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A statue of a bull is displayed outside the Shenzhen Stock Exchange in the southern Chinese city of Shenzhen. Picture: REUTERS/BOBBY YIP
A statue of a bull is displayed outside the Shenzhen Stock Exchange in the southern Chinese city of Shenzhen. Picture: REUTERS/BOBBY YIP

The JSE looks set to follow mixed markets on Thursday morning, with sentiment still fragile as investors contemplate the chances of the world’s largest economy falling into recession in coming months.

Attention on Wednesday was squarely on testimony by US Federal Reserve chair Jerome Powell before Congress, but he told legislators that while recession is a possibility, it is not likely.

The Fed delivered its first 75 basis point (bp) hike since 1994 in June, and there are concerns that the fight against inflation will prompt an economic slowdown.

“Powell leaves no-one in any doubt that the employment side of the Fed’s dual mandate now runs an almost non-existent second behind the imperative of getting the inflation genie back in the bottle,” National Australia Bank head of foreign exchange strategy Ray Attrill said in a note.

SA’s inflation for May also surprised to the upside on Wednesday, coming it at 6.5%, its highest since January 2017.

From a monetary policy perspective, it is important to note that this latest inflationary overshoot was driven once again by food and fuel prices, with the upward drift in core and services inflation still gradual as expected, Anchor Capital investment analyst Casey Delport said in a note on Wednesday.

“Should the June print pull higher still, coupled with further rand weakness, there will be strong case for greater front-loading of interest rate hikes — in this case a hike of 75bps in the July meeting could well be plausible,” said Delport.

“However, based on this latest print and its respective drivers alone, we believe that the Bank will likely hike rates by 50bps in July, followed by two more rate hikes in increments of 25bps in the September and November meetings,” she said.

In morning trade the Hang Seng was up 1.05% and the Shanghai Composite 0.58%, while Japan’s Nikkei was down 0.2%.

Tencent, which can influence the JSE through Naspers, gained 1.46%.

Gold was down 0.27% to $1,832.59/oz while platinum lost 0.11% to $928/oz. Brent crude was 0.8% weaker at $109.12 a barrel.

The rand was 0.25% weaker at R15.93/$.

The local corporate and economic calendars are bare on Thursday.

gernetzkyk@businesslive.co.za

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