JSE weakens on US consumer inflation

The JSE closed weaker and European markets firmed as investors digested the latest US inflation report showing consumer inflation cooling in March, though core prices remain elevated.

The consumer price index (CPI) edged up 0.1% month on month in March, lower than the market expectations of 0.2%, but core CPI — which excludes volatile food and energy prices — rose 0.4%, which was down from February’s 0.5% rise and in line with expectations.

Still, annual core inflation was up 5.6% from a year ago, and the overall CPI was 5% higher year on year. That’s the first time in more than two years that core came in above the overall measure, Bloomberg reports.

Producer price inflation is due on Thursday. With CPI, this is a critical gauge for the Federal Reserve before its next monetary policy meeting on May 2-3 to decide interest rates. “Although the numbers may seem encouraging, it’s not enough to aid the Fed to stop raising rates as investors hoped,” said SPI Asset Management managing partner Stephen Innes. The Fed will probably raise rates by 25 basis points, he said.

The JSE all share fell 0.32% to 77,740 points after being little changed for most of the session. The top 40 was down 0.4%. At 6.48pm, the Dow Jones industrial average was 0.3% firmer at 33,785.84 points, while the S&P 500 was up 0.24%. European markets were moderately higher, with London’s FTSE 100 adding 0.5%, France’s CAC 40 up 0.09% and Germany’s DAX firming 0.31%.

Minutes from the Fed’s March policy meeting due later on Wednesday were expected to offer more clues on the thinking behind the US central bank’s 25 basis point hike in the wake of the collapse of Silicon Valley Bank and the subsequent mini-crisis in the banking sector.

“The central bank has vowed to keep hiking rates in an effort to fight stubbornly high inflation, despite higher rates potentially pushing the US economy into recession,” said Citadel Global director Bianca Botes.

“Prospects of a recession have seen safe-haven demand pivot from dollars to gold. The price of the precious metal remains above the $2,000 mark, highlighting that uncertainty in the global markets is high.”

At 6.04pm, the rand was little changed at R18.3728/$, but it weakened 0.68% to R20.1895/€ and 0.41% to R22.9175/£. The euro was 0.7% firmer at $1.0989.

Gold rose 0.23% to $2,007.39/oz and platinum was up 2.22% at $1,015.60/oz. Brent crude was 1.97% firmer at $87.15 a barrel.