Sticks on the JSE fell for a fourth day in a row yesterday as traders waited for US economic indicators to show when the Federal Reserve (Fed) would start cutting interest rates.
The JSE All-Share Index moderated 0.2% to 80 482 index points by 5pm, marking the fourth straight session of losses as financials, industrials and resource-linked stocks dragged the bourse.
The local equity market surpassed the performance of global equity markets and surged 8.2% in the second quarter of the year, supported by strong gains in financial shares followed by a firm performance in industrial shares and a gain in the resources index.
However, investors yesterday were eagerly awaiting today’s US inflation data to assess the timing of the Fed’s potential interest rate cut following reluctance to ease monetary policy.
Fed Chair Jerome Powell on Tuesday night emphasised that inflation has significantly decreased over the past two years, though it still exceeds the central bank’s 2% target.
Powell said the Fed needed greater confidence that inflation was moving towards its 2.0% target, adding that the Fed was not comfortable cutting rates right now.
Fed futures hint that markets are expecting two interest rate cuts of 25 basis points each in the US before the end of the year.
However, Powell expressed concern that a higher-for-longer interest rate policy could pose a risk to economic growth as he highlighted the already softer labour market and recent weaker economic data.
André Cilliers, currency strategist at TreasuryONE, yesterday said the US economic data will be key in giving an idea of where South Africa’s monetary policy will shift.
“The markets continue to tread water as Powell remains cautious on rate cuts,” Cilliers said.
“(Today’s) key US CPI numbers will be closely watched with markets expecting core inflation to remain somewhat sticky at 3.4%,” he said.
The rand also remained muted at R18.13 to the greenback by 5pm, stuck in a narrow 18.05/18.25 range for now.
The domestic currency often takes cues from global drivers like US monetary policy in the absence of major local data points.
The rand is also moved by commodity prices, and it has been stronger as the gold price has risen to $2 450 (R47 515) per ounce this year, a historic high.
The high in the gold price was reached in May this year, but prices subsided over June, then lifted somewhat in July, as the implied Fed funds futures also saw some movement.
S&P Global said its Global Price Pressures Index rose to “its highest level since September, 2022” – below 2021’s high but raising some caution for expected rate cut cycles given already stubbornly slow disinflation (falling inflation) trajectories.
“While commodities prices rose over Q2.24 both on the quarter and year on year, the month of June saw a price moderation, dipping by -2.7% month on month for the overall Economist Commodities Index,” said Annabel Bishop, Investec chief economist.
“Some self-correction in prices would be expected in this environment in June, while July so far has seen mixed outcomes. Commodities’ prices overall are not expected to see a further substantial increase over the remainder of the year,” she said.
BUSINESS REPORT