JSE weakens after US inflation surprise

The JSE was weaker on Thursday and its global peers were mixed as investors digested another US inflation report that was hotter than expected.

The market was expecting a 0.3% rise in February’s producer price index (PPI), a measure of wholesale inflation. Instead it rose 0.6% on the month. January’s increase was 0.3%. Year on year, the headline index rose 1.6%, the biggest move since September 2023, reports Bloomberg.

The core PPI, excluding food and energy, accelerated 0.3% in February, compared with the estimated 0.2% increase.

PPI is considered to be a leading indicator for inflation as it indicates costs early in the supply chain.

US retail sales rebounded, up 0.6% in February, according to commerce department data that is adjusted seasonally but not for inflation. The increase helped reverse a downwardly revised 1.1% slump in January, but was still below the estimate for a 0.8% rise. Retail sales gained 1.5% year on year, below the 3.2% increase in the CPI.

The two inflation reports and the retail sales are among the last key economic reports expected before the federal open market committee (FOMC) meeting on March 20.

“Fed officials made [it] clear that they want to see evidence that inflation is easing towards the 2% target before committing to interest rate cuts, data this week isn’t giving much confidence yet,” said FXTM senior research analyst Lukman Otunuga.

“While markets expect the Fed to keep rates unchanged at next week’s FOMC meeting, traders will be looking for clues about the future of monetary policy after policymakers update their outlooks at the meeting.”

The JSE all share lost 1.24% to 73,340 points with major indices weaker. The top 40 was down 1.39%.

At 6pm, the Dow Jones industrial average was 0.27% weaker at 38,938 points, while markets were mixed in Europe.

Standard Bank led the losses on the JSE on the day, falling 6.81% to R186.11 - the biggest one day fall since December 2022, despite the group announcing that higher average interest rates across all regions supported strong expansion in its net interest margin.

The group also said higher average interest rates bolstered provisions for bad debt in the face of client strain and a difficult macroeconomic outlook.

At 6.18pm, the rand had weakened 0.94% to R18.7315/$, 0.34% to R20.3933/€ and 0.63% to R23.8791/£. The euro was 0.56% weaker at $1.0887.

Gold lost 0.71% to $2,158.83/oz and platinum 0.58% to $931.52/oz. Brent crude rose 1.88% to $85.14 a barrel.