US stocks ended little changed on Monday, with indexes hovering near record levels as concerns about a correction cut earlier gains that had been prompted by news about a flurry of acquisitions.

New York - United States stocks ended little changed on Monday, with indexes hovering near record levels as concerns about a correction cut earlier gains that had been prompted by news about a flurry of acquisitions.

The Dow and the S&P 500 briefly hit all-time intraday highs.

Early in the session, investors' sentiment was brightened by a slew of deal news, including Yahoo’s acquisition of Tumblr.

Among the day's top gainers were solar companies after shares of JA Solar Holdings soared following an unexpected rise in revenue and a quarterly loss that was far smaller than expected.

Energy stocks were the day's top gainers in the S&P 500 while consumer staples were the biggest underperformers. The S&P energy sector index rose 1.3 percent. In contrast, the S&P consumer staples index fell 1 percent.

Earlier, the Dow climbed to an all-time intraday high at 15,391.84, while the S&P 500 edged up to a new intraday record high at 1,672.84. Both major indexes are up about 17 percent for the year so far.

“Today is definitely a slow period in terms of news or economic data, and there isn't a catalyst to really move higher or lower,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

“There are people scared by the sharpness and the length of this rally, which is totally understandable. But there are still those who are afraid to not invest and miss the rally.”

The S&P 500 is up nearly 1,000 points from its low in March 2009. And more than 38 percent of the stocks hit a 52-week high within the S&P 500 last week - the highest percentage since at least 1990.

The Dow Jones industrial average slipped 19.12 points, or 0.12 percent, to 15,335.28 at the close. The Standard & Poor's 500 Index shed 1.18 points, or 0.07 percent, to finish at 1,666.29. The Nasdaq Composite Index declined 2.53 points, or 0.07 percent, to end at 3,496.43.

Earlier, the Nasdaq touched a fresh 52-week intraday high at 3,509.41.

Yahoo Inc will buy blogging service Tumblr for $1.1-billion cash, giving the Internet pioneer a much needed social media platform to reach a younger generation of users and breathe new life into its ailing brand. Yahoo shares rose 0.2 percent to $26.58.

Shares of JA Solar jumped 70.4 percent to $9.56. It focus on margins over volume paid off as the Chinese solar products maker halved its operating loss in the first quarter by selling more panels in high-margin Japan.

Other solar companies' shares such as China Sunergy surged 50 percent to $2.52 and LDK Solar Co Ltd shot up 20.4 percent to $1.83. Yingli Green Energy Holdings climbed 13.1 percent to $3.10.

In other deal news, Actavis rose 1.3 percent to $127.15 after the company said it will acquire Warner Chilcott in a stock-for-stock transaction valued at $5 billion. Warner Chilcott gained 2 percent to $19.60.

Freeport-McMoRan Copper & Gold and Plains Exploration & Production said they would pay shareholders more in dividends if they approved Freeport's roughly $6 billion takeover offer for Plains. Plains shares leaped 7.4 percent to $48.94, while Freeport's stock gained 0.6 percent to $32.88.

Wall Street got more feedback from the Fed on Monday with some comments from Charles Evans, the president of the Federal Reserve Bank of Chicago. Evans said the US Federal Reserve could keep up its current level of bond-buying stimulus, but could end it abruptly in the autumn if by then it was sure that the labour market was on a solid footing.

Investors will get more comments from the Fed when Chairman Ben Bernanke testifies before a congressional committee on Wednesday.

The beginning of the end of the Fed's massive bond-buying program, which has given strong support to stock gains, might come sooner than many investors think if recent gains in the US labour market hold.

The Fed will also release minutes from its most recent policy-setting meeting on Wednesday. The minutes will be parsed for signs of the Fed's direction on monetary stimulus.

Volume was roughly six billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, slightly lower than the year-to-date average daily closing volume of about 6.34 billion.

Advancers outnumbered decliners on the NYSE by a ratio of 17 to 13. On the Nasdaq, nearly 14 stocks rose for every 11 that fell. - Reuters

The price of oil rose on Monday, taking its cue from the stock market and the United States dollar.

New York - The price of oil rose on Monday, taking its cue from the stock market and the dollar.

Benchmark oil for June delivery gained 69 cents to close at $96.71 a barrel on the New York Mercantile Exchange.

