The JSE was weaker on Friday morning, along with its global peers as investors digested European Central Bank’s (ECB) hawkish stance, with focus turning to the US inflation report later.
The ECB on Thursday announced its plans to raise key interest rates by 25 basis points (bps) at its next meeting in July, and also downgraded its economic growth forecasts for the eurozone.
The bank expects a further hike at its September meeting, and hinted that rates could rise a further 50 basis points then. Under the ECB’s plans, its key rate would rise to zero or higher after its September 8 policy meeting, exiting negative territory for the first time in eight years.
Investors are also keeping a close eye on the US key inflation report due on Friday, which could be instrumental in shaping the Federal Reserve’s next move.
“The roller coaster activity on stock markets continued following the ECB’s tilt to a hawkish bias at their [recent] policy meeting,” said Oanda senior market analyst Jeffrey Halley.
With the release of the US inflation data later, I am expecting a very binary outcome this evening with median forecasts for the headline at 8.30%, and core inflation at 5.90% year on year.
“A number at 8.40% or higher probably sparks a risk aversion sell-off across asset markets with the dollar winning. Conversely, a print at 8.20% or lower probably sees a buy everything, sell dollars rally, as Fed hiking expectations are pared ahead of next week’s federal open market committee meeting,” said Halley.
At 10.05am, the JSE all share had lost 0.82% to 68,348.29 points and the top 40 0.84%. Industrial had fallen 1.06%, industrial metals 0.83%, resources 0.65%, banks 0.665 and financials 0.52%.
At the same time in Europe, London’s FTSE 100 had lost 0.9%, France’s CAC 40 1.41% and Germany’s DAX 1.44%.
Earlier in Asia, the Shanghai Composite gained 1.42%, while Hong Kong’s Hang Seng fell 0.29% and Japan’s Nikkei 1.49%.
At 9.41am, the rand had strengthened 0.49% to R15.4081/$, 0.15% to R16.3929/€ and 0.44% to R19.2319/£. The euro was 0.2% firmer at $1.0638.
Gold and platinum were little changed at $1,846.19/oz and $973.5, respectively. Brent crude was down 0.46% to $122.26 a barrel.
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