The JSE rallied for a second session on Wednesday, as did its global peers, with investors cheering softer-than-expected producer inflation in the US.
October’s producer price index (PPI), which measures wholesale prices, fell by 0.5% month on month, its biggest drop since April 2020. Markets had expected an increase of 0.1%. On an annual basis PPI was up 1.3%, compared with expectations of 2%.
Core producer prices, excluding food and energy, were unchanged on the month, with an annual rise of 2.4%. That number also was below forecasts.
Retail sales for October, also released on Wednesday, slipped 0.1% — the first decline since March, but better than an expected 0.3% drop.
The data came after US consumer inflation came in softer than forecast for October, adding to market bets that the Federal Reserve could be done with raising interest rates and may even start cutting them next year.
According to the CME FedWatch Tool, there’s more than a 60% chance the Fed could start cutting rates as early as May.
“Despite inflation still being above the Fed’s 2% target and policymakers sticking to their hawkish tone, the new data seem to eliminate the chance of another interest rate hike through the January meeting,” said SPI Asset Management partner Stephen Innes.
“Fed chair Jerome Powell has said the central bank’s move will be dependent on the coming data. This is the second piece of data this week showing inflation pressures may be abating, and that high interest rates are finally working as hoped,” Innes added.
The JSE all share gained 1.85% to 74,800.29 points, while the top 40 added 2.04%.
At 7.04pm, the Dow Jones industrial average was 0.33% firmer at 34,941.47 points, while the broader S&P 500 was up 0.21% and the tech-heavy Nasdaq 0.17%. Markets in Europe were also firmer, with London’s FTSE 100 adding 0.62% at the close.
Investors are also eyeing developments in Washington. Late on Tuesday, the House of Representatives passed a bill to avert a government shutdown, and is due before the Senate for a vote. Should it pass there, the legislation goes to President Joe Biden. Failure to agree on the bill could see the government shut down at the end of the week.
The rand held steady on the day, having strengthened 2.45% in the previous session — the biggest one-day gain since May. At 6.50pm it was little changed at R18.2094/$, while it had strengthened 0.4% to R19.759/€ and 0.68% to R22.6383/£. The euro was 0.26% weaker at $1.0851.
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