MARKET WRAP: JSE gains in line with global markets ahead of crucial US CPI data

The JSE had a blockbuster session on Monday for the second trading day in a row, taking its cue from world markets.

Investors are betting that US inflation numbers for August, due on Tuesday, will show a declining trend. If so, the data would likely slow the pace of interest rate increases by the US Federal Reserve.

US inflation likely decelerated to an annual rate of 8% in August, according to Bloomberg median estimate, from 8.5% in July.  However, core US inflation, which excludes volatile energy and food, likely picked up 6.1% year-on-year from 5.9%.

Market moves have been erratic over the last few weeks amid fears that excessively high interest rates could tip the global economy into a recession.

The JSE all share index gained 1.55% to finish at 69,772 points — , its highest close in two weeks.  All the main indices closed positively, indicating the broadness of the rally.

“There is also a sense that the war in Ukraine has entered what might be described as a decisive phase, which is helping market sentiment,” said Greg Katzenellenbogen, senior portfolio manager at Sanlam Private Wealth.

The rand gained 1.35% to R17.08 by 7pm, showing the global risk-on sentiment and a weaker dollar. As recently as last week, the rand fell to R17.54/$, which was its weakest since August 2020 before subsequently rebounding.

Brent crude surged 6% to $93.99 a barrel, the most since March 23, according to Infront data.  Other commodities were firmly in the green, thanks to a weaker dollar that tends to support metal prices. The platinum price rose 3.3% to $904.40/oz

“Market expectations for September’s US interest rate move have been fluctuating, closer to between 50 basis points and 75 earlier in the month, and a lower-than-expected CPI print tomorrow could see the market move its rate hike view back closer to 50bp ,” said Annabel Bishop, chief economist at Investec Group.

Higher US rates make dollar-based investments more attractive and tend to divert capital from emerging markets, which are regarded as more risky. 

Europe’s leading stock markets ended about 2% higher, while the tech-heavy Nasdaq in the US was about 1% higher at 7pm SA time.

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