Banks and financials weigh on JSE

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JSE1 Independent Newspapers The JSE. Photo: Simphiwe Mbokazi.

The JSE was fairly flat at noon on Tuesday‚ as markets awaited newsflow from Europe ahead of the EU summit on Thursday and Friday.

Mining stocks made back some of their recent losses‚ but banks were hard hit‚ with Absa leading the down side in the sector‚ after the release of a negative trading update.

Lingering eurozone concerns weighed on global market sentiment‚ with investors casting doubt on the ability of the EU leaders to reach a breakthrough agreement at their summit this week that would solve Europe’s debt woes.

However from next week the market focus could change somewhat. “The second quarter US company results will begin to be released and the spotlight will move to hardcore company data‚” said Francois du Plessis‚ director at Vega Asset Management.

Absa Group’s (ASA) share price has fallen more than 8% today‚ after the negative trading update‚ which was far worse than the market expected. Absa said its headline earnings for the six months ending June were likely to be 0%-10% below the R4.595bn achieved in the same period a year ago‚ largely on the back of an increase in credit impairments in its mortgage legal book.

At 11:57 local time‚ the JSE all-share index was 0.12% higher at 33‚861.94 points‚ with resources gaining 1.08%‚ gold shares lifting 2.75% and platinum counters somewhat stronger‚ adding 0.35%.

Financials shed 1.57%‚ banking stocks tumbled 3.22%‚ while industrials picked up 0.21%.

The rand was trading at 8.44 to the US dollar‚ from 8.49 at the JSE’s close on Monday‚ while gold was quoted at US$1‚584.44 a troy ounce from US$1‚571.72/oz at the JSE’s previous close and platinum was at $1‚440.50/oz‚ from $1‚431.20/oz previously.

Rand Merchant Bank said that the week got off to a shaky start‚ with local markets giving back ground ahead of the EU summit on Thursday and Friday. “Risk off sentiment is likely to linger for the remainder of the week as the local market awaits an outcome and any rhetoric‚ emanating from Thursday’s EU summit‚ for further direction‚” the bank said.

London’s FTSE 100 was flat at noon local time‚ paring earlier gains after data showed that the UK government borrowed more than expected in May. The FTSE was at 5451.88 points‚ while in the East the Hang Seng Index closed up 0.45% at 18‚981.84 points.

Dow Jones Newswires reported that top EU officials proposed in a report‚ that would be debated at a summit of leaders on Thursday‚ that the supervision of eurozone banks should be transferred to a European supervisor‚ possibly the European Central Bank‚ in return for allowing the bloc’s bailout fund to help with insuring deposits and financing the liquidation of failing lenders.

The seven-page report sets out ideas for the future functioning of the currency union‚ including forcing governments to get approval of their budget deficit from other eurozone countries and possibly adapt their budget plans‚ in an effort to fight off the debt crisis that has rocked the bloc. The document‚ which was sent to EU countries early on Tuesday morning‚ was prepared by the presidents of the European Council‚ the European Central Bank‚ the European Commission and the Eurogroup‚ the regular gathering of eurozone finance ministers.

“The report remains relatively vague — for instance it does not clearly set out what institutions should take on the new powers at the European level. But the presidents propose that it should be fleshed out by December‚ with a preliminary version done by October. If EU‚ or at least eurozone leaders‚ accept its basic principles at their summit later this week‚ it could set off a lengthy and likely rocky overhaul of the currency union‚ that would not only require changes to the EU treaty‚ but also to national constitutions and referendums in some countries. It is also likely to create larger splits between the 17 EU countries that use the euro and the 10 — soon to be 11 — states that don’t‚” Dow Jones reported.

Meanwhile the central bank of Cyprus backed the Cyprus government's request for aid from Europe's bailout fund on Tuesday and said it was necessary to take steps to contain possible contagion from the country’s banking sector‚ which had been hit hard by the debt crisis in neighbouring Greece. On Monday‚ Cyprus formally became the fifth country to request aid from the temporary European Financial Stability Facility‚ or its soon-to-be-operational permanent successor the European Stability Mechanism.

On the JSE‚ Anglo American (AGL) was up R2.90‚ or 1‚09%‚ to R269.40‚ BHP Billiton (BIL) added R1.80 to R230.40 and Sasol (SOL) was up R2.75 to R352.90.

AngloGold Ashanti (ANG) rose R7.73‚ or 2‚68%‚ to R295.94 and Gold Fields (GFI) added R2.99‚ or 2.82% to R108.95. Harmony Gold Mining (HAR) picked up R2.45‚ or 3.06% to R82.39.

In platinum stocks‚ Impala Platinum (IMP) added 6 cents to R135.16‚ while Northam Platinum (NHM) shed 18 cents to R24.88.

Among other miners‚ Kumba Iron Ore (KIO) was up R6.30‚ or 1.14%‚ to R561.30.

Among banks and financials‚ Standard Bank (SBK) fell R3.54‚ or 3.08%‚ to R111.46‚ Absa (ASA) shed R12.59‚ or 8.05%‚ to R143.90 and Nedbank (NED) left behind R4.61‚ or 2.59%‚ at R173.39.

In construction and building materials PPC (PPC) dipped 33 cents‚ or 1.23%‚ to R26.46. - I-Net Bridge


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