Oil moved higher as US stock markets reversed early losses around midday. Although stocks slipped in the afternoon, a weak dollar propped up oil prices.

Since oil is traded in dollars, a weaker dollar makes crude and other commodities more appealing to investors holding other currencies. The euro rose to 1.2897 from $1.2829 on Friday. The dollar fell to 102.29 yen from 103.18 on Friday.

Traders will watch economic reports later in the week for clues about the health of the world's two biggest economies. The US government will release home sales and durable goods orders for April and HSBC will release its monthly survey on China's manufacturing growth.

Analysts are also awaiting testimony on Wednesday from Federal Reserve Chairman Ben Bernanke. Of special interest are any possible hints that the Fed might be preparing to scale back its loose monetary policy because recent data has pointed toward a sustained economic recovery.

Brent crude, a benchmark for many international oil varieties, rose 16 cents to $104.80 a barrel on the ICE Futures exchange in London. - Sapa-AP

The dollar inched higher versus a basket of currencies on Tuesday but stayed below a three-year high.

Singapore - “Will he or won't he?” is the question investors want answered at Wednesday's Congressional testimony by Federal Reserve Chairman Ben Bernanke, as suspense builds on whether the Fed will soon start tapering its bond-buying stimulus scheme - as hinted at by a Fed regional president last week.

The dollar inched higher versus a basket of currencies on Tuesday but stayed below a three-year high, as investors ponder if Bernanke might reveal the timing of any wind-down at his appearance before the Joint Economic Committee before Congress takes its Memorial Day recess.

A start to cutting the bond-buying programme beginning in the northern summer was hinted at by San Francisco Fed President John Williams last week - putting the issue firmly on the economic committee's agenda.

The US dollar index, which measures the greenback's value against a basket of currencies, edged up 0.1 percent to 83.797. On Monday, the dollar index had shed 0.6 percent, retreating from Friday's high of 84.371, its strongest level since July 2010.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 percent.

Australian shares slipped 0.7 percent on profit-taking. In South Korea, the Korea Composite Stock Price Index eased 0.2 percent to 1,978.74, inching away from a closely-watched resistance level.

“The market atmosphere is pretty good, though it is still facing psychological resistance near 2,000 points,” said Kim Young-june, a market analyst at SK Securities.

Japan's Nikkei share average slipped initially as a pause in the yen's weakness spurred profit-taking, but later showed resilience.

The Nikkei touched a 5-1/2 year intraday high as retail investors scooped up underperforming shares, and was last up 0.1 percent on the day.

“Institutional investors are actually rather quiet today. It seems to be more retail-investor-driven today,” said a senior trader at a foreign bank.

Against the yen, the dollar edged up 0.2 percent to 102.47 yen but remained below a 4-1/2-year high of 103.32 yen set on Friday.

Spot gold fell 0.4 percent to $1,388.09. Gold drifted lower on outflows from exchange-traded funds and as the dollar firmed, putting pressure on bullion which has lost nearly a fifth of its value this year.

Brent crude edged up 0.1 percent to $104.86 a barrel.

Global equity markets had mostly pushed higher on Monday, driven up by a flurry of merger and acquisition activity, with MSCI's all-country world equity index touching its highest level since June 2008.

US stocks ended little changed on Monday, but both the US benchmark S&P 500 index and the Dow briefly hit all-time intraday highs. - Reuters

The demands by the National Union of Mineworkers (NUM) of a 60 percent wage increase helped push the rand to a four-year low yesterday, highlighting the ripple effect of the prospect of more turmoil in the mining industry.

Wiseman Khuzwayo

The demands by the National Union of Mineworkers (NUM) of a 60 percent wage increase helped push the rand to a four-year low yesterday, highlighting the ripple effect of the prospect of more turmoil in the mining industry.

At 5pm, the rand was bid at R9.4692 to the dollar, 8.13c weaker than Friday’s bid at the same time.

NUM has adopted a brinkmanship approach in its wage hike demands in the gold and coal sectors, in the hope of bolstering dwindling membership numbers lost to rival Association of Mineworkers and Construction Union (Amcu).

The Chamber of Mines said NUM represented about 65.5 percent of employees within the relevant bargaining categories at AngloGold Ashanti, Gold Fields, Rand Uranium, Harmony, Pan African Resources, Sibanye Gold and Village Main Reef.

