The JSE tracked firmer global markets on Monday as investors welcomed some positive US corporate earnings reports. Focus this week turns to monetary policy decisions by the European Central Bank and the SA Reserve Bank.
Goldman Sachs and Bank of America posted earnings and revenue that beat expectations, after a mixed bag of company results last week.
Investors are anticipating a slew of earnings reports this week that will shed light on the state of the US economy. Interest rates and inflation surged during the three-month period, and market participants are looking for signs of how that affected consumer behaviour and profits.
“Better than expected earnings from Goldman Sachs and Bank of America may be helping the positive mood at the start of the week,” said Oanda senior market analyst Craig Erlam.
“Though I think it’s way too early to be looking at the earnings season as a tailwind for equities,” added Erlam.
The JSE extended the previous session’s gains, with metals counters pushing the local bourse higher. The JSE all share index rose 2.96% to 67,016 points — its best one-day gain in a week. The top 40 index added 3.15%. The industrial metals and mining index jumped 5.1% and the precious metals and mining index collected 3.96%.
At 5.50pm, the Dow Jones industrial average was 0.61% firmer, whileEuropean markets also posted gains.
Global financial markets were unsettled last week by US inflation numbers that exceeded expectations. This week, the focus is squarely on the response from central banks to high inflation and concerns about slowing growth.
Both the ECB and the SA Reserve Bank will deliver monetary policy decisions on Thursday. The ECB is expected to finally increase rates and the consensus is for a 25 basis point (bps) hike, but there is a strong chance of a 50 bps increase across all rates to front-load the hiking cycle.
“The ECB should follow through on earlier guidance by increasing its policy rate by 25 bps, dipping its toes into a rate-hiking cycle well after other major central banks,” said Bureau for Economic Research analysts. “Given conflicting monetary policy signals from the latest eurozone inflation and growth trends, of interest will be whether the ECB confirms earlier commentary that the pace of rate hikes is expected to accelerate at the bank’s next scheduled meeting in September.”
Locally, SA also looks set for a 50 bps interest rate hike, after recent data showed inflation rose above the SARB’s target band of 3% — 6%.
At 5.46pm the rand had weakened 0.15% to R17.0925/$, 0.86% to R17.3618/€ and 1.34% to R20.4880/£. The euro was 0.74% firmer at $1.0159.
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