MARKET WRAP: JSE pares losses ahead of US inflation data

The JSE reversed most of its intraday losses to end Tuesday’s session slightly lower, while the rand staged a mild recovery from its weakest level against dollar since October 2020.

Still, rising inflation and interest rates remain the dominant drivers of sentiment and the release of US inflation data on Wednesday will be closely monitored by markets. Prices in the world’s biggest economy are expected to have accelerated to an annual rate of 8.8% in June, according to Bloomberg’s median estimate, from 8.6% in May. But core inflation, which excludes volatile food and energy, is likely to have eased to 5.7% from 6% on an annual basis.

The JSE all share settled 0.09% lower at 67163.71 points, dragged down mainly by resources stocks that were hit by lower commodity prices. However, banks and financial stocks fared better, along with domestically-orientated industrial stocks.

“At present, there appears to be a wall of worry with multiple negative factors keeping investors from aggressively buying stocks: inflation, inflation expectations and the path for interest rates could be seen as the main driver,” said Lester Davids, an analyst Unum Capital.

“As inflation has increased, so have bond yields which has put pressure on heavyweight growth stocks that have led the market over the last few years,” Davids said, referring to the US big-tech stocks that have borne the brunt of the global market sell-off.

Global growth concerns have had a huge impact on commodity prices and, by extension, mining companies. The JSE resource 10 index shed a further 1.78% on Tuesday and is now 30% off its peak reached in early March. The JSE all share, meanwhile, is 13% below its record high in early March.

The rand, meanwhile, strengthened to below R17 to the dollar as the greenback softened against a basket of currencies, most notably the euro, which was 0.23% firmer at $1.0062/€. At 6.40pm the rand was 0.89% stronger at R16.9624/$, but it is still down 4% against the dollar so far in July.

Brent crude tumbled 6.2% to trade at $99.85 a barrel at 7.03pm as worries about demand amid a weakening global economy outweigh long-standing concerns about supply after Russia invaded Ukraine and its exports were sanctioned.

“Recession fears are strengthening the bearish case for crude and we're seeing those materialise after previously reaching very high levels,” said Craig Erlam, senior market analyst at Oanda.

“That said, the market remains extremely tight and the Opec report today highlighted that fact, with demand next year seen exceeding supply by a million barrels per day.”

mahlangua@businesslive.co.za