JSE firms as post-Brexit gloom lifts on possible further stimulus measures

The JSE closed higher on Monday as positive global sentiment lifted the post-Brexit gloom amid new stimulus plans set to be announced in Japan and in the UK.

The all share closed above 52‚000 points‚ the highest level in a week on broad-based gains with resources leading the pack.

UK and European markets were higher following Andrea Leadsom’s decision to drop out of the Conservative Party leadership race‚ paving the way for Theresa May to be appointed UK prime minister within the next few days.

This sets the scene for negotiations with the EU on Britain’s practical exit‚ with German chancellor Angela Merkel warning it would not be easy.

Barclays Research said it appeared likely that a new UK government‚ with May at the helm‚ would be in place by month-end.

A swift transition was likely to be seen as a positive result for financial markets and investors given that it should provide a degree of certainty with regard to the UK government’s new direction sooner than previously expected‚ Barclays said.

The market is pricing in an interest rate cut by the Bank of England (BoE) next month to stave off a UK recession.

Upbeat sentiment expressed by Eurogroup president Jeroen Dijsselbloem that Italy's troubled banks did not represent an acute crisis‚ together with indications that concern about Portuguese banks was overdone‚ supported positive market views on the troubled European banking sector.

The developments followed on Friday’s strong US jobs data and Japanese Prime Minister Shinzo Abe’s landslide victory after his party promised new stimulus measures to revive the Japanese economy.

The JSE all share closed 1.74% higher at 52‚170.40 points and the blue-chip top 40 added 1.70%. Resources rose 3.78% and the gold index firmed 3.62%. Banks lifted 2.83% and the South African listed property index ended the day 2.48% higher. Platinums rose 2.36% and financials added 2.31%. General retailers rose 1.70% and industrials added 0.91%.

The Dow Jones was 0.51% higher‚ near previous record levels‚ at the JSE’s close. The S&P500 hit an intraday record high. The FTSE 100 had lifted 1.34%‚ the Paris CAC 40 had risen 1.73% and Germany’s Dax was 1.93% higher.

Counterpoint Asset Management analyst Sarah Golding said repercussions from Brexit continued to be felt in the markets‚ as well as on the British political scene.

She said there was a real risk that the British economy might drift into recession over the next year‚ and to top it all‚ the International Monetary Fund (IMF) had downgraded the eurozone’s economic growth to 1.6% and 1.4% for 2016 and 2017 respectively.

“Clearly top-line growth is going to be hard to come by over the next few quarters‚” she said.

Friday’s upside surprise with the US nonfarm payroll data did little to increase expectations of a rate hike in the US as the jury was still out as to whether the data signified the beginning of grassroots growth for the US‚ she said.

“Economic news on the domestic front continued to paint a sombre picture‚” Golding said.

Among individual shares‚ Anglo American rocketed 7.74% to R150.94‚ with Glencore picking up 5.97% to R33.17.

Kumba Iron Ore added 2.80% to R121.30.

British American Tobacco softened 0.43% to R921.99.

Global luxury goods company Richemont lifted 0.89% to R83.15.

Logistics group Imperial gained 2.74% to R148.46 and Barloworld rose 2.60% to R77.86.

Among gold stocks AngloGold Ashanti was up 3.61% to R309.23 and Harmony jumped 5.11% to R65.17.

In the banking sector‚ Standard rose 3.94% to R128.99 and Nedbank regained 3.38% to R190.

Old Mutual added 2.05% to R37.76.

The Foschini Group stood out with the retails sector‚ jumping 4.12% to R142.10.

Capital & Counties rebounded 5.98% to R55.11‚ while Growthpoint rose 3.13% to R26.40.

Telkom ended the day 1.55% higher at R65.50.

TMG Digital/BDlive