The JSE was weaker on Wednesday, while global markets attempted a rebound after surprisingly robust US economic data reignited concerns over the trajectory of interest rates in the world’s largest economy.
The ADP monthly private sector employment report revealed that December job additions fell short of economists’ expectations, while weekly jobless claims came in lower than anticipated.
This data precedes Friday’s highly anticipated nonfarm payroll report for December. Market participants are closely watching these reports for insights that could influence the Federal Reserve’s interest rate decisions.
Tuesday’s US job openings and labour turnover survey (Jolts) report showed an unexpected surge in November job openings, highlighting the US economy’s enduring strength and sparking concerns that the Fed may refrain from further rate cuts.
Altogether, this week’s jobs data will offer vital insights into the US labour market, which has demonstrated remarkable resilience. The Fed began cutting interest rates in September after inflation eased closer to its 2% target.
However, achieving the Fed’s 2% target may prove challenging as concerns rise that tariff plans and policies under the administration of Donald Trump’s second presidency could push inflation higher.
“Equity markets initially faltered, with US futures reversing earlier gains as investors positioned for higher-for-longer interest rates amid strong economic resilience and potential tariff-driven inflation,” said TreasuryONE currency strategist director and head of market risk Wichard Cilliers.
“Looking ahead, markets remain focused on Friday’s NFP data, which could provide further clarity on the Fed’s next steps as traders brace for heightened volatility across asset classes,” said Cilliers.
The JSE all share lost 1.18% to 83,152 points and the top 40 1.16%.
At 6.20pm, the Dow Jones industrial average was 0.12% firmer at 42,598 points, while markets were also weaker in Europe.
Meanwhile, Fed governor Christopher Waller stated on Wednesday that he expects the central bank to continue easing interest rates in 2025. This comes as a response to speculation that the Fed may be done cutting rates after three reductions since September.
Waller expressed his scepticism regarding the potential impact of tariffs under president-elect Donald Trump on inflation, stating that he does not expect them to have a significant or lasting effect.
The rand was weaker on the day, as “the dollar rallied for a second day, buoyed by strong economic data and speculation over Trump’s potential tariff plans”, said Cilliers.
At 6.30pm, the rand had weakened 1.05% to R18.89/$, 0.46% to R19.47/€ and 0.12% to R23.35/£. The euro was 0.54% weaker at $1.03.
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