Metals dragged the JSE lower on Tuesday, with the local bourse breaking a four-day winning run after softer-than-expected economic data from China and hawkish comments by Federal Reserve officials dampened investors’ mood.
Minneapolis Fed president Neel Kashkari said overnight the US central bank probably has more work ahead to control inflation. He noted the world’s biggest economy has proved to be resilient despite aggressive interest rate hikes, adding that the inflation problem isn’t completely solved and more needs to be done to bring inflation within the Fed’s 2% target.
Kashkari’s comments suggested he is still leaning towards raising interest rates again, Reuters reported. The Fed kept interest rates steady at its most recent meeting last week.
Investors will be keeping a close eye on Fed chair Jerome Powell, who is due to speak on Wednesday and Thursday. Markets are keen to hear what the central bank has to say in light of recent jobs data which came in softer than expected.
“Lower bond yields enabled stocks to bounce back strongly in the second half of last week, aided by some less hawkish Fed commentary after the meeting and a softer jobs report,” said Oanda senior market analyst Craig Erlam. “But with yields now stabilising again, equities are under pressure and may require another boost from the data or central bank.
“But Fed officials remain extremely cautious, fearing stopping too soon and suffering another onslaught of criticism for underestimating the inflationary pressures. And we’re seeing that again, with Kashkari claiming it’s too soon to declare victory and that doing too much is preferable to too little,” Erlam added.
Meanwhile, China’s exports fell more than expected in October for a sixth straight month. Overall, the country’s foreign trade has remained sluggish this year as global demand has slackened, Bloomberg reported.
“Recent risk optimism is tempered somewhat as global growth concerns resurfaced after China’s trade data disappointed once again,” said TreasuryONE currency strategist Andre Cilliers. “Weaker Chinese trade data and a firmer dollar have weighed on commodity prices.”
The JSE all share lost 2.35% to 71,572.99 points and the top 40 2.56%. Precious metals fell 4.88%, resources 4.39%, industrial metals 3.96%, banks 2.25%, financials 2.14% and retailers 2.17%.
At 6.56pm, the Dow Jones industrial average was 0.19% firmer at 34,159.80 points while European equity markets were mixed.
At 6.24pm, the rand had weakened 0.55% to R18.33770/$ and 0.21% to R19.6371/€, while it was little changed at R22.5999/£.
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