JSE firmer as US moves to dodge default

The JSE pared gains on Thursday after rallying with global markets with the US House of Representatives passing the debt-ceiling bill in a crucial step to avoid the country’s default.

The House passed the bill to raise the debt limit and cap US government spending on Wednesday night by a wide margin, just days before Monday’s US default deadline of June 5.

In a dramatic end to weeks of tense talks between the White House and Republican House speaker Kevin McCarthy, the legislation was passed 314-117, supported by Democrats and Republicans.

The Senate was expected to forge ahead with the bill on Thursday and it should be sent to President Joe Biden as soon as Friday, reports Bloomberg.

“It remains to be seen how quickly majority leader Chuck Schumer can push the bill through the famously slow-moving upper chamber, where one senator’s opposition can slow down swift passage of legislation,” said SPI Asset Management managing partner Stephen Innes. “If the Treasury dries up, it would roil global financial markets, cost jobs and jeopardise vital government benefits for millions.”

The JSE was up 0.95% at 75,783 points, having gained more than 1% in intraday trade. The top 40 added 0.94%. Industrial metals rose 3.07%, resources 2.15%, retailers 2.02%, financials 1.51%, banks 1.45%, precious metals 1.31% and industrials 0.2%.

At 6.pm, the Dow Jones industrial metals index was 0.58% firmer at 33,098 points while markets were also firmer in Europe.

Meanwhile, investors are looking ahead to the Federal Reserve’s (Fed) June 13-14 policy meeting as another possible market catalyst.

Philadelphia Fed president Patrick Harker said on Wednesday he is leaning towards skipping a rate hike at the coming gathering but said that Friday’s payrolls report could change his mind.

Data on Thursday showed US private payrolls rose more than economists expected in May. The number of US jobless claims filed last week was smaller than economists forecast. The labour market has been a closely watched area of the economy given concern that sustained strength could prompt the Fed to once again raise interest rates at its policy meeting later this month.

The rand touched another record low at R19.9184 to the dollar on the day as “poor data out of China continues to add pressure to commodity-linked currencies such as the rand”, said Citadel Global director Bianca Botes.

At 5.57pm, the rand had reversed some losses and strengthened 0.72% to R19.5897/$. It was little changed at R21.0632/€ and R24.5537/£. The euro was 0.61% firmer at $1.0752.