The JSE firmed the most in more than a month on Tuesday, with global markets firmer as investors assessed the last bit of economic data ahead of the outcome of the Federal Reserve meeting on Wednesday.
US retail sales surprised economists with a 0.1% August increase, beating forecasts of a 0.2% decline, signalling solid consumer spending.
Investors were awaiting the retail sales data for August to see a final snapshot of the US consumers’ health before the Fed announces its interest rate decision on Wednesday, after its two-day federal open market committee (FOMC) September meeting.
Economists are predicting a 0.2% decline in overall sales. This data could significantly affect the rate cut outcome as markets expect a long-awaited rate cut from the Fed. If implemented, it would be the first interest rate cut by the Fed in more than four years.
The size of the rate cut remains uncertain, with traders divided between a 25 basis points (bps) and 50 bps cut.
According to CME Group’s FedWatch Tool, traders are pricing in a 67% chance that the central bank will cut rates 50 bps, up from 47% on Friday.
Markets expect further rate cuts, with 100bps-125bps predicted by year’s end, reports Bloomberg.
“Retail sales in the US unexpectedly rose in August, suggesting that the economy is on a solid footing,” said TreasuryONE director & head of market risk Wichard Cilliers.
“The Fed is expected to start cutting rates tomorrow after raising the cost of borrowing to its highest level in two decades. Markets are pricing in about 250 basis points of easing by the end of 2025,” said Cilliers.
The JSE all share gained 1.25% to 83,032 points — the most since July 31, lifted by all major indices. The top 40 added 1.2%.
At 6.10pm, the Dow Jones industrial average was 0.35% firmer at 41,637 points, with markets also firmer in Europe.
Outsurance was the second-best performer on the day, with the company’s share price gaining the most since March 2022 after it reported a strong performance in the year to end-June.
The strong performance lifted its ordinary dividend 29%, leading the company to declare a special dividend of 40c per share.
The rand lacked direction for most of the day, trading in a narrow range as markets await the Fed’s decision, said Cilliers.
“The rand remained steady against the dollar, trading in a narrow range of R17.60/$-R17.68/$ for the day, with no clear direction, yet,” he added.
At 6.21pm, the rand was little changed at R17.6263/$ and R19.602/€, while it firmed 0.28% to R23.1964/£. The euro was 0.12% weaker at $1.1117.
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