An IT building at Sharif University of Technology was damaged by a US-Israeli airstrike in western Tehran earlier this week. US President Donald Trump has announced a two-week ceasefire, with Iran declaring that safe passage through the Strait of Hormuz was “possible” for two weeks.
Sobhan Farajvan/Pacific Press/LightRocket via Getty Image
South African mining shares rocketed on Wednesday morning after US President Donald Trump announced a two-week ceasefire.
For its part, Iran said safe passage through the Strait of Hormuz was “possible” for two weeks.
“This may prove to be the off-ramp to the conflict that markets were looking for,” JP Morgan’s Kerry Craig told Bloomberg. “But these agreements can be fragile, so it’s too soon to call the all clear.”
READ | Trump blinks or Iran caves? Both sides claim victory as ceasefire deal is struck
Brent oil fell 16% in minutes, with investors hoping that global supply will normalise. By late morning, Brent was trading below $94 a barrel. Before the US and Israel launched joint strikes on Iran at the end of February, oil was trading around $76. Last month, it spiked above $110.
READ | Oil dives below $100, rand hits best level in a month after ceasefire
Frederick Mitchell, Aluma Capital economist, calculates that the $17 per barrel fall in the oil price on Wednesday morning translates into a R2.12/litre fall in the daily estimate of what the diesel and petrol prices will be in May.
The rand also plays a role in determining local fuel prices, as imports are priced in dollar. The local currency gained more than 2% to trade around R16.40/$ on Wednesday morning.
“When paired with the oil price drop, we are seeing a total daily swing of R2.71 in relief,” said Mitchell.
The prospect of cheaper fuel spread relief through global markets, and traders were betting that it might help to convince the US Fed to start cutting interest rates later this year.
This will have implications for the gold price. Lower interest rates are good news for non-yielding gold, which doesn’t have to compete with better returns elsewhere.
In addition, precious metals have taken a hit amid concerns that fiscal stress could lead to gold sales.
“This has included worries that sovereign wealth funds have sold positions to fund government cash calls; or that emerging market central banks are possibly using gold reserves as a source of near-term liquidity to support currencies or other requirements, such as defence spending,” said James Luke, senior portfolio manager for gold and commodities at Schroders.
These concerns have contributed to a 12% slump in the gold price since the war started.
“Platinum (which lost 18% of its value in March) fared even worse, though such is the strength of its recent rally that the March drawdown has only taken its price back to late-December levels,” says Peter Little, a fund manager at Anchor Capital.
This has triggered a big sell-off in SA mining stocks, with the gold (18%) and the platinum (25%) sectors worst hit in March.
But news of the ceasefire pushed gold 3% higher to $4 850 an ounce on Wednesday morning, with the platinum price up 5%.
This helped to boost the share prices of Implats (+14%), Valterra (+11%), Sibanye (+10%), Northam (9%), Anglo (+9%) and Gold Fields (+9%), which were all rocketing on the JSE by late-morning trading. The recovery has far to go, with Implats still 26% lower than pre-war levels.
Other JSE sectors have also suffered over past weeks as massive fuel price hikes and the weaker rand weakened SA’s economic outlook. The banking sector lost 10% of its value, while retailers have also taken a knock.
On Wednesday morning, some of the biggest recoveries were in the latter sector, with Pepkor (+9%), TFG (+9%) and Mr Price (+8%) all rallying.
But Sasol (-14%), Thungela (-14%) and Exxaro (-3%) were lower after seeing some strong gains in recent months as coal prices surged amid a global scramble for fuel.
The JSE’s All Share Index was up more than 5% around 12:15, while the Top 40 Index was up almost 6%.