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The JSE looks set to open to mostly positive Asian markets on Thursday morning, while the rand was comfortably below R17/$, with market focus still on US inflation after surprisingly high numbers for June.
US consumer inflation printed at 9.1% year on year in June, higher than the 8.8% expected by the market, disappointing those hoping to see figures indicating that price pressures had peaked.
The Bank of Canada also surprised the market with a 100 basis point interest rate hike, and focus on Thursday will be on US producer inflation data. A slight easing from May’s 10.8% year-on-year rise is expected.
US markets fell in response to Wednesday’s inflation data, but showed some recovery at the close, with the S&P 500 Index losing 0.45%, having earlier fallen some 1.5%.
Possibly helping stocks was the fallback in 10-year US treasury yields, where an initial 10 basis point spike after the inflation numbers was more than fully reversed, National Australia Bank head of foreign exchange strategy Ray Attrill said in a note.
Bond markets are, however, strongly signalling recession, and at -22 basis points the inversion of the yield curve for two- and 10-year treasuries is at its worst since November 2000, SPI Asset Management managing partner Stephen Innes said in a note.
An inverted curve refers to the yield on longer-dated bonds falling below shorter-dated ones, reflecting that the market expects lower interest rates in the future, which is a strong indicator of looming recession. Bond yields move inversely to prices.
In morning trade Japan’s Nikkei was up 0.78%, the Hang Seng 0.28% and the Shanghai Composite 0.31%.
Tencent, influential to the JSE due to Naspers, rose 0.24%.
Gold was 0.17% weaker at $1,731.03/oz while platinum was little changed at $851.50. Brent crude was up 0.21% at $100.21 a barrel.
The rand was 0.15% weaker at R16.92/$ and R16.98/€. Focus this week has been on the greenback reaching parity with the euro for the first time in two decades.
The local corporate calendar is bare on Thursday, while in economic news mining data for May is due later. Mining output is expected to have fallen more than 10% in the month, after a surprise 14.9% crash in April. Output in an industry that has proved to be a major support for the rand and the fiscus was under pressure that month due to rail dysfunction, load-shedding and a strike in the gold sector.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.