JSE dips, rand stronger ahead of US inflation data

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Photo: Getty
Photo: Getty

Emerging market shares fell on Tuesday, pressured by a rise in US bond yields ahead of March inflation data.

By late Tuesday morning, the JSE's all-share index was down a percent at 73 686 points. Investec (-5%) was among the biggest losers, while Harmony gave up more than 3%

Later on Tuesday, data is expected to show US consumer prices increased by the most in 16-1/2 years in March, serving as the latest prompt to strengthen the Federal Reserve's hawkishness.

US Treasury yields hit 3-year highs, helping the dollar hold strong against most emerging market currencies. 

"With real yields heading higher, and the Fed now decisively turning hawkish... the scope for relative-value trades in EM FX is now looking diminished," strategists at JPMorgan said in a note.

However, the rand firmer at R14.56/$.

Major central banks have started to turn off pandemic-induced stimulus taps as the war in Ukraine has exacerbated inflation which was already on the rise.

Emerging market stocks, which had fared better than the S&P 500 and MSCI's all country index in the first two months of the year, have started to underperform since the start of Russia's invasion, down almost 10%.

On the day, losses for the broader emerging markets index was limited by a rally in China shares as some lockdown measures were lifted in Shanghai, while regulations on the country's gaming sector were also eased after a multi-year crackdown.

Russia, meanwhile, flagged a possible contraction in growth this year of more than 10%, according to a report. The rouble fell past 80 a dollar, extending losses after the central bank lifted some capital controls

In Turkey, industrial production expanded by a larger than anticipated 13.3% year-on-year in February, data showed.

Turkey's lira was down 0.2% with the central bank seen keeping the key interest rate unchanged this week, despite inflation at 61%.

Sri Lankan bonds rose after the central bank temporarily suspended foreign debt payments to avoid a hard default.

Sovereign dollar bonds in crisis-hit Sri Lanka fell more than 1 cent after the central bank decided to divert its limited foreign reserves for imports of essential items such as fuel instead.

Better mechanisms for dealing with sovereign debt stress will be needed to stave off defaults in poor countries, the International Monetary Fund said on Monday.

Fitch on Tuesday warned Pakistan's political volatility adds to external financing risk.

Pakistan bonds fell after Monday's rally following the appointment of Shehbaz Sharif as prime minister. Stocks rose 0.1%, extending the previous session's near 4% jump, while the currency jumped more than 1%.

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