The local market showed weakness on Wednesday due to volatile global sentiment, as investors assessed the chances of an interest rate cut by the US Federal Reserve. Likewise, the South African Reserve Bank's Monetary Policy Committee (MPC) is set to announce its interest rate decision this afternoon. Many economists predict that the MPC will likely keep the repo rate steady at 8.25%.
US stocks closed lower on Wednesday due to a significant selloff in chip and AI-related shares. The S&P 500 dropped 1.39%, while the Nasdaq 100 fell 2.77%, marking its worst day since December 2022. This decline followed threats from the Biden administration to impose stricter trade barriers and harsher penalties on companies selling technology to China.
The Nikkei fell by 0.43%, pressured by losses in Japanese technology stocks that mirrored a selloff in major US tech shares. This decline occurred as investors shifted into other sectors anticipated to benefit from potential US interest rate cuts. Meanwhile, China's Hang Seng saw a slight rally on Wednesday, closing up 0.06%.
European markets showed mixed results on Wednesday. Britain's FTSE 100 rose by 0.30%, as traders adjusted their expectations for a rate cut by the Bank of England following the release of UK inflation data. June's annual inflation rate in the UK was 2%, slightly above the 1.90% forecasted in May. Meanwhile, Frankfurt's DAX fell by 0.50% to 18 440, weighed down by losses in tech and industrial stocks. Investors assessed the potential impact of US trade barriers and restrictions on the European corporate sector.
In commodities, gold prices climbed on Wednesday, nearing the record high set in the previous session, driven by rising expectations of a US interest rate cut in September, which increased demand for non-yielding bullion. Spot gold rose 0.40% to $2 467.48 per ounce, while US gold futures also increased by 0.40%, reaching $2 469.90. Brent crude rose over 1.50% to trade at $85.06 per barrel at 22h30 local time.
