Markets mixed ahead of US inflation rate on Wednesday

Market commentary

The rand rose to its highest level in nearly two months on Monday, while the FTSE/JSE All Share Index advanced, despite a mixed performance from global markets. Investors remain focused on the upcoming US inflation data set to be released this week. Data released on Friday showed that the US job market remained strong in November, with job growth exceeding expectations and average hourly earnings rising more than predicted. However, the unemployment rate edged higher, and labor force participation fell. While traders expect a rate cut at the upcoming December meeting, uncertainty lingers over the trajectory of future cuts. By 18h00, the rand had strengthened 1.40% to R17.75/$, marking its most significant one-day gain in over two months.

US stocks began the week lower, with Nvidia shares dropping due to a Chinese antitrust investigation and ahead of a crucial inflation report. The S&P 500 fell 0.60%, the Nasdaq Composite decreased by 0.50%, following recent record highs, and the Dow Jones dropped 240 points. The upcoming inflation data on Wednesday is highly anticipated as it may influence expectations for Federal Reserve rate cuts.

The Hang Seng surged by 2.80%, the largest one-day gain since early October, closing at a near one-month high of 20 414 points. This rise was driven by substantial gains across various sectors, following a muted morning session. Traders looked past CPI and PPI data in response to remarks from the Chinese Politburo, which indicated that the government and the People's Bank of China will adopt a more proactive fiscal policy and a moderately loose monetary policy next year. Additionally, China plans to increase "unconventional" counter-cyclical adjustments to combat the economic slowdown. Meanwhile, President Xi Jinping and other top leaders are preparing for the annual Central Economic Work Conference this week, which will assess policy implementation for 2024 and establish priorities for 2025.

The STOXX 50 and STOXX 600 edged higher on Monday as investors geared up for a week of key events, including the European Central Bank's (ECB) anticipated 25-basis-point rate cut on Thursday - its fourth this year. Markets are closely watching for signs that the ECB may accelerate rate cuts to bolster Europe’s faltering economy. Optimism was further lifted by China’s pledge to adopt "moderately loose" monetary policies and implement "more proactive" fiscal measures, fueling expectations of stronger domestic consumption. This provided a boost to European luxury stocks, with Kering jumping as much as 4%.

Brent crude oil futures approached $72 per barrel, driven by optimism over China’s shift toward looser monetary policies and geopolitical uncertainties in the Middle East. China, the world’s largest oil importer, signalled a "moderately loose" monetary policy for 2025, marking its first significant shift in over a decade to stimulate economic growth. This move has improved risk sentiment and supported crude prices. Geopolitical tensions also contributed, with reports of Syrian President Bashar al-Assad's ouster raising concerns about further instability in the Middle East.