Global optimism boosts SA markets amid softer inflation

South African markets traded higher on Wednesday, driven by supportive global sentiment and local inflation developments that reinforced expectations of future interest rate relief. The FTSE/JSE All Share index outperformed, led by gains in resource and industrial stocks, while financials were mixed as investors balanced moderating domestic price pressures against ongoing growth headwinds.

February inflation data showed yearly CPI slowing more than expected to 5.40%, down from 5.90% in January and comfortably below the South African Reserve Bank’s 6% upper target band — the weakest read since early 2024. The softer inflation print reinforced market pricing for a potential repo rate cut later this year, helping support the rand and lift risk assets.

The rand traded firmer against the US dollar, buoyed by improved risk appetite and dovish repricing following the inflation release, though gains were tempered by broader dollar strength earlier in the session. Stronger US economic data and sustained Federal Reserve (Fed) rate-cut expectations supported global risk sentiment, driving spill-over flows into emerging markets such as South Africa despite persistent domestic structural constraints.

US equities extended gains on Wednesday as investors reassessed the implications of AI-driven disruption for the technology sector while maintaining expectations of Fed rate cuts. The Nasdaq 100 advanced 0.80%, while the S&P 500 and the Dow added 0.50% and 0.20%, respectively. Rate markets continue to price in multiple cuts this year; however, minutes from the Fed’s latest meeting showed several FOMC members cautioning that the disinflation process could prove gradual and uneven. 

In corporate developments, Nvidia climbed 1.60% after Meta announced plans to deploy millions of its chips in a new data centre, helping the stock recover from recent weakness amid concerns that elevated AI infrastructure spending may not translate into commensurate revenue growth. Amazon and Micron rose 1.80% and 5.30%, respectively, following disclosures that large asset managers had increased their holdings. The dollar index hovered near 97.7 on Wednesday, supported by stronger-than-expected US economic data and surprise hawkish signals from the Fed, which bolstered demand for the greenback.

European stocks closed higher on Wednesday, outperforming North America as an improving macro backdrop and reports of a potential ECB leadership change lifted sentiment. The STOXX 50 rose 1.40% and the STOXX 600 gained 1.20%, both at record highs. Tech and AI-linked stocks led gains, with ASML and Siemens up nearly 4%, while Rheinmetall surged 5% amid broader defence sector strength following solid BAE Systems earnings and renewed hawkish rhetoric from US President Donald Trump on Iran. The euro weakened toward $1.18 as investors weighed a report that Christine Lagarde may step down early as president of the European Central Bank.

Global commodity markets traded in mixed fashion amid shifting risk sentiment and sector-specific drivers. Crude oil traded moderately lower as profit-taking followed recent gains, while base metals like copper rebounded over 2% on renewed industrial and tech demand. Precious metals were cautious, with gold and silver edging slightly lower amid subdued trading volumes.