JSE poised for strong gains on Wednesday morning

South African stocks could rally on Wednesday morning as Asian markets surge on renewed optimism about a US-China trade deal and after the European Central Bank (ECB) said more stimulus could be on the horizon.

The S&P 500 Index closed 1% higher on Tuesday. On Wednesday morning, Hong Kong’s Hang Seng Index rose 2.4%, the Shanghai Composite advanced 1.5%, Japan’s Nikkei 225 added 1.7%, Korea’s Kospi 1.1%, and Australia’s main benchmark 1%.

Chinese internet and gaming giant Tencent rallied 3.7% in Hong Kong, suggesting a strong opening for major shareholder and JSE-heavyweight Naspers. 

In Australia, JSE-listed miner BHP Group added 1.8%.

Trump tweeted on Tuesday that he “had a very good telephone conversation with President Xi of China”.

“We will be having an extended meeting next week at the G20 in Japan. Our respective teams will begin talks prior to our meeting,” he said.

This came as ECB president Mario Draghi said policy-easing measures were on the table if required.

No major company results are expected on the JSE on Wednesday.

Statistics SA is due to publish consumer inflation data for May at 10am. Analysts have said a benign reading — where inflation is below 4.5% — would make a strong case for an interest rate cut.

The US Federal Reserve will also be in focus on Wednesday as its monetary policy committee announces its latest rate decision following a two-day meeting.

Elsewhere, the UK is expected to publish inflation numbers, and the US will release fuel and crude oil stocks data.

The rand, which posted strong gains on Tuesday, was slightly weaker on Wednesday morning at R14.57/$, R18.29/£, and R16.30/€.

“The good news should be priced in for the most part, but short-term knee-jerk reactions can be expected leading up to and during the events of the Federal Reserve and SA’s state of the nation address over the next two days, posing good foreign currency buying opportunities,” said Bianca Botes, treasury partner at Peregrine Treasury Solutions.

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