The JSE tracked weaker European and US markets on Wednesday as investors maintained their focus on rising interest rates that, coupled with weak economic growth, has raised renewed fears of stagflation.
The World Bank has warned that many countries face recession amid high inflation along with rising interest rates, slowing economic growth and soaring oil prices in the wake of the war in Ukraine.
On Tuesday the international financial institution slashed its estimate for global growth in 2022 to 2.9% from a January prediction of 4.1%, due to a surge in energy and food prices, supply disruptions triggered by Russia’s invasion of Ukraine, and a move by central banks globally to increase interest rates.
RMB economist Mpho Molopyane warned against unwarranted optimism after Tuesday's data that shows economic expansion in SA in the first quarter rebounded to pre-pandemic levels, “especially as the World Bank harps on about the risk of stagflation — a theme [that is] underlying a good measure of market anxiety”.
Stephen Innes, managing partner at SPI Asset Management was similarly cautious. “The reality for the [global] economy and probably the stock markets is that aggressive central bank rate hikes are likely to take a sharp bite out of household consumption as cost of living pressures come from goods and services, depressed real wage gains and markedly higher mortgage servicing,” he said.
The JSE all share lost 0.52% to 69,950.21 points, with all sub-indices lower except for industrials, and oil, gas and coal. The top 40 was down 0.45%.
At 7.10pm, the Dow Jones industrial average was 0.76% lower at 32,929.50 points, while European markets were little changed to weaker.
Along with Thursday’s keenly awaited ECB meeting, markets will now be firmly focused on Friday’s US inflation for May. Analysts expect the year-on-year number to ease to 8.2% from 8.3% in April, according to a Bloomberg survey.
The rand gained for the third straight day, reaching R15.2525/$ in intraday trading, the strongest since April 21.
“The rand’s performance is curious as it is one of a handful of currencies to post gains against the greenback today. There isn’t overwhelming support for further [strengthening] but perhaps the relative stability in commodities prices and a dearth of meaningful global data,” said Molopyane.
At 6.03pm, the rand had strengthened 0.82% to R15.26726/$, 0.49% to R16.3756/€ and 1.16% to R19.1456/£. The euro was 0.26% firmer at $1.0727.
Gold gained 0.27% to $1,857.27/oz and platinum 0.3% to $1,018. Brent crude was 1.97% higher at $123.19/bbl.
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