JSE, rand firm with Fed in focus

The JSE closed firmer on Wednesday with investors’ focus on the US Federal Reserve interest rate decision due later in the evening at the conclusion of its first two-day meeting of the year.

A hike of 25 basis points is widely expected, but of greater interest is Fed chair Jerome Powell’s address after the announcement at 9pm local time as markets attempt to gauge the likely direction of the central bank. With evidence of inflation easing, investors are hoping Powell will signal a pause in tightening in the near future.

“Markets are positioned cautiously in anticipation of what’s to come,” said Oanda senior market analyst Craig Erlam. “There’s no doubt that investors have one eye on the Fed decision, as they have all week. It’s not just about the rate hike itself, which will almost certainly be 25 basis points according to markets, but the signal the central bank sends about what lies ahead, given the progress made in the economic data in recent months,” Erlam added.

“There is growing evidence that rate hikes have worked in cooling the economy, inflation and labour market, but the question is whether the Fed believes it has done enough, particularly on the core measure where inflation could prove more stubborn.”

The JSE all share gained 0.43% to 79,816.87 points, led by banks, financials, food producers and industrials, while the top 40 closed 0.4% higher. Industrial metals, resources and precious metals were weaker.

Standard Bank led the gains in its sector, adding 5.37% to R182.54 — the most since October. Nedbank was up 4.01% to R234.20 and Absa rose 3.46% to R205.74.

At 6.49pm, the Dow Jones industrial average was down 0.71% at 33,844.36 points. In Europe, the UK’s FTSE 100 eased 0.14% and France’s CAC 40 was less than 0.1% weaker. Germany’s DAX rose 0.35%.

The rand firmed in line with other emerging market currencies on the day, breaking a four-day losing streak as “it bounced back from experiencing pressure from all the negative news flow against the broader macro backdrop of the Fed’s rate decision,” said RMB market analyst Siobhan Redford.

At 6.22pm, the rand had strengthened 1.38% to R17.1622/$, having earlier weakened to R17.43/$. It had strengthened 0.81% to R18.7482/€ and 1.16% to R21.1554/£. The euro was 0.56% firmer at $1.0922.

Gold was little changed at $1,928.94/oz, but platinum was 0.65% lower at $1,004.46/oz. Brent crude was 1.35% weaker at $84.33 a barrel.