Surprise market Turnaround as China cuts rates on Friday November 21st

What?

If you are a gambler you might have gone for a bet that the JSE would close in negative territory last week Friday. This was in line with the continuous weakness of the market for four consecutive days last week and the lack of exciting news either globally or locally. That changed on Friday when China took the surprise decision to cut interest rates in a bit to stimulate the economy. The People’s Bank of China cut its benchmark one-year loan rate by 0.4 percentage points and its one-year deposit rate by 0.25 percentage points‚ a step which analysts described as a surprise move. This news out of China last week was reinforced by news from the European Union that the ECB needed to accelerate inflation quickly to prevent deflation in the eurozone. The ECB may broaden its asset-purchase programme‚ making quantitative easing (QE) more likely.

So what?

Investors responded to this news positively all over the world with indices in Europe, in Asia, the US and the then the surprise turnaround of the JSE which delivered its best daily performance so far this year on Friday‚ closing 3.21% up as China lowered interest rates and stimulus talk in Europe buoyed global markets.

jse 21 nov

Top winners on the market were mostly in the mining sector and included Assore up 11.5 percent, Implats up 8.8percent, Kumba 7.9 percent, Exxaro 7.1 percent and Anglo up 6.6 percent. As markets open this morning on the JSE, investors will continue to watch out both company news, data from stats SA expected today and global data. Coming out of Asia, this morning markets have continued to trade positively following the news out of China last week Friday. From stats SA today, data on  Statistics of Liquidation and in solvencies, October 2014. According to data published by Statistics South Africa last month, the number of liquidations decreased by 4,2percent in the third quarter of 2014 compared with the third quarter of 2013. There was a year-on-year decrease of 0,7percent (1 fewer case) in September 2014.

The number of insolvencies decreased by 8, 3 percent in August 2014 compared with August 2013. A 10,7percent decrease was estimated between the three months ended August 2013 and the three months ended August 2014. There was a decrease of 6, 4 percent in the first eight months of 2014 compared with the first eight months of 2013.

Analyst expect this trend to continue and should positively impact the market today. However, investors will remain cautious on the JSE today as they await GDP data to be released by stats SA tomorrow.

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