The JSE was firmer on Thursday morning, while the rand made small gains as investors digested recent inflation reports from SA and the US.
In the US, November’s inflation report met economists’ expectations, paving the way for the US Federal Reserve to cut interest rates again at its December meeting. The consumer price index (CPI) rose 0.3% from October and 2.7% from the previous year.
Core CPI, which excludes volatile food and energy prices, increased 0.3% on the month and 3.3% on an annual basis.
Despite the slightly higher inflation rate, traders believe it is still low enough for the Fed to cut rates again. In fact, Fed fund futures are pricing in a 96% likelihood of a rate cut at the next meeting.
Andre Cilliers, currency strategist at TreasuryOne, said the US inflation numbers helped market expectation solidify around a 25 basis point (bp) cut to US rates next week, supporting high-yielding currencies like the rand.
In SA, annual consumer inflation accelerated to 2.9% in November from 2.8% in October, data from Stats SA showed. However, CPI remained flat month on month, indicating overall price stability. Core inflation softened to 3.7% year on year from 3.9% previously.
“While SA inflation will likely tick higher in December, the low base allows the [SA Reserve Bank] flexibility for further rate cuts,” said Cilliers.
At 10.27am, the rand had firmed 0.1% to R17.6653/$, while it was little changed at R18.5792/€ and R22.5514/£. The euro was 0.18% firmer at $1.0515.
FNB economist Koketso Mano warned that growing trade restrictions and geopolitical tension could drive inflationary pressure and keep monetary policy tighter than expected.
“The monetary policy committee (MPC) will remain cautious due to the risk of higher global inflation and tighter financial conditions,” said Mano.
At 10.35am, the JSE all share had gained 0.4% to 87.463.72 points, with major indices mixed, while the top 40 had added 0.37%.
At the same time in Europe, the FTSE 100 had gained 0.23% and Germany’s DAX 0.16%, while France’s CAC 40 was little changed.
Earlier in Asia, the Shanghai Composite gained 0.85%, Hong Kong’s Hang Seng 1.14% and Japan’s Nikkei 1.21%.
In the commodities markets, gold was little changed at $2,717.41/oz, while platinum gained 1.03% to $948.13/oz. Brent crude was 0.23% firmer at $73.76 a barrel.
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