gas producing facilities.

And tensions between Iran and the major powers over Tehran’s nuclear enrichment programme also failed to staunch crude’s fall, with the market seemingly focusing squarely on demand.

”It seems that the market is losing interest in geopolitical and weather-induced ‘props’, and instead is becoming more aware of growing supply/demand imbalances,” said Edward Meir, analyst at MF Global in New York. ”On the demand side, energy participants are sensing that the global growth picture is deteriorating rapidly, and is now no longer confined solely to the US.”

US stock futures gained on Tuesday as oil prices continued to drop, with no change in rates — and possibly on outlook — expected from the Federal Reserve.

S&P 500 futures rose 8,9 points to 1 257,70 and Nasdaq 100 futures added 15,5 points to 1 827,25. Dow industrial futures rose 69 points, Dow Jones Newswires reported.

Among JSE resource stocks, Anglo American was up R10, or 2,65%, to R387 and BHP Billiton advanced eight cents to R221.

Sasol added R1,80 to R375,80.

Platinum miner Anglo Platinum was up R11,98, or 1,38%, to R876,98 and Impala Platinum collected R4,01, or 1,98%, to R207,01.

Among gold miners, AngloGold Ashanti was off R1,51 to R225 and Harmony lost R2,81, or 3,91% to R68,99. Gold Fields, which suffered sharp losses of around 11% on Monday, was up R1,70, or 2,4%, at R72.

Among industrials, SABMiller added R7,50, or 4,9%, to R160 and Tiger Brands was up R4,40, or 3,01%, to R150,35.

Bidvest advanced R2,45, or 2,44%, to R102,70.

Among banks, Nedbank was up R1,20, or 1,17%, to R104,20 but Standard Bank was down 50 cents to R86,51 and Absa was down 11 cents at R101,79.

In the news, short-term insurer Mutual & Federal was down 50 cents, or 3,23%, to R15. Earlier it reported diluted headline earnings per share of 55 cents for the six months ended June from 178 cents a year ago.

In addition, the company said it had been informed by Old Mutual of its intention to initiate a competitive sale process in September 2008 to dispose of its entire shareholding in the company.

Also in the news, shares in fleet management and vehicle tracking company Digicore Holdings rose 13% after the company released a trading update saying its earnings are expected to be higher.

Digicore’s shares were quoted at 680 cents, up 79 cents, or 13,14%, from the previous close. The company said its headlines earnings per share for the 12 months ended June 2008 are expected to be between 40% and 50% higher than the HEPS of 44,1 cents per share for the same period in 2007.

Shares in waste management company Enviroserv rose R1,80 rand, or 12,7%, to R16, after Absa Capital Private Equity announced it is to buy the entire share capital of EnviroServ Holdings in a private equity deal worth over two billion rand. Absa has made an offer of R16,60 per share to the board of directors of EnviroServ to acquire the entire 113,4-million issued share capital of the company. – I-Net Bridge