JSE buoyed by less hawkish Bank

The JSE touched a record high on Thursday after the Reserve Bank slowed the pace of its rate increases and amid news that the US was in reasonable shape in the fourth quarter. The JSE all share gained 0.98%, while retailers, industrials and banks were the day’s main gainers.

The JSE touched a record high on Thursday after the Reserve Bank slowed the pace of its rate increases and amid news that the US was in reasonable shape in the fourth quarter.

Data from the US Bureau of Economic Analysis shows that the world’s biggest economy expanded at an annualised rate of 2.9% in the last quarter of 2022, slightly above the market consensus of 2.6% but lower than the 3.2% in the previous quarter.

Locally, the Reserve Bank slowed the pace of its monetary tightening, hiking its benchmark repo rate by 25 basis points to 7.25%, with forecasts split between 25bps and 50bps.

“Stocks rallied after recession risks eased following better-than-expected GDP data ... but not all the way as rate cut bets were pared back,” FXTM senior research analyst Lukman Otunuga said. “For stocks to have a sustained rally, we still need a recession and this [US] data is delaying hopes of that happening before the middle of the year,” he added.

““A recession will help get the job done with bringing inflation all the way down, otherwise a tentative soft landing will just keep Fed [US Federal Reserve] policy restrictive.”

The JSE all share gained 0.98% to 80,508.97 points — having touched 80,904 points earlier — while the top 40 added 1.04%. Retailers, industrials, financials and banks were the day’s main gainers, while precious metals and resources sank.

“With the monetary policy committee stating that the risks to inflation remain to the upside, I do think there will be one more repo rate rise of 25bps coming through at the next meeting in March,” said EY Africa chief economist Angelika Goliger.

“Looking beyond the first quarter of 2023, I am expecting rates to remain at this higher level to the end of the year, with some rate cuts starting to come through in 2024,” she added.

At 6.56pm, the Dow Jones industrial average was little changed at 33,733.23 points, having earlier gained more than 0.5%. Markets in Europe were firmer.

The focus now shifts to next week’s meeting of the Fed’s federal open market committee, where members are widely expected to announce a 25bps hike as the central bank stands firm on inflation.

The rand reversed earlier gains, which IG senior market analyst Shaun Murison said was due to “both strength in the US dollar as well as a slightly less hawkish [Reserve Bank]”.

At 6.39pm, the rand was 0.74% weaker at R17.2352/$, and 0.19% softer at R18.7157/€. The euro was 0.52% lower at $1.0858