JSE faces higher Asian markets after US rally

The JSE is facing green screens from Asia on Friday after US markets rallied despite the latest US inflation data coming in hotter than expected, making it likely that the US Federal Reserve will raise interest rates again next month.

The Nikkei in Japan surged by 3.48%, the Hang Seng in Hong Kong 3.37% and the Shanghai composite in mainland China 1.57%. Year to date, the Hang Seng is down by more than a quarter (27.21%), the Shanghai composite 15.65% and the Nikkei 7.33%.

Tencent, which influences the JSE via Naspers, jumped 3.98%, but is down 43.59% this year.

The Shanghai composite was buoyed by US market gains as traders also shrugged off new Chinese economic data. China’s consumer price index (CPI) rose 2.8% in September, the fastest since April 2020, while the producer price index grew its slowest since January last year.

Markets were also boosted by the People’s Bank of China saying it will support the economy which has struggled for growth amid new coronavirus cases while the government maintains its zero-Covid policy.

Some hope that the 20th National Congress of the Chinese Communist Party, which starts on Sunday, will see the government start the process of reopening after almost three years of the pandemic.

The Nikkei and Hang Seng largely rallied as a result of the headway made on Wall Street on Thursday.

In the US, consumer prices rose at an annual rate of 8.2% in September, above the consensus forecast of 8.1%, but below August’s reading of 8.3%. The CPI increased 0.4% in the month, more than the 0.3% estimate from Dow Jones.

Core CPI, which strips out the effect of volatile food and energy prices, rose 6.6% year on year from 6.5% last month and was up 0.6% in the month, the same increase as August.

“Global risk remains firm, dumbfounding expectations of negative cross-asset fallout from a stronger-than-expected US CPI report,” SPI Asset Management managing partner Stephen Innes wrote in a note.

“The US CPI print was billed as the glamour stat to watch this week and from that perspective its release certainly didn’t disappoint. However, those hoping for an ease in US core inflationary pressures were severely disappointed,” National Australia Bank (NAB) currency strategist Rodrigo Catril wrote in a note.

“The strong CPI report cemented expectations for another 75 basis points hike by the Fed early November, with the market now pricing in a small chance of a jumbo 100 basis points hike,” Bank of New Zealand senior market strategist Jason Wong said in a note.

US markets increased on Thursday as the Dow Jones ended 2.83% up, the S&P 500 2.60% and the Nasdaq 2.23%. The Nasdaq has lost just under a third of its value so far this year (32.74%), the S&P 500 close to a quarter (23.49%) and the Dow Jones close to a fifth (17.89%).

In local market news, the JSE closed 0.21% weaker on Thursday at 64,392.43 points and the top 40 lost 0.37%.

The dollar was weaker against the rand on Friday morning, sliding 0.24% to R18.20. The greenback has gained 14.08% against the rand so far this year.

In commodities, the price of Brent crude was down 0.28% to $94.30 a barrel while gold ticked up 0.10% to $1,667.40/oz and platinum 0.54% to $901.12.

No corporate or economic news is expected on Friday.

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