JSE drifts but rand toughens up slightly

The JSE was little changed on Friday, with global markets mostly positive as investors consider recent data that could have an effect on interest rates.

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.

On Thursday, the US’s core personal consumption expenditures (PCE) price index slowed to 2.4% year on year in January from 2.6% the previous month. On a monthly basis, the PCE index rose 0.3%, as forecast.

The core PCE index, the Fed’s preferred gauge of consumer inflation, rose 2.8% on a yearly basis, matching the estimates of economists surveyed by Bloomberg.

The reason the PCE is the Fed’s preferred measure is that the index tends to show inflation trends that are less affected by short-term price changes. While the PCE is still well above the central bank’s 2% target — giving credence to Fed’s cautious approach — Thursday’s data helped allay concerns about a pickup in prices, Bloomberg reported.

PROBABILITY

As of Friday, the CME FedWatch Tool showed that markets are pricing in a nearly 70% probability that the Fed will lower the policy rate by 25 basis points in June. However, these numbers remain a moving target.

“Market bets on an early rate cut in the US were a touch higher after Thursday’s PCE deflator number came out on market estimates,” said TreasuryOne currency strategist Andre Cilliers. “However, Fed officials have made it clear the central bank is intent on a cautious approach to interest rate cuts.”

The JSE all share index and the top 40 were flat on Friday, with the former at 72,775 points. Banks added 1.48%, financials 1.26% and retailers 0.95%. Industrial metals and miners lost 0.53%, precious metals and miners 0.52%, resources 0.47%, listed property 0.43%, industrials 0.4% and food producers 0.24%.

At 5.50pm, the Dow Jones industrial average was little changed at 39,053 points and the S&P 500 had added 0.25%. In Europe, the FTSE 100 rose 0.73%, France’s CAC 40 0.12% and Germany’s DAX 0.43%

At 5.54pm, the rand had strengthened 0.45% to R19.1045/$, reaching an intraday best of R19.0888/$. It had firmed 0.14% to R20.7041/€ and 0.1% to R24.1725/£. The euro was 0.31% firmer at $1.0837.

Gold gained 1.29% to $2,070.18/oz and platinum 0.63% to $880.54. Brent crude rose 2.18% to $83.73 a barrel.