JSE, rand end firm as dollar weakens

The JSE closed firmer on Friday, with the rand gaining for the fourth consecutive day as the dollar eased after the US Federal Reserve’s preferred measure of inflation showed moderating prices in December.

The US core personal consumption expenditure (PCE) price index grew 0.2% month over month, in line with market estimates, while the annual core PCE data decelerated to 2.9% against expectations of 3% and the former reading of 3.2%.

“The PCE number, combined with the stronger estimate on the fourth quarter US GDP [released on Thursday], support the notion that the world’s biggest economy could be headed for a soft landing after all,” said FXTM senior research analyst Lukman Otunuga.

“Markets are now widely expecting the Fed to keep interest rates unchanged at the next policy meeting. But we are of the view that the recent data will lead the Fed to cut rates in the second half of the year,” added Otunuga.

The JSE all share gained 1.41% to 75,084.38 points, and was up 3.34% for the week, and the top 40 added 1.53%. Industrial metals rose 2.05%, banks jumped 1.76%, resources garnered 1.62%, industrials and financials both firmed 1.43% and the precious metals and mining index advanced 1.25%.

At 6pm, the Dow Jones industrial average was 0.35% higher and the S&P 500 was 0.25% firmer. In Europe, the FTSE 100 rose 1.5%, France’s CAC 40 2.31% and Germany’s DAX 0.24%.

Investec chief economist Annabel Bishop said last week’s data — particularly the GDP and PCE reports, staved off some concerns, and strengthened the case for a soft landing for the US, while also reducing some degree of market expectations about the timing of the first cut in the US interest rate cycle.

“Markets now expect the first US rate cut with a 100% probability to happen on June 12, shifting from the May meeting ... with the Fed funds futures tabulating less than a 50% chance for a cut by the Federal Open Market Committee on March 20,” said Bishop. She noted that the rand will remain beholden to the US inflation outcomes.

At 6.06pm, the rand had strengthened 0.57% to R18.7596/$ — having touched an intraday best of R18.7123/$. It firmed 0.48% to R20.362/€ and 0.34% to R23.8638/£. The euro was 0.14% firmer at $1.0861.

Gold lost 0.17% to $2,016.77/oz, while platinum rose 3.37% to $914.3/oz. Brent crude was 0.38% weaker at $81.53 a barrel.