JSE may have its first fall of 2022 on Thursday after hawkish Fed minutes

The JSE looks set to start to weaker Asian markets on Thursday and may have its first loss so far in 2022, after minutes from the US Federal Reserve’s December meeting indicated tighter monetary policy conditions are on their way.

Inflation has been more widespread and persistent than previously anticipated, the minutes read, even as the US continues to see a recovery in its labour market.

“Participants generally noted that, given their individual outlooks for the economy, the labour market and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” the minutes read.

The prospect of less accommodative monetary policy had already weighed a bit on US markets on Tuesday ahead of the release, with tech shares under pressure, while yields on US treasuries climbed. The prospect of higher future interest rates can weigh on tech shares, given much of their valuation is driven by expectations of future earnings.

The tech-heavy Nasdaq slumped more than 3% on Wednesday, its worst day since February 2021, while the Dow fell 1%.

In morning trade on Thursday Japan’s Nikkei had slumped 2.69%, on track for its worst day since June 2021. The Shanghai Composite was down 0.14% and the Hang Seng 0.4%.

Gold was down 0.29% to $1,805.30/oz, while platinum had lost 1.03% to $972.68. Brent crude was 0.65% weaker at $79.64 a barrel.

The rand was 0.37% weaker at R15.95/$ but it had gained 0.67% on Wednesday. The local bourse had added only about 9 points, but this was enough for a record close of 75,060.92.

Local focus is likely to continue to be on the implications of the first part of the state capture commission report, which has made damning findings about a number of politicians and politically connected individuals. The corporate and economic calendar is bare.

International focus is now likely to shift to the release of US nonfarm payrolls numbers for December on Friday, which could further inform just how fast the Fed will reduce its policy support.

gernetzkyk@businesslive.co.za