The JSE tracked weaker global markets on Friday as investors digested Federal Reserve chair Jerome Powell’s comments which saw US Treasury yields rise to a 16-year high.
The yield on the benchmark 10-year US Treasury note stood at 4.935% during early US trade on Friday, having hit 5.001% in the previous session. Yields rose after comments by Powell suggested the Fed is likely to keep rates steady, damping hopes of rate cuts. The first time it traded above that level was July 20 2007, when it yielded as high as 5.029%, reported Bloomberg.
Powell said at an event hosted by the Economic Club of New York on Thursday that inflation remains too high and lower economic growth will likely be needed to bring it down. Powell also said he doesn’t think rates are too high.
“Equity markets remain under pressure, with bond yields rising again,” said TreasuryOne currency strategist Andre Cilliers. “Powell highlighted the resilience of the US economy and high inflation, while raising concern over the conflict in the Middle East — factors that make the policymakers’ task more complicated.”
The JSE all share lost 1.08% to 70,198.01 points, with most major indices mixed with the exception of food producers and precious metals, which rose 4.8% and 3.41%. The top 40 was down 1.1%.
At 6pm, the Dow Jones Industrial Average was 0.54% weaker, with markets also lower in Europe.
Market participants are keeping a close eye on the Israel-Hamas situation in the Middle East. Bloomberg reported that markets are likely to react particularly if the war moves towards an Israeli ground offensive in the Gaza Strip, with fears the war may widen to a regional conflict.
“Risk aversion is rising heading into the weekend amid fears of an escalation in the Middle East. The potential for the war between Israel and Gaza to become more widespread is making traders nervous,” said Oanda senior market analyst Craig Erlam.
Traders are wary that increased tensions could trigger a shock in oil prices, “adding a significant risk premium to oil prices at a time when the market is already extremely tight.”
The rand broke a three-day losing streak. At 6.11pm, it had strengthened 0.16% to R18.9716/$, 0.12% to R20.0797/€ and 0.12% to R23.0293/£.
Gold gained 0.58% to $1,988.54/oz and platinum 0.76% to $899.8/oz. Brent crude was unchanged at $93.03 a barrel.
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