The JSE ended weaker on Tuesday after trading in a narrow range as investors focused on the release later in the day of the minutes of the Federal Reserve’s most recent meeting and the outcome of the Reserve Bank’s meeting on Thursday.
Investors are betting that US interest rates are at their peak after signs that inflation in the world’s biggest economy has cooled sufficiently, and optimism is growing that the Fed might even start cutting rates early in 2024.
Despite bank officials saying they still may keep rates high to ensure inflation falls to the central bank’s 2% target, investors’ focus is on when a rate cut might come. According to Bloomberg, traders are pricing in a 30% chance of that as soon as March.
Moreover, Fed funds futures pricing data suggests an almost 100% probability that the Federal Open Market Committee (FOMC) will hold steady on rates at its next meeting, on December 12-13.
Market participants are hoping the minutes from the Fed’s October 31-November 1 policy meeting — where policymakers kept the benchmark rate at 5.25%-5.50% — will provide more insight into the central bank’s thoughts on inflation and interest rates.
“While the minutes are somewhat outdated at this point and the [recent economic] data since has looked more promising, sentiment on the committee going into year-end is important,” said Oanda senior market analyst Craig Erlam.
“Policymakers desperately don’t want to underestimate the threat of inflation again now [as they did at the beginning of Covid], just as pressures appear to be easing. I expect the minutes will simply re-emphasise the need to stay higher for longer, with perhaps slightly less talk of further rate hikes,” he added.
The JSE all share and the top 40 were little changed — both indices ended the session down less than 0.1% — with the former closing at 74,270 points.
At 6.59pm, the Dow Jones industrial average was 0.23% weaker at 35,070.78 points., Market in Europe were also marginally weaker.
Locally, consumer inflation data and the SA Reserve Bank’s monetary policy committee (MPC) meeting are the focus. CPI data will be released on Wednesday, while the MPC concludes its two-day meeting on Thursday.
Most economists expect the Bank to keep rates unchanged when governor Lesetja Kganyago delivers the last monetary policy statement for 2023.
At 6.40pm, the rand had weakened 1.08% to R18.5443/$, 1% to R20.2677/€ and 1.38% to R23.2368/£. The euro was little changed at $1.0936.
Gold added 1.28% to $2,002.67/oz and platinum 2.19% to $939.13/oz. Brent crude was 0.18% weaker at $81.84 a barrel.
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