JSE trims gains over US inflation number

The JSE pared gains on Friday, with its global peers mixed as investors digested another hotter-than-expected US inflation report.

The producer price index (PPI) for January, a measure of wholesale inflation, increased 0.3%, higher than the market forecast of 0.1%. Core inflation, which excludes food and energy, increased 0.5%, higher than the expected 0.1%.

The report follows another upside surprise in consumer inflation earlier in the week, suggesting prices are stickier than many had expected and supporting the idea of delayed interest rate cuts by the US Federal Reserve.

Fed chair Jerome Powell and other Fed officials have indicated that a March rate cut was unlikely. With more data pointing to a strong US economy, the outlook on the first cut continues to be pushed farther out.

According to Bloomberg, the recalibrated bets for cuts to rates have simply brought forecasts closer to what the Fed has been outlining. Critics have been saying traders’ expectations had gone overboard in how quickly and how much the Fed could cut rates in 2024. The expectation is still for the Fed’s next move to be to cut its main interest rate, which is at its highest level since 2001.

In the meantime, the hope is that a solid economy will allow companies to deliver growth in profit, which has helped stocks somewhat.

“Markets are seemingly trying to hold on to the thin gains made so far in what’s been an up and down week,” said FXTM senior research analyst Lukman Otunuga.

“It’s been a roller coaster week for stocks as markets attempt a bounce back from a Tuesday slump, with traders carefully assessing the direction of the US economy,” Otunuga said.

The JSE all share gained 0.54% to 73,616 points, with major indices mixed. The top 40 added 0.67%.

At 5.50pm, the Dow Jones industrial average was 0.14% weaker at 38,701 points, while markets in Europe had also trimmed the session’s gains.

Transaction Capital led the gains on the local bourse, gaining for the fourth successive day, buoyed by the news that it wants to raise R900m-R1.25bn by issuing and selling shares in WeBuyCars before its planned unbundling and separate listing of the profitable second-hand vehicle trader. This move will see the company reduce its 74.9% holding in the unit to 57%-67%. The company’s shares leapt 6.21%’to R9.70 on Friday, bringing the week s gains to more than 20%.

At 5.43pm, the rand had strengthened 0.32% to R18.8797/$, 0.26% to R20.3372/€ and 0.3% to R23.7523/£. The euro was little changed at $1.0772.