“The gold mining industry in particular is contemplating sacking thousands of workers just after the current bargaining season and indications have been made, though not loudly.”

The union said that the demands were submitted to the Chamber of Mines on Friday, and that NUM wanted the entry wage of surface workers raised from the current minimum of R5 000 a month to R7 000 a month, and R8 000 a month for both underground and open-cast mineworkers.

Meanwhile, trade union Solidarity, which represents mostly skilled workers, said yesterday it was seeking a 10 percent pay hike for its members in the gold and coal sectors.

It is now pay back time for the mining companies. Gideon du Plessis, the general secretary of Solidarity, told Reuters there had been a “gentleman’s agreement” that Solidarity’s members would be rewarded for continuing to work last year in difficult circumstances during a wake of violent wildcat strikes by other unions in the industry.

The chamber said: “We appeal to all parties to explore every option in trying to reach settlement without resorting to damaging industrial action, and to reach agreements that will strike a balance between what is affordable to the companies and meets the expectations of the employees. The future of the gold industry is in our collective hands – it is our responsibility to ensure its safety and sustainability.”

Gwede Mantashe, ANC’s secretary-general, said yesterday its national executive committee discussed the state of the trade union movement in the country at the weekend.

It noted that the recent attacks on NUM and the SA Transport and Allied Workers Union is in fact an attack on Cosatu as a federation, and on the congress movement as a whole.

He said: “The ANC resolved to develop a comprehensive programme of engagement with individual unions.

“The officials were directed to engage Cosatu on an ongoing basis.”

The attacks Mantashe was referring to were from splinter groups Amcu and the National Transport Movement.

Amcu has been eating into the membership of the NUM.

But it is difficult to envisage how the ANC would engage with Amcu, which is affiliated to the politically non-aligned National Council of Trade Unions.

It would be even more difficult because Joseph Mathunjwa, the president of Amcu, was expelled from NUM when Mantashe was its general secretary.

Meanwhile, the Commission for Conciliation, Mediation and Arbitration said the conciliation process in the dispute by Amcu against Lonmin on the unions recognition, continued. So far there had been no outcome.

Business Watch, page 16; rand, page21

Ellies has been a favourite among traders and investors since the 2008/09 financial crisis bottom, when it traded around 90c a share.

Colin Abrams

SMALL-CAP electrical stock Ellies has been a favourite among traders and investors since the 2008/09 financial crisis bottom, when it traded around 90c a share. It is now trading around R9.80 a share, and has given a new upside break-out in price

.

Ellies (ELI). New upside breakout.

Recommendation: Buy/add.

Trend: Medium-term sideways to up. Long-term up.

(Daily)

n Ellies recently broke out of a large sideways channel (lines 1 and 2). It is pointing to a higher target still, in a solid long-term uptrend.

n However, the daily stochastic oscillator is overbought (on top), but any pullback when one occurs, will be temporary.

n Buy some at current levels (or add to longer-term holdings). But buy the majority of your position on a minor pullback: to R9.50 or lower.

n The minimum upside target is R11.40: the height of the channel projected up. Lock in partial profits there, but the odds favour it continuing up beyond that to R12 to R14 over the next six to 12 months.

n Medium-term players, place your stop-loss as a weekly (on Friday) close below line 1 (at R8). As a shorter-term trade though, the stop is a close below R8.70.

Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend his courses, please go to www.themarket.co.za

The embattled platinum industry may see a spurt of takeover and merger approaches soon as investors turn up the heat on the bosses to devise other ways to ride out the current crisis.

Dineo Faku

THE embattled platinum industry may see a spurt of takeover and merger approaches soon as investors turn up the heat on the bosses to devise other ways to ride out the current crisis.

With more than a third of platinum mines operating at a loss, consolidation might be what awaits the industry, according to analysts.

Platinum producers are battling stunted demand, soaring costs, fractious labour relations and a wary government, bent on minimising job losses even as companies plead for leeway to ensure their future viability by taking painful restructuring decisions today.

Deal activity could involve purchasing or tie-ups of individual shafts between struggling mines. “We can expect co-operation between neighbours where it makes sense. One example is the royalty agreement between Royal Bafokeng Platinum and Impala Platinum,” said Michael Kavanagh, a mining analyst at Noah Capital.

