Stronger day out for JSE as US markets strengthen

The JSE firmed on Wednesday as a stronger rand supported banking and financial stocks.  US markets were higher in late morning trading on Wednesday as financial and consumer stocks led a broad rally among the major sectors.

The rand firmed to R12.97 to the greenback at the close of trading, seeing financials lifted 0.83% banking stocks 0.90%.

The blue-chip Top40 closed 0.28% higher, followed by the All Share index which edged 0.32% higher.

Brent Crude spiked up above $47 per barrel after US Crude Oil inventories released this afternoon showed an increase of 181 000 barrels for last week. This was on the back of a forecasted draw of 2.1 million barrels. This move higher in Brent Crude is contrary to what some market watchers would have expected given this build in stockpiles. The commodity was trading at $47.19 per barrel when the JSE closed, which pushed JSE listed oil & gas producer Sasol higher and the stock closed up 0.92% at R369.50 per share.

There was a large selloff of Eurozone government bonds on Wednesday as the European Central Bank reignited expectations for future inflation and a possible reduction of its stimulus as soon as September. 

The euro reached a fresh 2017 high of $1.1369, as markets digested recent comments from Mario Draghi. The central bank could potentially "adjust" its policy in response to "improving economic conditions," he declared at an event in Sintra, Portugal. Meanwhile, Janet Yellen said yesterday she didn't expect another financial crisis in "our lifetimes" and warned against any unwinding of financial reforms.

Germany's 10-year yield has nearly doubled in two days. It jumped 10 basis points from 0.24 percent to 0.34 percent on Tuesday to strike a one-month high, and then a further 6 bps on Wednesday to 0.40 percent.

In the United States, consumer confidence rose to 118.9 index points in June, from 117.6 previously, better than the consensus of 116.  However expectations over the next 6 months have decline as the labour market in the US is nearing full employment, with persistent labour shortages.  This is likely to put upward pressure on costs and inflation, meeting the Fed’s dual mandate to hike interest rates.