South African stocks at new 10-month high

JOHANNESBURG – South African stocks muscled to a fresh 10-month high on Friday after US economic data buoyed global equities but MTN trimmed gains amid uncertainty about merger talks with India’s Bharti Airtel.

The rand was steady against the dollar but weaker against other currencies, despite positive trade account data, with investors disappointed there is still no clarity on the possible tie-up aimed at creating the world’s No.3 wireless operator.Government bonds added to gains since Wednesday on rising hopes interest rates will fall again.The JSE Top-40 index of blue-chip stocks edged up 0,61 per cent to 21 855,80 points, besting the previous session’s 10-month closing high, while the broader All-share index gained 0,79 per cent to 24 258,51 points.’The guys were earlier waiting on the sidelines after the recent big gains. But US GDP figures seem to have been better than expected and we’ve turned around with Wall Street,’ said one Johannesburg-based trader.The rand was trading at 7.83 against the dollar mid day, little changed from its close in New York on Thursday of 7,8325. But it was well off early levels and slipped against the euro, partly on uncertainty regarding the MTN-Bharti deal.’It’s lost against the crosses despite a fantastic trade surplus number,’ Bidvest Bank dealer Ion de Vleeschauwer said.’Perhaps the market expected some sort of action on the MTN deal. There may be disappointment there is no clarity on that.’Official data showed the country’s trade account recorded a second consecutive surplus in June, after notching up the first one in two-and-a-halft years in May.The 3,2 billion rand surplus will help narrow the deficit on the current account, which has weighed on the rand over the past three years.De Vleeschauwer said the local currency needed to close firmer than 7,70 to confirm a stronger trend and should see resistance at around 7,88/90, he said.The dollar was weaker against most currencies after a government report showing a less-than-expected contraction in the US economy in the second quarter was offset by a decline in consumer spending.The resolution of a week-long South African council worker strike did not stir interest among investors, who have largely ignored the industrial action all week.However, the 13 per cent wage increase settlement may have implications for inflation – some economists predict high pay rises across industries could add between 0,5 and 1,25 percentage points.Despite those concerns, government bonds firmed and yields fell for a third straight day, after consumer and factory gate price inflation, and credit and money supply growth all came in softer than expected.The trade data and a fall in fuel prices this week further reinforced calls for another interest rate cut. The central bank paused its cutting cycle in June on inflation worries.The yield on the 2015 bond was down 1,5 basis points for the session at 8,385 per cent, while the 2036 yield fell 2,5 basis points to 8,435 per cent.US stocks edged higher after the government reported the economy shrank at a slower-than-expected pace in the second quarter, boosting local sentiment, but performance was mixed.MTN rose on hopes merger talks with Bharti would be extended, but trimmed gains after sources said a statement would probably only be released today, stoking uncertainty. The stock closed 0,8 per cent higher at 128 rand.Financials were mixed, with Investec up 3,24 per cent, but Nedbank down 2,46 per cent ahead of the banking reporting season this week. Absa closed down 0,42 per cent to 117,50 rand moments after it said it would report a bigger fall in EPS than expected today.-Nampa-Reuters