Suitors from outside the sector were likely to scour the industry for potential takeover targets as they were in a better financial position, analysts said. Those suitors could include Chinese investors and local empowerment mining companies like Exxaro and African Rainbow Minerals (ARM), he added.

But if history is a guide, any whiff of a mega deal in the platinum industry right now would raise concerns in government circles because the industry’s current state makes it more than likely that job cuts would be a feature in any of the deals contemplated.

Competition issues are another hurdle. Back in 1996, a merger attempt between Impala Platinum, the world’s second-biggest platinum producer and Lonmin, the world’s third-biggest platinum producer was shot down by the competition authorities due to fears of over-concentration of supply.

Glencore Xstrata, which has an interest in platinum through its 25 percent stake in Lonmin, could also become a potential suitor, Kavanagh added. However, it was not clear whether the recently merged mining and commodities giant, had the appetite to boost its exposure to platinum.

Kavanagh said recent share slumps indicated that investors were bailing out of the platinum sector, opting instead to sit back until stability returned. “If you put yourself in an investor’s shoes, you have to deal with rising costs, labour issues, and animosity from government,” he said.

Platinum, which has fallen 15 percent so far this year, traded at $1 455 (R13 674.8) an ounce yesterday. In early 2008 it briefly went over $2 000.

Last year, ARM chairman Patrice Motsepe said that the company was positioning itself for acquisitions.

Tyler Broda, an analyst at Nomura, said it was not clear whether Anglo American would consider selling its 80 percent stake in Anglo American Platinum (Amplats), partly because its new chief executive Mark Cutifani had yet to announce his strategy.

Amplats, whose shares have shed about R44 billion in market value so far this year, has been forced by the government to scale down its restructuring, adding to uncertainty about its long-term future.

“There is going to be a full review of [Anglo’s] portfolio, not only Amplats, which could lead to potentially selling off Amplats,” Broda speculated.

The rand hit four-year lows on Monday after the National Union of Mineworkers sought wage hikes of up to 60 percent.

Johannesburg - South Africa's rand hit new four-year lows on Monday after Mercedes-Benz said workers at an assembly plant had staged an illegal strike and a government-allied union demanded big wage hikes for coal and gold miners.

The car maker said workers agreed to resume operations on Tuesday after several days of wildcat action in South Africa's auto industry, centred on the port city of East London.

But news of the halt spurred a currency fall already under way after it emerged that wage hikes of up to 60 percent had been demanded by the National Union of Mineworkers (NUM).

The rand, a highly liquid emerging market currency vulnerable to sudden shifts in sentiment, hit its lowest levels since 2009 in morning trade and then lost another three cents in the late afternoon session to a new four-year low of 9.4875/dollar.

The NUM pay demands in a submission to the Chamber of Mines seen by Reuters on Sunday rattled mining investors after wildcat strikes at platinum and gold mines killed 50 people and cost billions in lost output last year.

Employers and workers are squaring off for next month's salary bargaining period against a backdrop of high inflation and shrinking company margins in Africa's largest economy due to soaring costs and sinking commodity prices.

This is making South Africa vulnerable, said George Glynos, managing director at financial consultancy ETM Analytics.

“Commodity prices are retreating, you have wage negotiations which look like they are turning pear-shaped even before they have begun, and all that on top of a fragile economy,” he said.

Shares in Africa's top bullion producer AngloGold Ashanti fell more than four percent and rival Gold Fields shed four percent to four-and-a-half-year lows after gold fell for an eight straight session on global markets.

A fierce union turf war is damaging labour relations at South African mine shafts, with the NUM fighting an aggressive challenge to its once near monopoly of members from the growing Association of Mineworkers and Construction Union (AMCU).

AMCU has poached tens of thousands of platinum miners from NUM in an increasingly violent struggle at mine sites.

The union battle poses a headache for President Jacob Zuma's ruling African National Congress (ANC), which faces criticism that it mishandled last year's mines violence. Opponents say it and the mainstream NUM have neglected the rights of workers and sided with mine bosses, a charge they both deny.

The ANC's Secretary General Gwede Mantashe, a former top NUM official, defended the union on Monday, saying that “recent attacks” on it were akin to an attack on the ruling party's alliance with its labour allies.

