JSE firmer as markets await inflation data

The JSE closed firmer on Monday amid mixed global peers as investors continue to watch the banking sector, while US inflation data will be the main focus this week.

US regional bank stocks extended Friday ’ s rebound as recent data showed continued stability in the deposit base of smaller banks, according to Bloomberg.

A note last week from JPMorgan upgrading banks such as Western Alliance, Zions Bancorp and Comerica helped ease concerns in the sector. The firm said the three banks appeared “substantially mispriced” in part due to short-selling activity.

This came after California lender PacWest said it had been assessing strategic options including a possible sale, sparking wider fears about the health of the US regional bank sector.

Investor attention this week turns to US April consumer price index (CPI) data on Wednesday which will help guide the Federal Reserve in its interest rate decision at the next federal open market committee meeting in mid-June. Last week, the Fed hiked rates by 25 basis points.

“The CPI report is expected to show that core inflation cooled marginally in April, according to consensus expectations,” RMB analysts said. “Any surprises to the downside for the inflation report will see bond yields start to head lower once again, given how tetchy the market is and how traders are looking for any reason to go against the Fed’s stance of no rate cuts coming any time soon.”

Further evidence of inflation slowing down could reinforce expectations around the Federal Reserve pausing and eventually cutting interest rates, FXTM senior research analyst Lukman Otunuga said. “Should inflation remain sticky, this could rekindle bets around the Fed leaving interest rates higher for longer.”

The JSE all share gained 0.56% to 78,572 points and the top 40 added 0.62%. The precious metals and mining index added 1.99%, resources advanced 1.82% and industrial metals garnered 1.49%.

At 6.05pm, the Dow Jones industrial average was 0.15% weaker, while the S&P 500 was little changed. Markets were mixed in Europe.

The rand held steady, reaching an intraday best of R18.2725/$. At 6.16pm, it had strengthened 0.6% to R18.3012/$, 0.53% to R20.1789/€ and 0.43% to R23.1260/£. The euro was little changed at $1.1026.

“For now, the local currency remains stuck in the R18 to R18.50 range ahead of Wednesday’s US inflation numbers,” TreasuryONE currency strategist Andre Cilliers said.