Picture: BLOOMBERG/WALDO SWIEGERS
Picture: BLOOMBERG/WALDO SWIEGERS

The JSE could be in for a slow start to the week, with several markets in Asia, including China and Hong Kong, shut for a public holiday.

The outcome of the US Federal Reserve’s policy meeting on Wednesday will be the main event for the markets this week.

The world’s most influential central bank is widely expected to keep interest rates unchanged at record lows, but will give a fresh indication on how it sees consumer inflation playing out in the coming months.

Global markets have been fretting over whether the current cycle of US consumer inflation, which hit its highest level in 12 years in May on an annual basis, is temporary or lasting.

The US Fed has previously indicated that higher inflation will be transitory, implying that it will not scale back its loose monetary policy, a pillar of support for global markets.

The yield on the benchmark US Treasury hovered near its lowest level in three months on Monday at 1.46%, signalling that the market is increasingly buying into the argument high inflation will be temporary.

“I am expecting no change to the Fed Funds rate or the language. Despite US core inflation being at 30-year highs, the Fed is too heavily invested in the transitory inflation narrative to blink now,” said Jeffrey Halley, senior market analyst at Oanda.

“Thus, I very much doubt the members will even move their rate hike expectations forward in the dot plot. One look at the US bond market will tell them any mention or hint of the taper word will result in carnage across multiple asset classes.”

The rand was on the back foot against the dollar as it lost 0.38% to R13.72/$.

Brent crude rose 0.88% to $73 per barrel, its highest level in two years.

mahlangua@businesslive.co.za

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