The JSE firmed with global peers on Thursday as investors digested an interest-rate cut by the SA Reserve Bank and US Federal Reserve.
In a widely expected move, the Reserve Bank’s monetary policy committee (MPC) announced a 25 basis points (bps) cut in its benchmark repo rate, lowering it to 8% — with SA’s inflation rate trending downward, reaching 4.4% in August, below the Bank’s midpoint target of 4.5%.
Bank governor Lesetja Kganyago said MPC members considered an unchanged stance, a 25 bps cut, and a 50 bps cut — with the 25 bps cut a unanimous decision.
The Bank move follows a 50 bps interest-rate cut by the Fed on Wednesday, its first lowering in four years. The significant policy move is seen by some analysts as an aggressive start to a monetary-easing cycle in the world’s largest economy.
The cuts by the Fed and the Reserve Bank have big implications for financial markets, signalling a supportive monetary policy environment, which could drive economic growth and boost investor confidence.
The rate cuts are expected to particularly benefit interest rate-sensitive sectors such as financials, property, retail and construction.
A weaker dollar and lower interest rates make SA stocks more attractive to foreign investors, potentially increasing foreign investment. Improved sentiment and reduced debt servicing costs may also boost consumer spending, benefiting retail and consumer-focused stocks.
“Lower inflation, reduced political risk, the fading energy crisis and a strong rand have cleared the way for the [Bank] to finally start cutting rates. Policymakers are likely to tread carefully, as highlighted by the Bank’s communique that accompanied the decision to cut the repo rate 25 bps to 8%,” said Schroders senior emerging markets economist David Rees.
“However, favourable local macro conditions, with the onset of Fed easing, mean that rates are likely to fall further in the months ahead to boost economic growth in 2025,” said Rees.
The JSE all share gained 1.26% to 83,760 points — led higher by gains in metals, with industrial metals adding 3.1%, resources 1.82% and precious metals 1.23%. The top 40 was up 1.29%.
At 5.45pm, the Dow Jones industrial average was 1.15% firmer at 41,982 points, with markets also firmer in Europe.
Shares in Lighthouse Properties were among the worst-performers on the day after the company announced an equity raise, targeting about R500m, to be implemented through an accelerated book-build process.
The group invests in dominant and defensive malls in large West European cities. The company’s share price lost 1.98% to R7.94 — its biggest one-day loss in more than two weeks.
At 6.17pm, the rand had strengthened 0.35% to R17.4802/$, while it was little changed at R19.4853/€ and had weakened 0.35% to R23.2104/£. The euro was 0.3% firmer at $1.1148.
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