JSE, rand weaker on US inflation

The JSE tracked weaker global markets on Tuesday, while the rand weakened along with its emerging market peers after US inflation came in higher than expected.

Data from the US Bureau of Labor Statistics showed the consumer price index (CPI) rose 0.3% in January and was up 3.1% on an annual basis, coming in higher than Bloomberg’s expectations of 0.2% month-on-month increase and a 2.9% annual increase.

Core prices, which exclude volatile food and energy components, rose 0.4% month on month and 3.9% annually. Core CPI was expected to have increased 0.3% in January and 3.7% from a year earlier, respectively.

After a string of Federal Reserve (Fed) officials cautioned that the central bank would need to see further evidence that the war against inflation was indeed being won before the first interest rate cut could be implemented, Tuesday’s hotter inflation data has raised doubts that the Fed will be able to cut rates several times this year.

According to the CME FedWatch Tool, the latest 30-day Fed funds futures pricing data shows that a May rate cut by the Fed is largely off the table after the release of January’s consumer inflation numbers, Bloomberg reported.

On the other hand, the chance of a rate cut in June now stands at 78.6%, down from 92.2% on Monday, while the chances of the Fed holding rates steady in June are at about 21.4% on Tuesday, against just 7.8% on Monday.

“Tuesday’s inflation data has officially forced traders to reconsider their hopes for interest rate cuts,” said FXTM senior research analyst Lukman Otunuga.

The JSE all share lost 0.89% to 73,062 points — with major indices mostly ending lower, while the top 40 fell 1.06%.

At 6.05pm, the Dow Jones industrial average was 1.13% weaker at 38,358 points .

Transaction Capital led gains on the local bourse, with its shares rising 9.99% to R8.26 — the most in two weeks, after the company said it wanted to raise R900m-R1.25bn by selling some shares in WeBuyCars ahead of the planned unbundling and separate listing of the profitable second-hand car dealer. The move will help reduce debt at a group level and remove cross-default triggers now in place.

At 6.02pm, the rand had weakened 1.15% to R19.1137/$, 0.35% to R20.4855/€ and 0.79% to R24.0838/£. The euro was 0.5% weaker at $1.0718.