The rand remained steady on Thursday, while the JSE was slightly weaker as investors weighed prospects of interest rate cuts in the US and possible tensions between the US and China.
Locally, the Reserve Bank’s monetary policy committee (MPC) kept the interest rate steady at 8.25% and warned that “the battle against inflation is not yet won”. Four members of the committee preferred an unchanged stance, while two members wanted a reduction of 25 basis points.
“The MPC statement embodied some perceptions and trends that opened up the prospect that, barring shocks — and if the current MPC vote shifts in that direction — a lower interest rate cycle might commence later in the year, perhaps even by the MPC’s next meeting,” said North-West University Business School economist Raymond Parsons.
At 5.22pm, the rand had strengthened 0.25% to R18.1525/$, 0.36% to R19.8152/€ and 0.33% to R23.5644/£. The euro was 0.26% weaker at $1.0908.
Global tech-heavy bourses extended the previous session’s losses as the technology sector continued to struggle amid the market’s rotation on hopes of easing monetary policy.
The Nasdaq’s underperformance marks a continuation of the broader shift away from tech seen in recent days. Investors are dumping shares of artificial intelligence companies as the growing likelihood of a September interest rate cut from the Federal Reserve bolstered optimism in the broader market, reported Bloomberg.
“A significant change in investor sentiment has occurred in the markets over the past week. Previously, the market was heavily reliant on a few large-cap tech stocks to drive growth, while many other stocks struggled due to high interest rates,” said SPI Asset Management partner Stephen Innes.
“However, with the release of a positive inflation report last week, which hinted at a potential interest rate decrease by the Fed in September, investors have started to rotate out of these tech giants and into previously underappreciated areas of the markets,” added Innes.
Investors are keeping a close eye on possible geopolitical tension between the US and China after US President Joe Biden said he was considering the most severe trade restrictions available if companies continued to ship advanced semiconductor technology to China.
“The Biden administration’s plan to impose further export restrictions on chip-making equipment to China has raised the prospect of a broader trade war, with tech stocks suffering heavily and weakening global equity markets,” said TreasuryOne currency strategist Andre Cilliers.
The JSE all share index lost 0.15% to 80,334 points, with major indices mixed. The top 40 was down 0.15%.
At 6.05pm, the Dow Jones industrial average was 0.77% weaker at 40,879 points, while markets were mixed in Europe.
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