Global Markets

Sentiment across the global markets was again dampened this week by the persistent rise in the price of black gold. Oil rose once again on the back of a weaker dollar to a record $146.30 per barrel. Supply concerns emerged from Iran to further push the price higher and comments from the OPEC meeting in Spain indicated supply and demand were in balance.

A brief respite was seen across local bourses as investors clung on any positive news that came out of the US. JP Morgan surprised with smaller than predicted losses and jobless claims released on Thursday were better then expected. This, coupled with mega oversold positions of major world indices, prompted a powerful rally on Wednesday with the DOW up almost 300pts.

Banks and financials led the rally world wide as investors began to see value in the recently hammered sector. Talks of the bailout of Fannie Mae and Freddie Mac also prompted buyers to invest in the now cheap mortgage houses and banks, supporting the market.

The recent pullback in oil, to the low of $129.70, calmed fears that high oil prices will eat into company earnings and affect share prices. However, these lower levels would need to be sustained for a period, before its impact becomes material.

Local Markets

Positive sentiment from the low oil price and world markets filtered into the JSE. Buyers returned and pushed the ALSI up 1100 points on Thursday after a dismal beginning to the week. This was one of the biggest positive moves in a single day for the ALSI, in almost 6 months.

Investec’s comments that the South African CPI rate stated as 10.9% by Stats SA , should in fact be closer to 8.7%, certainly stirred local sentiment. The blame was put on Stats SA for failing to rebase the new weightings of the CPI basket. These comments sparked enormous buying pressure in the local banking sector, sighting a topping out of the current rising interest rate cycle.

Standard Bank, the country's top lender, climbed to R86, its highest value since June 6. FirstRand rallied to R15.50. Absa Group, the country's biggest provider of home loans, rallied to R96 and Nedbank Group, which is controlled by Old Mutual, surged to R101. Long term, we still remain bearish on banks, in expectation of pending revised earnings.

The rand continues to strengthen as the extension of talks between MTN and Reliance nears. The rand was last at 7.59 to the dollar and is expected to hold on to its strength in the short term. The sell-off in resource stocks continued as metal prices, especially platinum, came off some more. Implats was most punished as it fell 19% closely followed by Anglo Platinum, which fell 17%. Gold showed strength however and reached highs of $989.50, before subsequently selling off as well.