JSE, rand firm on US inflation data

The JSE broke a three-day losing streak on Thursday, pushed higher mainly by mining companies, while the rand firmed after the latest reading of the Federal Reserve’s preferred measure of inflation was in line with market expectations.

Price increases as measured by the Personal Consumption Expenditures (PCE) Price Index, slowed to 2.4% year on year in January, down from 2.6% the previous month, the US Bureau of Economic Analysis (BEA) reported on Thursday.

On a monthly basis, the PCE Price Index rose 0.3% as forecast. The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, matching the estimates of economists surveyed by Bloomberg.

Inflation and the outlook on interest rates have been the dominant theme for markets for some time, with investors trying to get a grip on when the Fed could start cutting interest rates.

On Wednesday, New York Fed President John Williams said the inflation outlook has improved and that his baseline scenario was for three rate cuts in 2024.

However, many Fed officials have supported a cautious approach to cutting, saying inflation risks remain.

While the PCE is still well above the central bank’s 2% target — giving credence to the Fed’s cautious approach — Thursday’s data helped allay concerns about a pickup in prices, Bloomberg reported.

According to the CME FedWatch Tool, markets almost unanimously expect no change at the Fed’s next policy in March and see an 80% probability of another pause in May.

The JSE all share gained 0.73% to 72,729.73 points and the top 40 added 0.81%. Precious metals rose 3.28%, resources 2.02%, food producers 1.03%, industrial metals 1.02%, SA listed property 1.02%, financials 0.6% and banks 0.34%. At 6.41pm, the Dow Jones industrial average was down 0.33% at 38,818.99 points, while the broader S&P 500 was 0.14% softer. European markets ended the session mixed.

Diversified miner South32 rose the most in more than a month after the company said it agreed to sell its Illawarra Metallurgical Coal business for as much as $1.65bn (R31.6bn), making headway in its strategy to simplify and reduce capital intensity. The share price gained 3.72% to R36.53.

At 6.20, the rand had strengthened 0.42% to R19.192/$, reaching an intraday best of R19.1438/$. It had firmed 0.63% to R20.7504/€ and 0.49% to R24.2472/£.

The euro was 0.22% weaker at $1.0812.