The JSE weakened along with the US and European markets on Friday, while the rand fell the most in a month after US inflation data came in worse-than-expected.
The May consumer price index came in at its highest level since 1981, putting pressure on markets across the board. The report showed prices rising 8.6% year over year, and 6% for core inflation, which excludes food and energy prices. The market expectation was an increase of 8.3% for the main index and 5.9% for the core index.
Investors were keeping a close eye on the inflation report, which will be instrumental in shaping the US Federal Reserve’s next move. Inflation has been surging all year, leading the Fed to raise rates to mitigate those pricing pressures. The US started raising rates in March and implemented a 50-basis-point hike in May, its largest in 22 years.
“Stocks tumbled after a hot inflation report removed any chance for the Fed to pause tightening in September,” said Oanda senior market analyst Edward Moya. “CPI readings are skyrocketing and, unfortunately that may continue for another report or two as shelter, gasoline, and food prices are the biggest drivers.”
“This was a very bad inflation report. The Fed’s latest mistake is that it did not act strongly to cool inflation, and it will now be forced to deliver more rate hikes as inflation is clearly not transitory and not ready to peak,” said Moya. “Markets are now pricing in a half-point rate increase for the September meeting, which makes the Jackson Hole Symposium very unlikely to be an opportunity for the Fed to change their tightening course.”
The JSE all share lost 1.61% to 67,803 points and the top 40 retreated 1.73%. The industrial metals and mining index fell 4.74%, resources declined 2.38%, financials were off 1.59%, banks eased 1.48% and industrials were down 1.23%.
At 6.10pm, the Dow Jones industrial average was 2.19% lower, while in Europe, London’s FTSE 100 had fallen 2.12%, France’s CAC 40 2.69% and Germany’s DAX 3.08%.
The rand reached an intraday weakest level of R15.8743 to the dollar — the worst level in almost three weeks. At 5.56pm, the rand had weakened 2.22% to R15.8278/$, 1.44% to R16.6534/€ and 1% to R19.5103/£. The euro was 0.92% weaker at $1.0519.
Gold gained 1.06% to $1,846.19/oz, while platinum was little changed at $974.74. Brent crude was 1.51% weaker at $120.96 a barrel.
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