JSE, global stocks rally on Fed rate cut hopes
SOUTH African and global stocks had a bullish run yesterday on the back of the market’s US Federal Reserve rate cut hopes.
The JSE index reverted some initial losses to close about 0.5% up at 77 539 points, its highest in nine months, mainly driven by heavyweight resourcelinked stocks and tech companies, according to Trading Economics.
Traders continued to re-assess the outlook for interest rate cuts, while also monitoring more corporate results across the globe. On the data front, a larger-than-expected rise in US jobless claims offered further evidence of cooling in the labour market, raising hopes of interest rate cuts by the Fed.
AFP reported that the London and Frankfurt stock exchanges hit record highs yesterday as the Bank of England kept its interest rate at a 16-year high, but raised hopes of a cut in the coming months.
Meanwhile, Wall Street rose following data showing a climb in claims for unemployment benefits that could raise the prospect of a US rate cut.
The British capital’s benchmark FTSE 100 index, which has been breaking records repeatedly in recent days, topped 8 390 points a couple of times during the day. The DAX in Frankfurt came just shy of striking 18 700 points. The Paris CAC 40 also rose after falling earlier in the day.
The Bank of England kept its key rate at 5.25% for a sixth meeting in a row in efforts to tame inflation, mirroring a wait-and-see approach by the Fed and European Central Bank, AFP reported
“There is a cautious sense of optimism with analysts predicting we are edging closer to the first cut in interest rates since the pandemic, with the first cut potentially this summer,” said Richard Flax, the chief investment officer at Moneyfarm.
The rand strengthened against the dollar to R18.4917 at 8.20pm.
Annabel Bishop, the chief economist at Investec, said the rand had remained constrained by risk-averse sentiment, with the US stretching out its launch of its anticipated interest rate cut cycle has had a negative effect on emerging markets (EM), their currencies and their capital flows.
Volatility had been significant in emerging markets, including currencies, as the US Federal Reserve funds futures had seen probabilities continuously fall for an early US rate cut this year, now pulled into quarter four 2024, she said.
Institute of International Finance noted in its Global Debt Monitor report this quarter that debt in EM had grown to $105 trillion (R1 949 trillion), doubling over the past decade, adding to concerns around global financial stability.
The largest growth in EM debt had come from India, Mexico and China, while for South Africa, the IIF noted South Africa needed an improvement in investor confidence after a lengthy period of capital flight.