JSE Higher after Smaller SARB Rate Hike

  • Market Overview

The local bourse closed up by more than 1% on Thursday after the South African Reserve Bank (SARB) hiked interest rates by 25 basis points (bps), smaller than the 50 bps markets expected. “This marks the 8th consecutive rate hike since policy normalisation started in November 2021, to anchor inflation expectations more firmly around the mid-point of the target band of 3-6% and achieve the inflation target in 2024. The move was driven by the Bank’s assessment that risks to the inflationary outlook remain skewed to the upside. The headline CPI forecast was revised up to 6.90% in 2022 (vs prior estimate of 6.70%), kept unchanged at 5.40% in 2023, and raised to 4.80% in 2024 (vs 4.50%),” Trading Economics reported. However, the rand weakened after the announcement, trading at R17.20/USD at 21h40.

Better-than-expected earnings reports from SEB, Sabadell, Nokia (HE: NOKIA ), and German software company SAP, amongst others, helped major European indices close in the green on Thursday. “Elsewhere, the sentiment was lifted by China's reopening, an unexpectedly mild winter, and resilient activity data in the Eurozone,” stated Trading Economics.

Most Asian markets also closed up after increased activity during Chinese New Year celebrations. The Hang Seng closed up by 2.37% after a “swift economic reopening in China with pro-growth policies from Beijing also encouraged traders to enter new positions. Meantime, Lunar New Year travel and checkout data showed a sharp pickup in China's demand, while tourism activity recovered in Hong Kong due to a revival in cross-border travel,” Bloomberg News said. However, the Japanese Nikkei closed slightly down at 0.12% as “economic uncertainties continue(d) to weigh on sentiment.”

Wall Street was also trading higher at 21h30 after an advanced estimate showed that the US economy grew by 2.90% in the last quarter of 2022. US indices were also boosted when “Tesla (NASDAQ: TSLA ) shares jumped 7.91% after better-than-expected quarterly results and bullish commentary on demand reassured investors that the EV maker could cope with a slowing economy in 2023,” added Reuters.

A barrel of Brent crude traded for $86.13 at 21h40, while an ounce of gold traded at $1 930.66 at the same time.

PSG Wealth Daily Investment Update, 27 January 2023

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