The JSE joined the global move lower on Thursday after US Federal Reserve chair Jerome Powell’s hawkish comments overnight about inflation and interest rates.
Powell said the Fed was ready to raise interest rates in March and didn’t rule out hikes at every meeting to tackle the highest inflation rate in a generation. The central bank will also start to shrink its balance sheet as it increases rates.
Locally, the SA Reserve Bank’s monetary policy committee increased its benchmark repo rate by 25 basis points to 4%, as expected.
“It’s been a remarkable week so far in financial markets and it seems there’s still plenty more to come,” said Oanda senior market analyst Craig Erlam. “It’s been a tough month for investors, forced to watch on as central bank tightening expectations hammered risk appetite and, in turn, stock markets.
“There is little sign that the clear message from the Federal Reserve is helping calm markets, or even give investors much direction; stock traders reacted to the message that the Fed may be less concerned with financial markets,” Erlam added.
The JSE all share slipped 0.4% to 73,504 points and the top 40 eased 0.44%. Precious metals were the day’s biggest loser, falling 4.27%, followed by telecommunications (-1.23%) and industrials (-0.97%). Industrial metals led the gainers, rising 1.25%, while banks and financials gained 0.92% and 0.72%, respectively.
Speaking after the federal open market committee’s (FOMC’s) meeting on Wednesday, Powell said the US economy was strong and inflation had to be tackled. The hawkish tone, against a backdrop of turmoil in stocks, comes as consumer inflation has reached the highest levels since the 1980s.
Powell’s comments that the current economic expansion is very different to the one the last time the bank tightened have left investors with a lot to consider — some are now pricing in five rate hikes this year.
At 6.31pm, the Dow Jones industrial average was 1.07% firmer at 34,534.57 points. In Europe, London’s FTSE 100 closed 0.96% higher and Germany’s DAX rose less than 0.1%.
Earlier in Asia, Japan’s Nikkei slumped 3.11%, the Shanghai Composite was down 1.78%, while Hong Kong’s Hang Seng fell 1.99%.
At 6.20pm, the rand had weakened 0.67% to R15.4064/$, was little changed against the pound at R20.6400/£ and had strengthened 0.17% to R17.1812/€. The euro was 0.76% weaker at $1.1152.
Gold was down 1.24% to $1,796.82/oz and platinum 1.6% to $1,018. Brent crude was little changed at $89.72 a barrel.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.