The JSE pared losses on Tuesday, while global markets were weaker as investors assessed China’s disappointing economic data.
Investors are reassessing their expectations for Federal Reserve rate cuts this year, after recent US data that suggests the Fed may not ease monetary policy as much as anticipated.
Strong jobs and consumer price index (CPI) data have reduced the likelihood of imminent rate cuts, signalling a resilient US economy. However, the US economy is sending mixed signals, indicating both slowing and resilient growth. The Fed has reiterated its “cautious” approach, emphasising its data-driven approach to adjusting monetary policy.
On Monday, Fed governor Christopher Waller urged caution on future rate cuts, advocating for gradual reductions in the coming months.
“The key narrative in the market remains US interest rate cuts and more specifically a slower pace of cuts by the Fed as data continues to show the US economy remains resilient,” said Stephen Innes, a partner at SPI Asset Management. “Bets remain that the Fed will cut interest rates at a slower pace than markets had been forecasting.”
The JSE all share lost 0.52% to 85,949 points — having lost as much as 1% earlier in the session, while the top 40 was down 0.52%, with major indices mixed.
At 5.50pm, the Dow Jones industrial average was 0.28% weaker at 42,944 points, while markets were also weaker in Europe.
A report on Tuesday showed a sharp decline in Chinese exports for September, fuelling concern about the country’s economic health. The disappointing news, combined with weaker-than-expected lending and price data, has shaken already fragile market sentiment.
Investors are eagerly awaiting details on how China plans to stimulate the economy. At the weekend, China’s finance ministry announced new stimulus measures, but there was little clarity on policymakers’ plans, leaving investors searching for more information.
Markets have struggled to build on previous gains amid the concern that China’s stimulus efforts may not be enough to prevent further economic slowdown.
“Longer term, China will need to do more to revive confidence and give additional fiscal stimulus needed to support the broader economy,” said Stephen Kam, head of product at Schroders. “The government’s efforts in this regard could help spur genuine demand that would bolster the still-fragile market sentiment.
“We will closely watch the policy stimulus details and their subsequent tangible economic outcomes. Much remains to be seen about how all these new policies are implemented and what degree of additional fiscal stimulus may come from the government to support a sustained recovery,” said Kam.
At 6.13pm, the rand had weakened 0.43% to R17.6307/$, 0.33% to R19.2106/€ and 0.61% to R23.063/£. The euro was little changed at $1.0899.
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