JSE slips as Powell talks jobs

The JSE closed weaker but off the day’s lows on Thursday as investors mulled Federal Reserve chair Jerome Powell’s comments about the effect of interest rates hikes on unemployment. The JSE all share closed 0.63% lower at 65,295.42 points, driven mainly by resources, which fell 2.32%.

The JSE closed weaker but off the day’s lows on Thursday as investors mulled US Federal Reserve chair Jerome Powell’s comments on the effect of interest rate hikes on unemployment.

In testimony before the US Senate banking committee, he said aggressive hikes could put jobs at risk, as he pointed out that unemployment was at a “historically low level ”— 3.6% in May, down from nearly 15% in April 2020. A jobless rate above 4% would “still be very strong”, he said.

“It’s been a rather choppy week in financial markets and we’re seeing that reflected again on Thursday, with stocks struggling for direction after trying a recovery,” FXTM senior research analyst Lukman Otunuga said.

“The outlook is highly uncertain, and economic risks are heavily tilted to the downside, making any significant stock market recovery challenging.”

The JSE all share closed 0.63% lower at 65,295.42 points, driven mainly by resources, which fell 2.32%. The top 40 eased 0.67%.

While central banks are starting to accept that recession may be the price to pay for price stability, the central bank of Turkey (CBRT) left its benchmark rate at 14% on Thursday despite 73.5% inflation and a plunging lira.

Under instruction of President Recep Tayyip Erdogan, it is betting that cheaper money will spur economic growth while a weaker lira makes Turkey more competitive.

“The fact that it’s [the CBRT] undertaking such an experiment at arguably the worst moment in decades as other central banks scramble to hike rates and rein in what they consider to be sky-high single-digit inflation, makes the stubbornness of the CBRT all the more ridiculous,” Otunuga said.

For his part, Powell remained unequivocal about the need to focus on inflation. “We really have to get inflation down to 2%,” he told the senate committee, and conceded that the Fed misjudged the risk of high inflation.

At 6.46pm, the Dow Jones industrial average was down 0.43% at 30,353.29 points, and the S&P 500 was 0.27% softer. In Europe, London’s FTSE 100 closed almost 1% lower, while Germany’s DAX shed 1.76% and France’s CAC 40 lost 0.56%.

At 6.40pm, the rand had weakened 0.4% to R15.9892/$ and 0.2% at R19.5404/£. It was little changed at R16.784/€. The euro was 0.58% softer at $1.0504.

Gold was 0.32% weaker at $1,830.73/oz, while platinum lost 2.16% to $908. Brent crude was up 1.08% at $1110.89 a barrel.