Last year's mine violence dented South Africa's image with investors and led to ratings downgrades for the economy.

NUM, a key political ally of the ANC, is seeking an entry-level minimum monthly wage of R7 000 rand for gold and coal surface workers and R8 000 for those underground, according to the submission to the chamber of mines obtained by Reuters. The latter would represent a 60-percent rise from the current minimum wage of R5 000 a month.

NUM also said it wanted 15-percent increases for “all other wage categories”, meaning more experienced and skilled workers. Wage talks are due to begin next month.

South Africa's Solidarity trade union, which represents mostly skilled workers, said on Monday it was seeking 10-percent pay increases for its members from the country's gold and coal producers in the upcoming negotiations.

With spot gold fetching around $1 350 an ounce, down close to 20 percent so far this year, South Africa's mines, the deepest in the world, are hard pressed to turn a profit.

“If you look at the all-in-costs for South African gold miners, including capex (capital expenditure), the break-even costs right now are anywhere between $1 100 and ounce and $1 400 an ounce,” said David Davis, mining investment analyst with SBG Securities.

NUM still represents the bulk of the rank and file in the gold and coal sectors and needs to be seen taking a tough line with management to head off the assault from AMCU, which now dominates the platinum sector specifically.

African Bank Investments, a lender to lower-income South Africans such as miners, said on Monday many of its debt-laden customers were struggling to pay back their loans.

“The knock-on effect from the recent strike activity led to increased debt servicing burdens,” the bank said in announcing its first-half earnings.

AMCU's rise has been built in part on perceptions that NUM's leaders have grown too close to management and the ANC.

The view from the boardroom is somewhat different as NUM has been wringing above inflation wage hikes for its members over the past decade, a huge squeeze on company margins.

But even increases above inflation do not go far for workers at the bottom end of the pay scale who on average have eight dependants and are mostly drawn from poor rural areas.

Inflation, which is currently running near six percent, looks set to accelerate further given the recent weakness in the rand. - Reuters

"Stocks are not too overvalued and the economy is getting better."

New York - U.S. stocks dipped in early trading on Monday, with investors scrambling for catalysts after major U.S. equity indexes closed a fourth consecutive week of gains Friday.

Deals including Yahoo's $1.1 billion bid for Tumblr indicate that companies continue to search for growth through acquisitions despite record highs, a bullish sign for stocks.

The S&P 500 and Dow industrials finished Friday at fresh record highs and the Nasdaq Composite is at its highest since late 2000. A light economic and earnings calendar could leave the market vulnerable for a pullback, but those have been shallow and short-lived as investors take any weakness as a new chance to increase long positions.

“We got a lot of merger announcements this morning. It means there's a lot of appetite for equities and that's good for the market,” said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.

“Stocks are not too overvalued and the economy is getting better,” he said. “As long as the economy continues to improve, the market should be able to maintain these levels.”

The Dow Jones industrial average fell 34.62 points or 0.23 percent, to 15,319.78, the S&P 500 lost 2.41 points or 0.14 percent, to 1,665.06 and the Nasdaq Composite dropped 1.62 points or 0.05 percent, to 3,497.35.

HIGHLIGHT OF THE WEEK

Federal Reserve chairman Ben Bernanke's testimony before Congress on Wednesday is seen by many as the highlight of the week for markets. The beginning of the end of the Fed's massive bond-buying program, which has given strong support to stock gains, might come sooner than many investors think if recent gains in the U.S. labor market hold.

Yahoo shares dipped 0.3 percent to $26.44 after its board approved a deal to buy blogging and social networking site Tumblr for $1.1 billion in cash.

Actavis will acquire Warner Chilcott Plc in a stock-for-stock transaction valued at $5 billion. Actavis shares rose 3.1 to $129.41 percent and Warner Chilcott added 1.5 percent to $19.50.

Freeport-McMoRan Copper & Gold and Plains Exploration & Production said they would pay shareholders more in dividends if they approved Freeport's roughly $6 billion takeover offer for Plains. Plains shares jumped 7 percent to $48.77.

Pactera Technology International said it received a proposal from a Blackstone affiliate, its non-executive chairman and its chief executive to take the company private. Pactera shares rose 31 percent to $6.89.

Websense Inc shares jumped 28.5 percent to $24.72 after it agreed to be acquired by Vista Equity Partners.

