JSE faces mixed Asian markets on Thursday ahead of Reserve Bank decision

The JSE looks set to open to mixed Asian markets on Thursday morning, with sentiment this week slightly positive, and with all eyes on central bank activity later in the day.

The resumption of gas flows through the Nord Stream pipeline, the biggest linking Russia and Europe, has come as a relief for markets, though SA’s news has been less positive.

Consumer inflation jumped to 7.4% year on year in June, data showed on Wednesday, 0.2 percentage points more than expected, and the 14th consecutive month that it has been above the 4.5% midpoint of the Reserve Bank’s target range.

The jump in inflation keeps a 75 basis point interest rate hike on the table at Thursday’s Reserve Bank announcement. 

However, with policymakers concerned about the weakness of the economy and core inflation still soft, a 50 basis increase seems to be the most likely outcome, Capital Economics emerging markets economist Virag Forizs said in a note on Wednesday.

The inflation print on Wednesday is unlikely to have an influence on the Reserve Bank’s rate decision, given the concern around global growth, the slide in commodity prices and the already strained consumer, Sasfin Wealth fixed-income trader Alvin Chawasema said in a note.

The announcement is due at 3pm SA time, while the European Central Bank (ECB) is set to announce its latest policy decision at 2.15pm. 

Markets are increasingly pricing in a 50 basis point hike from the ECB, with the view now that it is a coin toss, despite previous warnings that it is likely to be 25 basis points, Oanda senior market analyst Craig Erlam said in a note on Wednesday.

In morning trade on Thursday the Hang Seng was down 1.28% and the Shanghai Composite 0.42%, while Japan’s Nikkei was up 0.21% and South Korea’s Kospi 0.35%.

Tencent, which influences the JSE via the Naspers stable, had fallen 0.92%.

Gold was down 0.25% to $1,691.53/oz while platinum lost 0.81% to $852.50. Brent crude was down 0.42% to $106.05 a barrel.

The rand was 0.12% firmer at R17.11/$.

Vodacom is due to give an update on the three months to end-June, its first quarter, later in the day. Anglo American Platinum and Kumba Iron Ore are also due to release production reports, covering their half years to end-June.

gernetzkyk@businesslive.co.za