JSE faces lower Asian markets despite Wall Street rally

The JSE is battling Asian markets, which are trading lower on Wednesday, despite the rally on Wall Street, amid worry about lower interest rates and high inflation in the region.

The yen was the lowest against the dollar in 24 years as the gap in interest rates between Japan and the US persists, with the Bank of Japan maintaining lower interest rates while other countries, including SA, followed the US and hiked interest rates.

World markets will watch Federal Reserve chair Jerome Powell’s testimony to Congress on Wednesday and Thursday and UK consumer price inflation data for May. Bank of England (BoE) chief economist Huw Pill said on Tuesday that the central bank would raise interest rates further if necessary to fight inflation.

“Recall the big deal with US CPI [consumer price index] was not the headline. It was the fact that every category rose. So, for May’s data, second-round effects is where to look for the BoE hawks,” Stephen Innes, managing partner at SPI Asset Management, said in a note.

Japan’s Nikkei was down 0.10%, the Shanghai composite 0.33% and the Hang Seng 1.24%.

Tencent, which influences the JSE via Naspers, is 1.26% lower.

Local investors will be fixed to their screens at 10am when the CPI for May is released. It is expected to breach the 6% upper limit of the SA Reserve Bank’s target band. If it does, it will be the highest CPI since March 2017.

Annual CPI remained unchanged in April at 5.9%, marking the 12th consecutive month in which annual inflation had been higher than the midpoint of the Reserve Bank’s 3%-6% target range.

Most of the recent pressure on inflation has been from food and fuel prices, worsened by the war in Ukraine, core inflation and price pressures in the services sectors building up as SA recovers from the Covid-19 pandemic.

After the Bank’s 50 basis point (bp) rate hike in May, which was the largest increase since 2016, the May inflation data could show if the 50bp hike will become a trend.

Gold was down 0.36% to $1,826.25/oz, platinum 0.49% to $937.27 and Brent crude 3.13% to $111.02 a barrel.

The rand fell against the dollar at R15.97.

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Source: businesslive.co.za