US Inflation Data Leaves Markets Mixed

US inflation reached a record 41-year high of 8.50% y/y in March 2022 on Tuesday, rising from 7.90% in the previous month and above the expected 8.40%. Energy and food prices were the biggest contributors to the increase. “Excluding volatile energy and food categories, the CPI rose 6.5%, the most in 40 years but slightly below forecasts of 6.6%. Many analysts expect that March will mark the peak in inflation although the war in Ukraine is far from over, supply chain bottlenecks persist and consumer demand remains elevated which is likely to weigh on the CPI for longer,” Trading Economics noted.

Growth stocks made up losses on the back of the US inflation data, boosting the three major US indices, with the Nasdaq as the day’s leader. The pan-European STOXX 600 took a slight knock when an undisclosed investor sold an over 5% stake in both Deutsche Bank (DE:DBKGn) and Commerzbank (DE:CBKG), causing the banks sector to falter.

Chinese shares rebounded on hopes of possible monetary policy support, and “easing in Covid-19 curbs... (that) lifted tourism and consumer goods sectors”, Reuters reported. However, in Japan, the Nikkei neared a 4-week low on Tuesday following a weak performance from US tech stocks in the previous session and ahead of the release of inflation data.

On the local front, the JSE lost 0.84% on Tuesday as investors digested the latest US inflation figures and possible US Federal Reserve (Fed) policy tightening expectations. Financials and IT weighed the most on the index. The rand continued to strengthen, reaching an intraday high of R14.44/$ and trading at R14.46/$ at 18h00.

The gold price rose more than 1% as Treasury yields softened after the release of US inflation data. Brent crude shot up again on Tuesday as China eased lockdown restrictions and OPEC warned that “it would be impossible to replace potential supply losses from Russia”. The oil cartel also expects consumption and supply cuts for 2022.



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