The JSE was weaker along with other global markets on Wednesday as investors worry that stubborn inflation will lead the US Federal Reserve to keep rates higher for longer, tipping the economy into a recession.
US markets dropped overnight, with other global markets following suit as the prospect of higher rates weighed on market sentiment.
Meanwhile, the latest batch of US retail earnings and their weak forecasts added to the sombre mood, raising concern about the state of the consumer in the world’s biggest economy.
The Fed on Wednesday is scheduled to release the minutes from its January 31-February 1 meeting. The central bank hiked rates by 25 basis points at that gathering.
“Risk sentiment remains negative ahead of this afternoon’s release of the Fed FOMC [Federal open market committee] minutes. Markets expect to reaffirm the Fed’s hawkish stance as inflation remains well above the Fed’s 2% target, and strong US economic data gives the Fed room to hike further,” said TreasuryONE currency strategist Andre Cilliers.
At 10.15am, the JSE all share had lost 0.51% to 78,412 points and the top 40 0.42%. Banks had added 1.09% and financials 0.50%. Precious metals had lost 2.57%, resources 2.25%, industrial metals 1.92% and retailers 0.78%.
At the same time in Europe, the UK’s FTSE 100 had lost 0.65%, France’s CAC 0.43% and Germany’s DAX 0.3%.
Earlier in Asia, the Shanghai composite was down 0.46%, Hong Kong’s Hang Seng 0.49% and Japan’s Nikkei 1.34%.
Locally, investors will focus on the budget speech to be delivered at 2pm. The budget is expected to focus on fiscal discipline as well as the Eskom debt restructure.
“The power crisis is weighing heavily on the economy, and markets are looking for how Treasury will finance possible further SOE [state-owned entity] bailouts, increased social grants, and public sector wage demands,” said Cilliers.
“We expect the rand to remain on the back foot in the run-up to the budget speech and the FOMC minutes.”
At 9.54am, the rand was little changed at R18.253/$, while it had weakened 0.15% to R19.4562/€ and 0.18% to R22.1331/£. The euro was 0.12% firmer at $1.0659.
Gold was little changed at $1,834.52/oz, while platinum lost 0.74% to $937/oz. Brent crude was 0.62% weaker at $81.94 a barrel.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.