JSE catches its breath after rally

The JSE ended weaker on Wednesday after a muted session, though market heavyweight Naspers had another solid performance in line with the rebound in technology stocks globally.

The all-share index gave up 0.54% to end at 72,607.46 points, dragged lower in part by resources and mining stocks such as Anglo American, which fell 4% to R657.60.

The SA share market appears to be in consolidation after the recent rally that took the all-share to the highest level in months. Investors, who are always forward looking, are betting that central banks in developed markets in particular could slow the pace of their policy tightening as signs are pointing to a plateau for inflation.

The US last week reported that headline inflation rose at an annual pace of 7.7% in October, well below market expectations of 8%, suggesting prices pressures are easing. That could prompt the Federal Reserve, which has been resolute in its fight against higher prices, to increase its benchmark rate by 50 basis points at its next meeting in December rather than the 75 basis points that the market was expecting before the latest data.

“There seems to be a temporary reprieve as markets enjoy a relief rally on the back of lower-than-expected inflation,” a market analyst, who spoke on condition of anonymity, said.

“There is still significant risk built up however, and it is my expectation that markets are likely to continue to be exceptionally volatile into the medium term. Even though inflation could be slowing, it is coming off a high base and central banks will want to avoid acting too early; that will keep volatility and uncertainty elevated.”

The rand, which is a major proxy for risk sentiment in developing markets, was steady on the day at R17.22/$ but still stronger than a few weeks ago when it traded well over R18/$.

Europe’s main markets were weaker after UK inflation surged to a fresh 41-year high in October, heaping pressure on Prime Minister Rishi Sunak.

“At 11.1%, the data implies a considerable squeeze on real incomes, with the pace far exceeding wages, which were confirmed to have risen 6% in the three months to September, yesterday,” Oanda senior market analyst Craig Erlam said.

“The only upside is this is expected to be as high as it gets. Of course, just as important is how quickly it’s going to fall and the latest surprise to the upside isn’t going to fill people with optimism,” he said.