JSE ends November on firm footing

The JSE tracked firmer global markets on Thursday after the reading of the US Federal Reserve’s preferred measure of inflation slowed as expected.

The local bourse rose 8.44% on the month as investors turned increasingly confident the Fed has reached its interest rate pivot, and could potentially even start cutting rates earlier in 2024 than initially expected. The main drivers of the monthly increase were banks, industrials, and precious metals, which gained 10.33%, 10.01% and 9.82%, respectively.

On the day, the JSE all share added 0.39% to 75,534 points — the main constituent indices were mixed — while the top 40 rose 0.5%.

The US core personal consumption expenditures (PCE) price index rose 3.5% year on year in October, down from 3.7% in September. The gauge is favoured by the Fed as providing a better snapshot of underlying prices as it also takes into account changing consumer behaviour such as substituting with cheaper goods as prices increase, according to Bloomberg.

In addition, US jobless claims rose more than anticipated in the week ending November 25. The data, along with employment numbers from the first week of November, show continuing signs of a cooling labour market.

That and the latest PCE reading is strengthening the belief that the Fed is done with its current hiking cycle and could be considering rate cuts sooner than previously expected. The Fed’s open market committee’s policy meeting is on December 12-13, with markets generally expecting members to keep the key lending rate steady.

“US inflation is heading in the right direction and continues to fall ahead of the December Fed meeting. Though the bulk of the PCE readings were in line with expectations, the data suggests disinflationary pressures are stronger than central banks’ officials have been willing to accept,” Oanda market analyst Craig Erlam said.

“Policymakers at the Fed must already be considering withdrawing such hawkish rhetoric after the meeting in two weeks. It will be interesting to see whether the jobs and CPI inflation reports in the interim tip them one way or the other,” he said.

At 6.15pm, the Dow Jones industrial average was 0.94% firmer at 35,765.08 points, while markets in Europe were also higher.

At 5.50pm, the rand had weakened 0.75% to R18.901/$, 0.21% to R20.5978/€ and 0.24% to R23.8606/£. The euro was 0.64% weaker at $1.0898.