The JSE closed firmer on Monday along with global peers as investors turn their focus to the US corporate earnings reports while keeping a close eye on the continuing hostilities in the Middle East.
The earnings season is set to gain momentum this week with Tesla, Netflix Bank of America and Johnson & Johnson all due to report.
The reports will follow a solid start to the season with JPMorgan Chase and Wells Fargo having posted solid results on Friday.
However, analysts are warning optimism about the earnings season could be derailed by any escalation of the Israel-Hamas war.
According to Bloomberg Economics, a wider war in the Middle East risks tipping the world economy into recession. That has added another concern to investors’ growing list of worries, including about whether the Federal Reserve has finished raising interest rates, reported Bloomberg.
News channels are reporting that Israel is preparing for a ground offensive in Gaza while there have been clashes with Hezbollah, a Shia Muslim political party and militant group, on the Lebanon border.
“Stocks are rising as the earnings season gains momentum this week, although risks arising from the Middle East remain on investors’ minds,” said SPI Asset Management managing partner Stephen Innes.
“Conflict in the Middle East has added another layer of concerns with investors still grappling with the high-for-longer interest rates narrative, inflation remaining sticky and a rise in yields [US Treasury] and oil prices,” said Innes. “But a focus on earnings and what the Federal Reserve will do with interest rates can give investors optimism in the short term.”
The JSE all share gained 0.31% to 73,146.75 points and the top 40 0.32%. Industrial metals rose 1.51%, food producers 0.47% and industrials 0.43%.
At 6.50pm the Dow Jones Industrial Average was up 0.95%, while markets in Europe were also higher.
The rand held steady, touching an intraday best of R18.76 to the dollar. At 6.15pm, the rand had strengthened 1.03% to R18.7881/$, 0.69% to R19.8082/€ and 0.43% to R22.9187/£. The euro was 0.37% firmer at $1.0543.
“The rand gained as the SARB reiterates hawkishness, along with some US dollar weakness,” said Investec chief economist Annabel Bishop. “The SARB hinted at the possibility of higher interest rates, not lower rates, with interest rate cuts in SA only likely once CPI inflation becomes anchored around the 4.5% midpoint of the target.”
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