Solar products maker JA Solar Holdings reported another quarterly loss on lower prices for panels that convert sunlight into electricity, but its operating loss nearly halved from the first quarter of 2012. Its shares jumped 19.1 percent to $6.68. -Reuters

Optimism about global growth pushed world shares to a near five-year high on Monday.

London - Optimism about global growth pushed world shares to a near five-year high on Monday, while debate about the future of the U.S. Federal Reserve's stimulus programme extended gold's longest losing streak in four years.

Data last week that showed U.S. consumer sentiment at its strongest in nearly six years continued to support equity markets ahead of this week's forward-looking PMI numbers from most of the world's top economies.

Futures prices pointed to a steady start for a Wall Street at record highs after earlier minor gains on European and Asian indexes lifted MSCI's world shares index 0.3 percent to its highest since June 2008.

A constant drip of central bank stimulus and pledges of support over that have driven a 40 percent surge in global stocks and squeezed core bond yields over the last year.

But with signs that growth in key economies is slowly improving, investors are starting to wonder what lies ahead.

The near 20 percent slump in yen since the start of the year has been the most recent example of the impact of such stimulus programmes, thanks to the Bank of Japan's $1.4 trillion plan to boost growth through inflation.

It was off Friday's 4-1/2-year low, however, at 102.5 yen to the dollar by 1230 GMT after Japan's economy minister suggested over the weekend the currency might have weakened enough.

“People say the excessively strong yen has corrected quite a bit. If the yen continues to weaken steadily from here, negative effects on people's lives will emerge,” Akira Amari told a Sunday talk show.

Toyko also upgraded its economic forecasts on Monday, as emerging signs of an upturn in exports and factory output added to growing evidence that Prime Minister Shinzo Abe's aggressive polices are beginning to reignite growth.

FED WATCH

The dollar has also been driven up in recent weeks by signs that some at the U.S. Federal Reserve are thinking about scaling down its $85 billion a month bond buying programme.

The Fed will break up this week's barrage of PMI data on Wednesday when it publishes the minutes of its recent meeting and its chairman Ben Bernanke speaks in front of Congress.

Following the recent policymaker comments, investors - who have become used to successive rounds of stimulus in recent years - will be watching closely.

“All eyes should be on central banks when judging risk appetite and its impact on FX markets,” Morgan Stanley's FX strategy team wrote in a note. “The U.S. economy has developed pockets of strength, leaving the market with the impression that the Fed might be the first major central bank to pull liquidity away from markets.”

That worry saw gold - often seen as a hedge against the kind of inflation central bank intervention can bring about - extended its longest losing streak in four years to hit a 1-month low of $1,338.95 an ounce. Silver and platinum also fell.

“We have started to see a series of positive readings coming out of the United States. We are positioned for a rising market and think that the best way is to invest in financials,” said HSBC equity strategist Robert Parkes.

COMMODITY VIEW

With risk appetite dominating markets, safe-haven German Bunds fell 40 ticks while demand for higher-yielding euro zone periphery bonds continued to improve.

The European Union's top economic official added to the pressure on yields as he said low inflation meant the European Central Bank had room to cut rates again.

Brent crude was down 0.4 percent on the day at $104.30 a barrel while copper had eased 0.7 percent to $7,282.50 a tonne as the talk of the Fed tapering its bond purchases, but mainly the stronger dollar, took its toll.

A strong dollar tends to depress oil and other commodities that are priced in the U.S. currency on international markets. The fundamental outlook for oil also looks less positive with a weaker demand growth for 2013 as well as higher supply, according to the West's energy watchdog, the International Energy Agency.

“The strength of the dollar has been negative for commodities,” said Olivier Jakob, analysts at Swiss energy consultancy Petromatrix.

“But short-term the market looks fairly balanced, with Brent trading in a range between $90 and $110 per barrel. It is

difficult to see it breaking out of that for a while.” -Reuters

Wage hike demands in coal and gold industries helped push the rand to a four-year low.

Johannesburg - Big wage hikes demanded by the government-allied trade union in South Africa's coal and gold industries helped push the rand to a four-year low on Monday, highlighting the ripple effect of the prospect of more turmoil in the industry.

