The JSE closed firmer on Wednesday buoyed by news that consumer inflation in December eased to the lowest level since May 2022. Global markets were flat to lower.
Data from Stats SA shows headline inflation eased to an annual 7.2% in December from November’s 7.4%, in line with the expectations of economists surveyed by Reuters. That’s above the upper limit of the Reserve Bank’s 3%-6% target range, but still the softest reading since May 2022.
“While it is encouraging to see a decline in CPI, higher inflation expectations and depreciating currencies continue to reinforce the pressing need for central banks to accelerate the normalisation of their policy rates, tightening global financial conditions,” said PSG Wealth CIO Adriaan Pask.
“On balance, capital flows and market volatility are expected to remain elevated for emerging market assets and currencies,” Pask said, adding that the “implied policy rate path of the SARB’s quarterly projection model indicates gradual normalisation through to 2024”.
The JSE all share gained 0.61% to 79,865.48 points while the top 40 rose 0.65%. Industrial metals were the biggest gainers, adding 2.23%, followed by resources (1.48%).
On Wall street, the Dow Jones industrial average was down 1.02% to 33,566.63 points at 7.08pm. European markets were mixed, with London’s FTSE 100 easing 0.26% while Germany’s DAX and France’s CAC 40 were little changed.
UK inflation eased for a second straight month in December, which analysts said was an indication that prices have peaked, but warned that with headline CPI still above 10% there’s still a long way to go.
“The Bank of England finds itself in the uncomfortable position of needing to keep raising interest rates as inflation is still more than five times its target,” said Oanda senior market analyst Craig Erlam.
“Markets are pricing in another 1% of rate hikes in the coming months, but if inflation remains stubbornly high, they may have to do more.”
In the US, the producer price index (PPI), which measures input costs and is regarded as a leading indicator of inflation, eased 0.5% in December, better than market expectations of a 0.1% decline.
With the consumer inflation easing, analysts say the PPI print bodes well for a slower interest rate hike by the Federal Reserve at its next meeting, on January 31 - February 1.
At 6.52pm, the rand was little changed at R17.053/$, while it had weakened 0.21% to R18.4476/€ and by 0.52% to R20.0679/£. The euro was 0.25% firmer at $1.0817.
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