MARKET WRAP: JSE joins global rally as markets cheer promising US inflation data

The JSE logged its biggest one-day gain in about four weeks on Thursday, joining its global counterparts after better-than-expected US inflation data. 

The all-share index gained 1.20% to 77,749.68 points, boosted by a broad rebound in resource shares as commodity prices perked up while the dollar came under mild pressure against a basket of currencies. 

The US headline inflation rose at an annual 3.2% in July vs 3% in July but was better than the market forecast of 3.3%. Core inflation, which strips out volatile food and energy items, was also better than expected at 4.7% year on year, slowing slightly from 4.8% in June. 

The inflation data is seen as crucial in determining the US Federal Reserve’s future path on interest rates, which have been driving market psychology for months. 

While price pressures in the world’s biggest economy have been abating, they are yet to come back within the Fed’s 2% target range, making it tricky to predict the path. 

But for the time being, the markets predict that the Fed is close to the peak in its hiking cycle, if not done already.

“The data reinforces the view that the Fed is at the end of its hiking cycle, but the room to cut rates is still long away,” independent analyst Karl Gevers said.

Crude eased

The inflation print knocked the dollar to the benefit of commodity prices, with platinum price surging 2.56% to $912.80/oz. Palladium was up 4.70% to $1,292.50/oz, though the rally came off a very low base.

Brent crude eased 0.54% to $86.88 per barrel but was close to its highest level since January, according to the Infront data.

The rally was broad based across the JSE, with banks and insurers faring well on the day, complementing sizeable gains in the big industrial stocks.

The rand extended gains to trade 1.3% up to R18.72/$, bouncing back after hitting R19/$ late on Tuesday, its weakest level in about a month.

In Europe, stock markets ended mostly higher, with France’s CAC 40 surging 1.5% while Wall Street was also higher as investors cheered the data.

“It will take something big for the Fed to consider hiking again you would think, having shifted to a more gradual approach in recent months,” said Craig Erlam, senior market analyst at Oanda before the release of the CPI data.

“To hike again in September could alarm investors and suggest the central bank has a lot more to do, which wouldn’t really be consistent with headline inflation about 3% and core below 5%.”

mahlangua@businesslive.co.za