Global Markets Weaken as Focus Turns to US Inflation

  • Market Overview

The FTSE/JSE All Share Index lost about 0.80% to close at 73 621 points on Monday amid cautious trading as investors anticipated the latest reading of the Federal Reserve's (Fed) preferred inflation metric this week. The monthly Personal Consumption Expenditures (PCE) Price Index report to be released on Thursday is expected to increase by 2.80% y/y and could also indicate where the Fed will take interest rates this year according to Bloomberg. Investors are also monitoring incoming corporate earnings, with several market heavyweights reporting this week, which should provide insight into consumer trends. At 19h00, the rand had weakened 0.14% to R19.34/$, 0.32% to R20.96/€ and 0.30% to R24.51/£.

Wall Street flatlined on Monday, pulling back from record highs, with the Dow Jones slipping 0.16%, while the S&P 500 and the Nasdaq fell 0.38% and 0.13% respectively, as traders kept a close eye on the market's momentum amid ongoing economic and inflation concerns. Trading Economics reports that: “current pricing suggests the Federal Reserve could maintain interest rates in March and May, with a higher likelihood of a rate cut in June around 53%.” Real GDP is expected to have increased at an annual rate of 3.30% in the fourth quarter of 2023, according to the advance estimate released by the Bureau of Economic Analysis.

European stocks had a negative start to the week ahead of the release of key inflation data which could advance the interest-rate cuts narrative in the Eurozone. European Central Bank (ECB) President Christine Lagarde said last Friday that the market is seen to be dovish at the moment, with bets on rate cuts in the Eurozone elevated after slower pay growth in the fourth quarter was deemed as “encouraging.” The pan-European STOXX 600 index was down 0.37% at 495.43.

Most Asian markets retreated on Monday as concerns over higher-for-longer interest rates prompted some profit-taking in technology stocks, while Japanese markets scaled new record peaks ahead of key inflation data. The Hang Seng Index fell 0.60%, also retreating from a near three-month high. The Nikkei 225 rose as much as 0.70% to a record high of 49 420 points, in what Bloomberg described as “an extension of a long-running rally in Japanese stocks, on the back of AI-driven strength in local tech and chipmaking stocks, as well as expectations that the Bank of Japan will remain ultra-dovish for longer.”

In commodities, oil prices rose on Monday as European diesel demand, hampered by Russian sanctions and shipping difficulties, pushed prices higher in an already anxious market due to planned overhauls at US refineries, Reuters reported. Brent crude was 1.06% firmer at $81.82 a barrel at 19h15, while gold lost 0.42% to $2 026.96/oz.

PSG Wealth Daily Investment Update, 27 February 2024

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