JSE could halt two-day slide after Wall Street U-turn

The JSE could rebound on Tuesday after a two-day slide left the all share index at its lowest level since late December.

Still, investors appeared unsettled in light of the uncertainty about the extent to which the US Federal Reserve was likely to increase interest rates to fight off runway inflation. Rising geopolitical tension fuelled by conflict between Russia and Ukraine also undermined risk appetite.

Asian share markets were weaker on Tuesday despite the dramatic comeback on Wall Street, where the tech-heavy Nasdaq, the S&P 500 and the Dow Jones industrial average reversed losses of more than 3% apiece, highlighting the skittish sentiment.

The two-day slide in the SA share market came off a high base after the all share scaled record highs over the past week.

The rand, which often acts a barometer of sentiment towards emerging markets, has been resilient against the dollar, though it was caught up in the selling frenzy on Monday.

SA’s currency was off 0.32% to R15.29/$, but still 4.05% stronger since the start of the year. Foreign investors bought a net R11.5bn worth of SA bonds over the past week, JSE weekly data show.

Elsewhere, Brent crude was a tad lower at $86.79, after sliding as much as 3% the day before. Rising Brent crude has been one of the drivers of headline inflation in SA, which rose to an annual rate of 5.9% in December, the highest in about five years.

The Reserve Bank is widely expected to lift rates by 25 basis points when its monetary policy committee wraps up its policy meeting on Thursday. Before that, though, the Fed ends its policy meeting on Wednesday.

“It could be a make or break week for the markets, with the Fed meeting on Wednesday, big tech earnings, and ongoing tensions on the Ukraine/Russia border,” said Craig Erlam, senior market analyst at Oanda.

“That may sound a bit over the top given how deep a correction we’ve already seen, particularly in the Nasdaq, but it could get much worse before it gets better.”

Erlam said the Fed needed to strike the right balance between taking inflation seriously and not wanting to cause further unnecessary turmoil in the markets.

mahlangua@businesslive.co.za