JSE could benefit from mild Asian market recovery on Friday

The JSE looks set to start to mixed Asian markets on Friday morning, but some recovery was visible after hawkish comments from the US Federal Reserve put pressure on global markets on Thursday.

Persistent inflation and a labour market recovery has prompted the Fed to signal faster-than-expected monetary policy tightening in 2022, prompting a climb in US bond yields and putting pressure on tech stocks.

“Based on how investors responded to the Fed minutes on Wednesday, you’d be forgiven for thinking they’re terrified at the prospect of tighter monetary policy and couldn’t have foreseen what the central bank was about to unleash upon us,” said Oanda senior market analyst Craig Erlam in a note on Thursday.

“But the reality is very different and the reaction is over the top. Something I tend to expect this time of year,” he said,  likely referring to increased volatility as a result of thin trading volumes.

In morning trade on Friday the Hang Seng was up 1.17% and the Shanghai Composite 0.27%, while Japan’s Nikkei had given back 0.22%, extending a 2.88% slump on Thursday.

Tencent, which influences the JSE via the Naspers stable, had gained 1.19% after adding 1.49% in the prior session. The Chinese tech giant fell 4.31% on Wednesday.

Gold was 0.1% higher at $1,792.40/oz, having lost 1.09% on Thursday. Platinum was up 0.36% to $971, coming off a 1.9% fall. Brent crude had gained 0.83% to $83.62 a barrel, bringing year-to-date gains to above 6%.

Oil is continuing to push higher as traders price in a modest economic impact from Omicron, Erlam said, and the knock to broader market sentiment from the Fed minutes is not reverberating around the crude market.

The rand was flat at R15.71/$ and had strengthened 1% on Thursday. The yield on SA’s 10-year bond climbed 4.5 basis points to 9.43% on Thursday, after having traded at this level in late December. Bond yields move inversely to bond prices.

Activity was somewhat subdued and directionless, with yields drifting up and ignoring the irrepressible currency, Sasfin Wealth’s head of fixed-income dealing, Ashley Dickinson, said in a note. Sentiment remained tenuous, and a fairly quiet, stable pre-weekend session should be expected, Dickinson said.

The JSE had its worst day in more than two weeks on Thursday, after reaching a record high on Wednesday. It needs to lose a further 0.6% for it to be negative in 2022.

The global focus on Friday is on the release of US nonfarm payrolls numbers for December, with the Bloomberg consensus for employers to have added 447,000 staff to their payrolls that month, more than double that of November.

gernetzkyk@businesslive.co.za