JSE likely to stumble after Fed’s hawkish pivot
The JSE faces pressure on Thursday, with Asian markets slipping after the US Federal Reserve played down the prospect of more interest rate cuts in 2019.
The Fed cut interest rates by 25 basis points on Wednesday evening, as expected, and cited uncertainty over the US-China trade war. There was, however, division among policymakers and the Fed has reduced expectations of another cut in December.
“With the US economy experiencing around 2% growth, which is fairly decent, the Fed is exercising caution over further precautionary rate cuts at this time,” deVere Group CEO Nigel Green said in a note.
US President Donald Trump immediately criticised the Fed’s messaging, with some analysts saying the central bank may have wanted to emphasise its independence in the face of his repeated calls for further cuts.
The rand was 0.25% weaker at R14.7272/$ as of 6.30am on Thursday.
Gold was flat at $1,494.86/oz and platinum was up 0.33% at $929.82. Brent crude was little changed at $63.60 a barrel.
In Asia, Hong Kong’s Hang Seng had fallen 1.24%. Tencent, which influences the JSE through market heavyweight Naspers, had fallen 1.3%.
Local focus is squarely on the Reserve Bank policy statement later, with the Bloomberg consensus that the Bank will keep the repo unchanged at 6.5%.
The prospect of fewer US interest rate cuts will constrain the ability of the Bank to cut rates in SA. Lower interest rates globally help support the rand, as it increases the relative attractiveness of SA bonds, which have higher risk premiums to US treasuries and thus offer higher returns.
There is little on the corporate calendar on Thursday.
Remgro, the Stellenbosch-based investment company controlled by businessman Johann Rupert, is expected to release its results for the year to end-June later. Remgro has not issued a trading statement, implying that its headline earnings per share has not moved in a range of 20%.