Global equities remain bullish, JSE hits new highs
By Chris Harmse
EQUITY markets globally, but more pronounced in South Africa, remained bullish as markets on Wall Street and on the JSE recorded new highs last week.
After three consecutive days of losses on Wall Street due to a strong rise in US treasuries, stocks recovered on Friday.
Investors are still positive on President’s Joe Biden’s proposed relief package, the high level of vaccination, as well as data showing that US business had its strongest expansion in almost six years in February.
The US Markit Composite Purchasing Managers Index (PMI) rose further to 58.8 points in February.
A reading above 50 indicates improving conditions.
Stocks on Wall Street also had a strong opening on Friday with the Dow Jones industrial index trading at a new record high of 31 581 points, with the S&P500 index adding 0.21 percent more to 3 992 points as the index moved towards the 4 000 points level.
The strong opening level came after news that US existing home sales were up 0.6 percent in January to 6.69 million units, beating market forecasts of 6.61 million. Year-on-year, sales jumped 23.7 percent.
On the previous Friday opening level, the Dow Jones gained another 0.6 percent at the opening last Friday. This was already 3.2 percent higher than the beginning of the year. Treasury yields continued to rise sharply.
On the domestic front, the first jabs of the Johnson and Johnson Covid19 vaccines, a sharp improvement in retail sales, the stronger US markets, profit announcements by resource companies, and more pressure on the ANC’s general secretary Ace Magashule to step aside, pushed equity prices on the JSE to a strong close and record level again on Friday. This after the ANC’s national executive committee adopted its guidelines on implemention of the resolutions of the governing party’s 2017 national conference last Sunday.
These guidelines related to the need for members and leaders facing criminal charges or serious allegations of wrongdoing to step aside.
Although an ANC’s national working committee was mandated to finalise these guidelines within 30 days, financial markets reacted positively on this decision.
The start of the Covid-19 vaccination programme in South Africa last week raised hopes that lockdown Level 3 maybe lowered in coming weeks.
South Africa’s retail sales retreated by 1.3 percent in December on the previous year. This was lower than the expected 3.5 percent drop. The fall was 4.3 percent in November.
On the JSE, the all share index broke through the 67 000 points level last Tuesday and ended Friday on a record high of 67 464.86 points. This was some 2.1 percent higher than the previous week. The index is up 8 059 points (13.6 percent) from the year’s opening level.
The Industrial index gained another 1 percent during the week and is now 15.5 percent higher for the year to date.
Resources, due to the weaker rand and higher global prices for platinum in particular, shot up by 6.4 percent.
The weaker rand last week put pressure on the financial board as the FIN15 index contracted by almost 3 percent to 12 369 points.
Listed property also gave up much of its gains from the previous week and traded last week down 3.1 percent down.
Commodity market prices were mixed last week. The gold price traded lower by $35 (about R511) last week at $1 782 an ounce. The platinum price continued its rally and traded Friday afternoon on $1 299 an ounce, up by $59 for the week.
Brent crude continued to rally as it traded on Friday afternoon at $63.85 a barrel after it touched $66 a barrel at one stage last week, after the severe snow storms in Texas, US.
Bonds remained negative on geopolitical sentiment in the country as rates moved up strongly last week, days before the National Budget on Wednesday.
The rand exchange rate turned around last week and started to move weaker again. Against the dollar, the local currency lost about 7 cents last week to R14.67 on Friday.
To the pound, the local currency depreciated by 39c to on R20.58 and against the euro it moved weaker for the week by 14c and traded on R17.80.
This week all eyes will be on South Africa’s national budget speech on Wednesday. Financing plans for the Covid-19 rollout are expected to be outlined, among other priorities like the funding models of various SOEs like Eskom, the Land Bank, and even the SAA.
Dr Chris Harmse is an economist of CH Economics
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