JSE edges up as markets await BOE interest rate move

Johannesburg - Global markets on Thursday were focused on the Bank of England, as investors were discounting the possibility that the bank will lower Britain’s record low interest rates even further for the first time in seven years.

Investors on the JSE however preferred to wait for news on the sidelines, in contrast with global markets which have been hovering at the highest levels this year in anticipation of such a move.

However, the Bank of England kept interest rates unchanged, much against market expectation.

READ: Rand rallies as England keeps rates on hold

By midday all major indices on the JSE were higher, but the Resources index was the only one making a substantial move with a 0.83% gain.

The All-share index was at that stage 0.33% higher at 52 897 points, after gaining 0.50% on Wednesday. Before Thursday’s trade, the index was 2.2% higher over the past seven days. The top 40 index was also 0.33% firmer at 46 422 points, with the Financial index 0.20% and the Industrial index o.23% stronger.

Global markets were still buoyant and Britain’s top share index on Thursday rose to an 11-month high. On Wednesday the Dow Jones and S&P 500 indices closed on record highs on Wall Street, while Asian shares hovered near eight-month highs on Thursday.

The Bank of England was expected to halve its benchmark interest rate to a record low of 0.25%, the first cut in more than seven years, in an attempt to cushion the economy from the shock vote in late June to pull Britain out of the European Union. The governor of the Bank of England, Mark Carney, had hinted he could ease policy to cushion the economy from the impact of Brexit.

Lower interest rates typically boost stock markets, as they dent returns on bonds and cash and can reduce borrowing costs for companies. The prospect of lower interest rates is particularly good news for British property stocks, which have been the hardest hit since Brexit.

But such a possibility did not do much for the share prices of the two British property companies also listed on the JSE, as both lost ground. Intu [JSE:ITU] was 0.50% softer at R53.80 and the share price is more than 18% lower over the past 30 days. Capital and Counties [JSE:CCO], which lost 28.1% over the past month, shed 0.27% to R56.00.

Concerns that Brexit could disrupt European economies have also taken a Federal Reserve rate hike off the agenda in the near future, and boosted expectations of more monetary stimulus from central banks from Europe to Japan.

Kumba [JSE:KIO] was the star performer in the resources sector on Thursday as the company said it expects first-half profit to rise by up to 23%, due to deferred tax assets in the prior comparative period. Headline earnings per share for the six months to June are likely to rise from 14% to 23%.

In early trade the share price was almost 7% higher on a new 52-week intraday of R134.50, but it lost momentum later on. The stock gained more than 10% over the previous seven days and 66.34% over the past month.

These sharp gains are mainly due to a rise of about 40% in the iron ore price this year, after it tumbled to multi-year lows due to oversupply and muted demand. Since the iron ore price started recovering, Kumba’s share price has gained 377.22% over the past six months.

Anglo American [JSE:AGL] reached R160 for the first time since April this year, when the share gained 3.00% to R160.00 by mid-morning. BHP Billiton JSE:BIL] was far more subdued than Anglo, gaining only 0.21% to R191.23. BHP Billiton is still 0.28% softer over the past 30 turbulent days, while Anglo gained 17.65%.

The retail sector received a great deal of attention after Wednesday’s data indicating that retail sales grew 4.5% in May on an annual basis. Woolworths [JSE:WHL] was the busiest share on the JSE in terms of value, but the share at mid-morning traded 0.45% lower at R82.53.

However, in early trade it was more than 2% higher at R84.87 after the retailer said it expects full-year profit to increase by 15% to 25% as sales for the 52 weeks to end-June 2016 rose.

READ: Warm weather impacts Woolworths winter sales

Woolworths said that excluding the impact of David Jones, whose acquisition was effective in August 2014, group sales grew by 16.4%.

There is also big demand for shares in Truworths [JSE:TRU], which gained almost 3% in early trade to reach R89.36, but by mid-morning the momentum was lost and the share traded 0.79% softer at R85.82.

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