The JSE closed marginally higher on Tuesday, adding to Monday’s sharp gain on the back of a turnaround in British fiscal policy, but analysts warn the rally may be losing steam.
The bourse gained almost 3% in the previous session after UK’s new finance minister, Jeremy Hunt, announced he would reverse the tax cuts announced by his predecessor Kwasi Kwarteng. Sentiment was further boosted by a solid start to the US corporate earnings season.
However, analysts warn that the rally could be short lived as the spectre of global recession and further aggressive interest rate hikes by the Federal Reserve and other developed economies’ central banks hasn’t disappeared.
“A strong start to the week — in part driven by the UK’s decision to no longer shoot itself in the foot — [but] nothing about it screams sustainable,” said Oanda senior market analyst Craig Erlam.
“I’m just not convinced there’s much substance behind it [the rally] as the economic landscape looks treacherous and we don’t even know if we’re at peak inflation and interest rate pricing yet,” Erlam added. “Those are substantial headwinds that will make any stock market rebound extremely challenging.”
The JSE all share closed 0.24% firmer at 66,350.98 points — having firmed more than 1% earlier in the session — while the top 40 was up 0.32%. Industrials and SA listed property gained 0.97% and 0.95%, respectively, but precious metals lost 1.19%, while resources, banks and financials were 0.82%, 0.33% and 0.24% lower.
Pick n Pay fell 9.31% to R58.54 — the most since 2020 — after the group said it continued to feel the effects of the civil unrest thanks to increased insurance premiums and related security costs, along with load-shedding. Despite reporting a strong half year growth in a trading update on Tuesday, albeit off a low base, the market took a dim view of the food, clothing and liquor retailer’s high operating costs, rising debt to finance expansion and sluggish revenue growth.
At 7.02pm, the Dow Jones industrial average was 1.02% stronger at 30,508.03 points, while in Europe, London’s FTSE 100 had gained 0.24% by the close, France’s CAC 40 added 0.44% and Germany’s DAX 0.92%.
At 6.40m, the rand had weakened 0.25% to R18.11/$ and 0.36% to R17.8528/€, but it was little changed at R20.5096/£. The euro was 0.18% stronger at $0.9856.
Gold was almost 0.1% firmer $1,650.91/oz, while platinum eased 0.49% to $909.51. Brent crude fell 2.94% to $89.13 a barrel.
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