JSE Top 40 Jumps 175 Points as Rand Firms and Bulls Eye 112,300 Breakout
South African equities had a pretty good run in mid-week trading, with the JSE FTSE All Share Index putting in its strongest single-day...
Quick overview
- South African equities experienced a strong mid-week rally, with the JSE FTSE All Share Index achieving its best single-day gain in weeks.
- Improving investor confidence, driven by easing bond yields and a stable global backdrop, has led to a shift towards riskier assets.
- The South African rand has strengthened against the US dollar, influenced by dovish signals from the US Federal Reserve regarding potential rate cuts.
- Lower global bond yields and positive PMI expectations are supporting the equity market, with the JSE Top 40 maintaining a bullish technical outlook.
South African equities had a pretty good run in mid-week trading, with the JSE FTSE All Share Index putting in its strongest single-day gain in weeks. Things looked bright, with improving investor confidence being supported by easing bond yields & a more stable global backdrop. As fixed income started to lose its allure, equities regained some of their appeal & that encouraged investors to shift towards riskier assets.
The rally also pretty much tracked broader emerging-market strength, as investors were happy to see signs that global monetary policy might become more supportive later this year. Trading volumes were still subdued, but the price action suggested that investors were genuinely interested – it wasn’t just a case of people closing out their short positions.
Rand Strength & Global Rates in Focus
The South African rand has started to do better against the US dollar, trading around 16.33 after gaining about 0.2% & currency markets are starting to take cues from dovish signals from the US Federal Reserve. This has reinforced the expectation of at least two US rate cuts later this year.
Fed commentary which talks about inflation easing & potential softening in the labor market has shifted the dial on rate expectations & that has meant that US yields are coming under a bit more pressure. This is the kind of environment which tends to favour higher-yielding emerging market currencies – like the rand.
Some of the key drivers supporting sentiment are:
- Lower global bond yields mean equities look relatively more attractive
- Expectations of US monetary policy getting looser
- Stabilizing emerging market currencies
Local Bonds & PMI Expectations Support Stocks
The yield on South Africa’s benchmark 2035 government bond has slipped to around 8.19%, which has only added to the equity bid, as lower yields tend to make stocks look more attractive on a relative basis.
The market is now looking at the upcoming PMI data, which should give us a bit more insight into how domestic economic momentum is doing. If the numbers come in positive & global data looks supportive, that should reinforce the current risk-on tone.
JSE Top 40 Technical Outlook: Trend Intact
From a technical perspective, the JSE Top 40 is trading near 110,218 & still consolidating within a well-defined ascending channel on the 4-hour chart. Price recently pulled back from the resistance level near 111,475, where we saw long upper wicks which suggested some short-term profit-taking rather than a more serious breakdown.
Support around 109,420 is still holding firm & aligns with the channel midpoint & prior breakout structure. If the price were to break down, we’d expect to see some stronger support kicking in around 107,410. Fibonacci analysis shows buyers are defending the 38.2% retracement, while RSI has cooled off but is still above neutral, which points towards some consolidation rather than a full reversal.
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