MARKET WRAP: JSE drops ahead of US Fed interest rate decision
The Reserve Bank is set to announce its monetary policy decision on Thursday; consensus is for the repo rate to remain unchanged at 6.5%
The JSE closed lower on Wednesday as investors remained cautious ahead of the US Federal Reserve’s interest rate decision later in the day.
Markets have largely priced in a 25-basis-point cut from the Fed, with the central bank facing pressure from US President Donald Trump to loosen monetary policy after the European Central Bank (ECB) cut its deposit rate by 10 basis points last week.
The SA Reserve Bank is set to announce its decision on monetary policy on Thursday. The consensus among 18 economists polled by Bloomberg is for the repo rate to remain unchanged at 6.5%.
“A key reason for this is that the Bank bases its interest rate decisions on a forward-looking process. In July, the monetary policy committee (MPC) indicated that it expects headline inflation to increase to an average of 5.4% in the first quarter of 2020,” PwC said in a note. “This will be a notable departure from the Bank’s current favoured level of 4.5% and edging towards the upper limit of the official target range (3%-6%). As such, the MPC cannot, at this stage, risk lower interest rates.”
Business Day TV spoke to CitiBank economist Gina Schoeman about why she expects a dovish hold from SA's central bank.
Shortly after the JSE closed the Dow was down 0.20% to 27,055.88 points. In Europe, the FTSE 100 was flat, while France’s CAC 40 added 0.22% and Germany’s DAX 30 0.21%. Earlier, the Shanghai Composite rose 0.25%, while Hong Kong’s Hang Seng fell 0.13% and Japan’s Nikkei 225 0.18%.
At 5.20pm, the rand had strengthened 0.39% to R14.6408/$, 0.5% to R16.1943/€ and 0.55% to R18.2676/£. The euro was flat at $1.1061.
Gold was up 0.47% to $1,508.18/oz while platinum lost 0.58% to $934.81. Brent crude added 0.33% to $64.2 a barrel.
The JSE all share fell 1.19% to 56,220.40 points and the top 40 1.45%. Industrials shed 2.32% and resources 0.44%. Property, however, gained 0.87%.
Sasol dropped 1.13% to R287.71. Bloomberg reported on Wednesday that the company is planning to sell its SA coal mining business.
Afrimat leapt 9.7% to R32.79 after the building materials supplier said on Wednesday that it expects its headline earnings per share (HEPS) to increase by between 80% and 100%, to between 167.6c and 186.2c, in the period ended August 31.
EOH fell 0.79% to R12.60 after the company said on Wednesday it expects a headline loss per share of 973c from continuing operations in the year to end-June.
Pan African Resources lost 2.63% to R2.22. The gold miner said on Wednesday that its HEPS grew 20.2% to 1.19 US cents in the year to end-June.
Richemont slumped 5.95% to R109.44 after the company’s stock was downgraded to “sell” from “neutral” by Swiss investment bank UBS on Wednesday.
Consumer inflation accelerated to 4.3% in August from a year earlier, up from 4% in July, data from Statistics SA showed on Wednesday. That’s still below below the mid-point of the Bank’s 3% to 6% target. The consensus was for consumer inflation of 4.2%, according to a Bloomberg poll.
Retail sales grew by 2% year-on-year in July, below the Bloomberg consensus for a rise of 2.6%, and down from 2.4% in June.