JSE lower amid focus on US rates

The JSE closed weaker amid mixed global peers on Tuesday as investors awaited fresh catalysts for direction while awaiting a key inflation report this week.

The outlook for US inflation and the timing of interest-rate cuts remain in focus. Investors are awaiting the release of January’s personal consumption expenditures (PCE) price index report on Thursday, in which they will be looking for clues into the health of the economy and for insights into the path of monetary policy.

Core PCE, the Fed’s preferred inflation gauge, is expected to rise 2.8% year on year. The report could indicate where the Fed will take interest rates in 2024, reported Bloomberg.

Federal Reserve of Kansas City president Jeffrey Schmid is the most recent Fed official to join other several central bank officials who have supported a cautious approach to cutting interest rates.

Schmid said on Monday the “best course of action is to be patient, continue to watch how the economy responds to the policy tightening that has occurred, and wait for convincing evidence that the inflation fight has been won”.

Schmid’s approach resonates with the message of other Fed policymakers in recent weeks signalling that they want to keep the policy rate in its current 5.25%-5.5% range until they have greater confidence that inflation is headed to the Fed’s 2% goal, reported Reuters.

“There is little change in market narratives, with investors awaiting further data from the US to guide their decision-making,” said Citadel Global director Bianca Botes. “The main focus this week is the Fed’s most preferred measure of inflation, the core PCE.”

The JSE all share lost 0.65% to 73,142 points with major indices mixed, while the top 40 was down 0.66%.

At 5.40pm, the Dow Jones industrial average was 0.34% weaker at 38,937 points, while markets were mixed in Europe.

The rand firmed more than 1% on the day, reaching an intraday best of R19.06/$.

Investec chief economist Annabel Bishop said the rand remaining above R19/$ mark is due to the “ongoing volatility in market expectations around US interest rate cuts, with a trend of overall weakness for the domestic currency”.

At 5.48pm, the rand had strengthened 1.11% to R19.0857/$, 1.1% to R20.6981/€ and 1.14% to R24.1898/£. The euro was little changed at $1.0845.

Gold gained 0.17% to $2,034.62/oz, while platinum rose 2.34% to $892.4/oz. Brent crude was 0.46% firmer at $82.13 a barrel.