The JSE closed firmer on Friday ending a strong week in which the all-share index gained almost 4%, led higher by a more than 10% gain in the precious metals and mining index.
This week’s rally was sparked by new economic data that suggested inflation in the US may be cooling. The latest US consumer and producer inflation showing easing price pressures gave investors hope that the world’s largest economy could be heading for a soft landing after more than a year of Federal Reserve rate hikes.
Investors are questioning when the Fed will reach its interest rate peak. In June, the Fed paused hikes for the first time in more than a year, though the minutes from the federal open market committee meeting suggest that as many as two more increases are possible this year.
“Inflation was already well off its highs but there was something about this report that was different,” said Oanda senior market analyst Craig Erlam. “Not only did it beat on the headline and core level, but both of the monthly readings were also incredibly positive. Now it’s just a question of whether that can be sustained.”
“The light at the end of the tightening tunnel is getting brighter and investors are increasingly confident of emerging after one more hike in two weeks,” said Erlam. “At which point the focus will turn to the economy and whether a soft landing can still be achieved before the discussion pivots to rate cuts.”
The JSE all share gained 0.56% to 77,750 points on Friday and the top 40 0.67%. The precious metals and mining index rose 2.84%, resources 0.91%, industrials 0.54%, banks 0.34% and financials 0.36%.
For the week, the all share index was up 3.9%, pushed higher by gains in precious metals (10.7%), resources (6.48%) and industrial metals (4.04%).
At 5.45pm, the Dow Jones Industrial Average was 0.37% firmer, and in Europe, the FTSE 100 and France's CAC were little changed, while Germany's DAX lost 0.22%.
Investors are now focusing on the corporate earnings season in the US.
“The next risk comes from earnings season which gets under way today [Friday], with JPMorgan, Wells Fargo, and Citigroup all reporting their second quarter,” said Erlam.
The rand broke a five-day winning streak but was still hovering around its best levels in almost three months. At 5.51pm, the rand had weakened 1.04% to R18.1021/$, 1.15% to R20.333/€ and 1.01% to R23.7355/£. The euro was 0.15% firmer at $1.1237.
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