JSE firms on Fed’s dovish line on rates

Metals pushed the JSE higher on Friday though its global peers were mixed as investors digested monetary policy decisions from the US Federal Reserve and the Swiss National Bank (SNB).

The Fed held interest rates unchanged at the conclusion of its two-day federal open market committee (FOMC) meeting last week as expected. However, policymakers reiterated they expected three interest rate cuts in 2024, which helped calm investor concern about whether the world’s premier central bank would indeed cut rates this year.

Fed chair Jerome Powell said he expected rates to ease as long as inflation data continued to trend lower.

“Global stock markets cheered the Fed’s economic projections [with the JSE catching up after a public holiday], which restated consensus for three interest rate cuts over the course of the year,” RMB analysts said in a note.

The JSE all share gained 1.15% to 73,254 points and the top 40 1.35%. Precious metals rose 5.44%, resources 4.37%, industrial metals 3.48%, industrials 0.59% and SA listed property 0.3%. Retailers lost 0.62%, food producers 0.25% and banks 0.22%.

On Wall Street, the Dow Jones industrial average closed 0.77% lower at 39,475.9 points, while the S&P 500 eased 0.14%. In Europe, London’s FTSE 100 and Germany’s DAX 0.61% and 0.15% respectively, though France’s CAC 40 fell 0.34%.

The Swiss National Bank (SNB) delivered a surprise on Thursday, cutting its benchmark rate by 25 basis points (bps).

“The unexpected move by the SNB materially impacted markets. The tactical importance of the SNB’s surprise is an enactment of prospects for other major central banks to act in advance of the Fed,” said the RMB analysts.

The rand gained up to 1.2% on Wednesday after the Fed indicated three interest rate cuts in 2024, but the currency since reversed those gains.

“The rand, which closed at R18.70 on Wednesday and touched R18.65 levels at one point on Thursday, has weakened ... in line with all the emerging market currencies as the dollar rallies,” said TreasuryONE currency strategist Andre Cilliers.

“The dollar reversed all of Wednesday’s post-FOMC losses on Thursday after the SNB surprised markets by cutting its benchmark rate by 25 bps, and US economic data surprised to the top side,” said Cilliers.

At close of trade on Friday the rand had weakened 0.92% to R18.9868/$, 0.51% to R20.5152/€ and 0.48% to R23.9253/£. The euro was 0.49% weaker at $1.0805.

Gold eased 0.74% to $2,165.64/oz and platinum 1.43% to $893/oz. Brent crude was at $85.43 a barrel.