JSE looks set to rally as lower US inflation data triggers market surge

The JSE looks set for a rally to end off the week after US markets buoyed Asian markets as the latest inflation data from the world’s largest economy beat expectations and gave investors something to smile about.

US consumer prices rose 7.7% year on year in October, well below market expectations of 7.9% and the slowest pace in nine months. Core CPI, which excludes volatile food and energy costs, rose 0.3% in the month and by 6.3% on an annual basis, also 20 basis points below the consensus figure.

“US equities and bonds flew higher in the wake of Thursday’s CPI print, which showed inflation is moderating, leading to some promising signs that US Federal Reserve tightening is finally easing. That’s a given,” SPI Asset Management managing partner Stephen Innes said in a note.

“Fed officials welcomed the inflation news but emphasised the need for further hikes, even if agreeing that stepping down hikes was appropriate,” Bank of New Zealand senior market strategist Jason Wong said in a note.

The Hang Seng in Hong Kong surged as it rose sharply by 5.84%, the Nikkei in Japan 2.81% and the Shanghai composite in mainland China 1.51%. Year to date the Hang Seng is down 27.12%, the Shanghai composite 15.16% and the Nikkei 3.70%.

Tencent, which influences the JSE via Naspers and Prosus, leapt 7.26%, but remains down 45.31% so far this year.

Meanwhile, authorities in mainland China urged for more targeted Covid-19 control measures as it affirmed its policy on the coronavirus.

“The new Politburo Standing Committee chaired by President Xi Jinping and made up of close amigos, reinforced the need to stick with the zero-Covid policy while urging officials to be more targeted with their restrictions so as to avoid damage to the economy,” National Australia Bank currency strategist Rodrigo Catril said in a note.

“Guangzhou looks like a test case for this policy, not heading into a Shanghai-style lockdown after the recent surge in cases, but a more targeted lockdown of only three of its 11 districts,” he added.

In local markets, the JSE rebounded in the afternoon session and the rand powered ahead after the US reported better-than-expected inflation data, raising hopes that price increases in the world’s biggest economy may have peaked and prompt the US Federal Reserve to ease up on its aggressive rate hikes.

The JSE all share gained 1.54% to 70,710 points after spending most of the day in the red before the US inflation report, while the top 40 was 1.68% firmer.

US markets closed sharply higher on Thursday with the Nasdaq, S&P 500 and the Dow Jones delivering their biggest single day returns since 2020, buoyed by the fresh inflation data. The Nasdaq jumped 7.35%, the S&P 500 5.54% and the Dow Jones 3.70%. However, the Nasdaq has lost 29.80% of its value in 2022, the S&P 500 17.52% and the Dow Jones 7.84%.

The rand depreciated by 0.10% against the dollar, trading at R17.42. The rand has lost 9.20% against the greenback this year.

The moves in commodity prices are mixed as Brent crude advanced 0.65% to $93.92 a barrel, while platinum retreated 0.28% to $1,035.10 and gold 0.14% to $1,751.73/oz.

In corporate news, the clothing manufacturer and retailer TFG, luxury goods retailer Richemont SA and security technology specialist ISA Holdings will release interim results on Friday.

TFG said last month it expects headline earnings per share (Heps), a measure of profit that strips out impairments and one-off items, will increase 8%-28% to R4.24-R5.03. This is partly because of a weaker period in the previous base that included a prior period with civil unrest in SA that led to closed stores, and severe UK and Australian lockdowns.

No economic data is expected.

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