The JSE ended firmer on Tuesday but had lost some steam by the close, indicating a degree of investor caution in the lead-up to the US Federal Reserve’s next policy meeting on Wednesday.
The all share ended 1.11% higher at 67,414,27 points, its best level since early September, led by heavyweights Naspers and Prosus, which each gained more than 8% to R2,056.35 and R862.38, respectively. Firmer industrials, and industrial metals and mining also offered support.
The SA share market gained nearly 5% in October, the best monthly performance since December 2021, in line with world markets where the Dow gained 15% — its best monthly performance since 1976.
The rally suggests that investors believe the Fed could be close to slowing the pace of interest rates increases amid signs of plateauing inflation.
Their optimism is reflected in US government bond yields, which have stabilised after pushing to their highest level since the 2007/2008 global financial crisis. The yields on the benchmark US 10-year note are hovering around 4.05% after touching 4.28% earlier in October.
US markets were weaker, however, with the Dow Jones industrial average 0.35% softer at 32,619.63 points at 7.45pm, while the S&P 500 was 0.34% weaker.
The dollar, meanwhile, has eased after reaching multiyear highs against a basket of currencies, which has given commodities a boost. Brent crude was up 2.2% to $94.80 a barrel in late trade, while palladium was trading 2.37% higher at $1,880/oz.
The rand, which tends to benefit from higher global risk appetite thanks to its liquidity, was 0.51 firmer to R18.1999/$ by 7.20pm, but is still 14.4% weaker so far this year to date, as the greenback remains the currency of choice in 2022.
But Sanlam Private Wealth portfolio manager Nick Kunze sounded a note of caution on equities. “It is very difficult to call a bottom [in the dollar], given the risks that still remain. What is encouraging though is that some of the ‘old school’ earnings have been encouraging,” he said, referring to Caterpillar, GM and Coca-Cola.
“I think we need to see some dovish rhetoric from the Fed in the next couple of weeks to allow the dollar to weaken, before I’m convinced that a bottom is in yet.”
The Fed is expected to raise rates by another 75 basis points at the conclusion of its policy meeting on Wednesday night but markets, which are more forward looking, will be looking for signs for future policy direction.
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