The JSE followed global markets higher on Wednesday, with the rand stabilising below R19/$, as investors welcomed the latest US consumer inflation report.
The December consumer price index (CPI) rose 0.4% from the previous month, exceeding Bloomberg economists’ forecasts of 0.3%. On a 12-month basis, CPI advanced 2.9%, in line with expectations.
Core inflation, which excludes food and energy, slowed to 3.2% year on year, down from 3.3% in November and below economists’ estimates. The decline in core inflation suggests that price pressures may be easing.
While the data is unlikely to change expectations for a pause in rate hikes later this month, it may curb speculation about potential rate increases.
The report followed the US producer price index (PPI), which measures wholesale inflation, falling short of economists’ expectations on Tuesday, while core PPI remained flat.
The PPI report also eased concerns about inflation acceleration, sparking a positive reaction in the stock market.
Analysts noted that the reports could spark a relief rally in stocks, as investors bet that the Fed may still have room to cut rates, with some analysts suggesting the reports could make the Fed more dovish, at least.
“The market’s initial response to the report was positive, with stocks surging higher, the dollar easing, and US Treasury yields falling,” said SPI Asset Management partner Stephen Innes.
“Investors appeared to breathe a sigh of relief after several months of sticky inflation readings.
“Specifically, the easing of core inflation suggests that the Fed’s efforts to combat inflation may be gaining traction,” added Innes.
The JSE all share rose 1.69% to 83,515 points and the top 40 was up 1.84%.
At 6.05pm, the Dow Jones industrial average was 1.52% firmer at 43,164 points. In Europe, the FTSE 100 gained 1.16%, France’s CAC 40 1.05% and Germany’s DAX 1.66%.
The rand maintained its gains for the day, adding to the previous session’s advances.
TreasuryONE currency strategist Andre Cilliers noted that the rand was supported by its undervaluation, “though volatility persists due to strong dollar performance”.
At 6.10pm, the rand had firmed 0.63% to R18.82/$, 0.65% to R19.37/€ and 0.28% to R23.03/£. The euro was little changed at $1.03.
Gold gained 0.16% to $2,681.81/oz and platinum 0.96% to $945.25/oz. Brent crude was 1.2% firmer at $80.88 a barrel.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.