The National Union of Mineworkers' (NUM) call for pay rises of up to 60 percent in a submission to the Chamber of Mines seen by Reuters on Sunday rattled mining investors after wildcat strikes at platinum and gold mines killed 50 people and cost billions in lost output last year.

Employers and workers are squaring off for next month's salary bargaining period against a backdrop of high inflation and shrinking company margins in Africa's largest economy due to soaring costs and sinking commodity prices.

This is making South Africa vulnerable, said George Glynos, managing director at financial consultancy ETM Analytics.

“Commodity prices are retreating, you have wage negotiations which look like they are turning pear-shaped even before they have begun, and all that on top of a fragile economy,” he said.

Reflecting the jitters over the threat of fresh mines unrest, the South African currency fell to a new 4-year low of R9.4790 to the dollar early on Monday before recovering to 9.4580 by 1228 GMT, still down 0.6 percent on the day.

Shares in Africa's top bullion producer AngloGold Ashanti fell over four percent and rival Gold Fields shed 4 percent to 4-1/2 year lows.

On global markets, gold fell for an eighth straight session to its weakest level in over a month, as fears that the U.S. Federal Reserve may wind back its economic stimulus programme hurt the metal's appeal as a hedge against inflation.

FIERCE TURF WAR

A fierce union turf war is roiling labour relations at mine shafts, with the NUM fighting an aggressive challenge to its once near monopoly of members from the growing Association of Mineworkers and Construction Union (AMCU).

AMCU has poached tens of thousands of platinum miners from NUM in an increasingly violent struggle at mine sites.

The union battle poses a headache for the ANC, which faces criticism that it mishandled last year's mines violence. Opponents say it and the mainstream NUM have neglected the rights of workers and sided with mine bosses, a charge they both deny.

The ANC's Secretary General Gwede Mantashe, a former top NUM official, defended the union on Monday, saying that “recent attacks” on it were akin to an attack on the ruling party's alliance with its labour allies.

Last year's mine violence dented South Africa's image with investors and led to ratings downgrades for the economy.

NUM, a key political ally of the ANC, is seeking an entry-level minimum monthly wage of R7,000 rand for gold and coal surface workers and R8,000 rand for those underground, according to the submission to the chamber of mines obtained by Reuters. The latter would represent a 60 percent rise from the current minimum wage of R5,000 a month.

NUM also said it wanted 15 percent increases for “all other wage categories,” meaning more experienced and skilled workers. Wage talks are due to begin next month.

South Africa's Solidarity trade union, which represents mostly skilled workers, said on Monday it was seeking 10 percent pay increases for its members from the country's gold and coal producers in the upcoming negotiations.

Spot gold is currently fetching around $1,350 an ounce, down close to 20 percent so far this year, and South Africa's mines, the deepest in the world, are hard pressed to turn a profit at these levels.

“If you look at the all-in-costs for South African gold miners, including capex (capital expenditure), the break-even costs right now are anywhere between $1,100 and ounce and $1,400 an ounce,” said David Davis, mining investment analyst with SBG Securities.

STRIKE THREATS

NUM still represents the bulk of the rank and file in the gold and coal sectors and needs to be seen taking a tough line with management to head off the assault from AMCU, which now dominates the platinum sector specifically.

AMCU has not yet submitted its wage demands to producers, which negotiate with unions on a company-by-company basis.

Anglo American Platinum, the world's top producer, is planning to cut 6,000 jobs from an initial target of 14,000 as it seeks to restore profits after recording a loss last year.

It scaled back its original plan under government pressure, but workers and unions have threatened strike action on the platinum belt if the announced lay-offs go ahead.

African Bank Investments, a lender to lower-income South Africans such as miners, said on Monday many of its debt-laden customers were struggling to pay back their loans.

“The knock-on effect from the recent strike activity led to increased debt servicing burdens,” the bank said in announcing its first-half earnings.

AMCU's rise has been built in part on perceptions that NUM's leaders have grown too close to management and the ANC.

The view from the boardroom is somewhat different as NUM has been wringing above inflation wage hikes for its members over the past decade, a huge squeeze on company margins.

But even increases above inflation do not go far for workers at the bottom end of the pay scale who on average have eight dependants and are mostly drawn from poor rural areas.

Inflation, which is currently running near 6 percent, looks set to accelerate further given the recent weakness in the rand. -Reuters