JSE on track for weekly gain after surprise rate cut

The JSE is on track for a weekly gain on Friday, boosted this week by a partial US-China trade deal and the Reserve Bank’s unexpected interest rate cut.

The Bank cut the repo rate 25 basis points on Thursday, also signalling a second cut is likely later in 2020, citing SA’s subdued inflation.

The key rate now sits at its lowest level, but judging by the sanguine reaction of markets, investors were anticipating the cuts more than the analysts’ projections suggested, said Monex Europe foreign exchange market analyst Simon Harvey in a note.

“The pre-emptive strike by the central bank is deemed sufficient by foreign exchange markets that are arguably more forgiving under a much improved risk climate,” said Harvey. “That may not last, however, as global cutting cycles begin to slow and a period of rate stagnation lingers in developed economies,” he said.

Global markets have been boosted this week by the US and China inking a partial trade deal, which analysts said reduces the chances of further friction between the world’s two largest economies.

The Dow reached a record high on Thursday, boosted by the trade deal, as well as solid retail sales numbers for December.

Asian markets were, however, subdued on Friday morning, with data indicating the Chinese economy grew 6% in the fourth quarter of 2019 — in line with expectations. Growth in 2019 was, however, the lowest rate in almost three decades, Reuters reported.

Hong Kong’s Hang Seng and the Shanghai Composite were flat, with Tencent, which influences Naspers, down 0.6%.

Gold was up 0.16% to $1,554.81/$ while platinum had risen 0.12% to $1,009.67. Brent crude was down 0.2% to $64.62 a barrel.

The rand was little changed at R14.41/$, having lost 0.3% against the dollar so far in the week.

The local corporate and economic calendar is bare on Friday.

Internationally, there is some focus on US industrial data for December, as well as eurozone inflation data for the same month.

[email protected]