Johannesburg - Global markets stumbled on Wednesday morning as a slip in the crude oil price dampened investor appetite for riskier assets, with the JSE following suit.
A mixed bag of US economic data also raised fears that the economic recovery in the country currently driving world markets may not be sustainable at a stage when US interest rates will be hiked. Wall Street ended a strong month lower on Tuesday afternoon, and on Wednesday the Asian markets were also on a weak footing following more bad news about China’s economy.
The pull back on the JSE started on Tuesday afternoon after the All-share index briefly reached a new intraday 52-week high in morning trade, supported by the big dual-listed shares in the Industrial index.
By mid-morning on Wednesday most of these big shares, some of which had been trading at new highs earlier in the week, were lower due to profit-taking and the All-share had lost 0.35% to 53 715 points. The Top 40 index was at that stage 0.51% softer at 47 730 points.
The big losers were the Resources index, which slipped 1.87% due to a pull back in commodity prices, and the Industrial index, which traded 0.22% softer. The Financial index was however 0.22% stronger while the Gold index gained 3.05% as renewed uncertainty gave the gold price a modest boost.
Crude pulled back from eight-month highs reached last week amid expectations that a global glut was easing. The fall in oil prices was exacerbated after United Arab Emirates Oil Minister Suhail bin Mohammed al-Mazroui said he was happy with the oil market, noting that prices have been correcting higher.
The UAE oil minister's comments indicated that an Opec meeting on Thursday may not pave the way for a production freeze. “The political will of the Opec countries to enact a production freeze is clearly waning as a sense of crisis among the oil producing countries appears to have receded following the recent spike in crude oil prices," wrote Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo.
US personal income and spending data on Tuesday suggested the US economy is rebounding from a weak first quarter, led by a surprisingly strong 1% rise in personal consumption in April. But dismal readings on consumer confidence and Midwest manufacturing raised worries the recovery may be short-lived.
Official and private surveys on China's manufacturing activity, which were roughly in line with expectations, suggested the world's second-largest economy is still struggling to regain traction.
David Dai, Shanghai-based investor director at Nanhai Fund Management Co, said any market rally is unlikely to be sustainable at this stage.
"The global economy is still weak, and the Fed will likely raise rates soon. I don't think the market will go up much further. The best strategy now is to take profit."
Sasol’s [JSE:SOL] share price did not follow global energy stocks lower on the uncertainty in the oil market and gained 0.53% to R479.51. The share price recently rallied strongly and is 37.2% higher over the past 90 days.
Much attention was focused on the proposed takeover of SABMiller by Anheuser-Busch InBev [JSE:ANB] as deal was approved on Tuesday by the South African Competition Commission, with certain conditions.
AB InBev’s share price was 0.64% higher at R2 006.97 and the share price has now increased 8.2% over the past 30 days. SABMiller, which reached an all-time of R990 earlier in the week, lost 0.35% and traded at R975.80. The company is 10.85% higher than a month ago.
One of the conditions of the deal is that SABMiller must sell its interest in Distell [JSE:DST]. Distell traded 0.34% higher at R153.00. Remgro [JSE:REM], which is regarded as a possible buyer, gained 1.66% to R247.14.
Naspers [JSE:NPN] was also a victim of profit-taking after the share price closed at an all-time high of R2 310.57 on Tuesday, setting the company’s market value at R1.01trn. Naspers became the fourth company on the JSE after AB InBev, British American Tobacco [JSE:BTI] and SABMiller to be valued at more than R1trn.
By mid-morning on Wednesday the share price traded 0.64% lower at R2 296.73. Boosted by strong gains in the share price of Tencent, the Chinese internet giant in which Naspers holds a 34.4% interest, the stock improved 8.8% over the past seven days and 29.3% over the past 90 days.