Johannesburg - The JSE remained higher at noon on
Thursday lifted by a rally in gold shares although investor sentiment
remained fragile due to developments in the euro area.
At 12:03 local time the JSE All Share [JSE:J203] index was up 0.39% at
33 014.79 points with the gold index adding 4.15% resources gaining
0.86% and platinum counters up 0.41%.
Financials garnered 0.32% banking stocks edged up 0.23% while industrials were flat (0.06%).
The rand was trading at 8.35 to the US dollar from 8.32 at the
JSE's close on Wednesday while gold was quoted at $1 560.30 a troy
ounce from $1 588.85/oz at the JSE's previous close and platinum was at
$1 424/oz from $1 462.70/oz at the previous session.
"It is very difficult as an investor to forge any strategy not
knowing what tommorrow will bring given the uncertainties in Europe,"
said David Shapiro, director at Sasfin Securities. "Gold shares are
picking up off a very low base. I'm struggling to find reasons that
would justify the rally other than the weaker rand and the fact that
they are oversold."
Investec Asset Management said in a note that resource equity
valuations appeared generally attractive with energy and certain
mid-cap gold equity valuations in particular looking compelling in the
current environment not least because they were less dependent on the
China growth story
"Many investors have been reducing resource equity exposure due to
concerns that commodity prices are flat-lining and costs are still
rising thus squeezing companies' margins. Whist this is true in some
cases we believe it is not in all and there are plenty of companies who
can improve margins by growing volumes and even reducing costs.
"The danger is that a number of analysts are now assuming not only
flat to declining commodity prices but also ever rising costs - which
inevitably leads to low valuations - but this is not possible when a
large portion of costs are dependent on commodity prices. In the short
term, European financial issues look set to keep markets volatile but
over the medium term we believe once China has destocked world growth
will not remain below trend and equities can re-rate to more normal
valuations.
US stock index futures edged higher on Thursday as investors
awaited data on weekly jobless claims and digested a round of weak
economic surveys from China and Europe Dow Jones Newswires reported.
A series of closely-watched surveys on economic activity in China
and Europe and other data proved mostly weaker than expected on
Thursday.
Private-sector output across the 17-nation eurozone contracted in
May at its sharpest pace since mid-2009 according to a "flash"
purchasing managers' index produced by Markit. The composite PMI reading
fell to a 35-month low of 45.9 from 46.7 in April. A reading of less
than 50 indicates a contraction in activity.
Meanwhile, the Ifo Institute's closely-watched gauge of German
business confidence tumbled more than expected to a six-month low at
106.6.
Earlier, the HSBC flash PMI for China's manufacturing sector dropped to 48.7 in May from 49.3 in April.
Asian equities finished mostly lower, but European markets shook off initial losses to push back into positive territory.
