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JSE Higher after Reserve Bank and Fed Cut Interest Rates

Published 2024/09/20, 08:48
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Wall Street surged as optimism grew around a potential "soft landing" for the US economy following the Federal Reserve's (Fed) 50-basis point rate cut. The Dow Jones climbed 522 points, while the S&P 500 rose 1.70%, with both indices reaching record highs. The Nasdaq 100 jumped 2.50%, leading the broader market rally as investors welcomed the Fed's efforts to stabilise growth. Gains extended beyond large-cap stocks, with small caps rising for the seventh consecutive session. The broad market strength signalled increased confidence in the Fed’s ability to manage inflation while sustaining economic growth, further supported by a larger-than-expected drop in weekly jobless claims.

The FTSE/JSE All Share Index strengthened alongside global markets on Thursday, reacting to interest rate cuts from both the Fed and the South African Reserve Bank (SARB). The SARB’s monetary policy committee (MPC) lowered the benchmark repo rate by 25 basis points to 8%, in line with expectations, as inflation in South Africa eased to 4.40% in August, below the midpoint target of 4.50%. The rand appreciated to 17.45/$ by 18h10 local time.

The Hang Seng rose 2%, closing at a two-month high of 18 017 points, marking its fifth consecutive session of gains. This followed a strong rally in US futures after the Fed’s 50 basis point rate cut on Wednesday and its plans for further cuts to support the economy and curb rising unemployment. The Nikkei also rallied 2.13%, with Japanese stocks hitting two-week highs as the yen weakened sharply in response to the Fed’s policy decision.

European stocks surged on Thursday, with the STOXX 50 jumping 2.20% to close at 4 943, while the STOXX 600 gained 1.30%, ending the session at 522.

Gold rose above $2 580 per ounce on Thursday after briefly pulling back from record highs in the prior session, as markets continued to digest the Fed's rate cut. Brent crude oil futures also gained momentum, rising above $74.50 per barrel, the highest level in over two weeks, amid expectations of stronger global energy demand and increasing risk premiums due to heightened tensions in the Middle East.

PSG Wealth Daily Investment Update, 20 September 2024

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