Local market steadies after Federal Reserve sharply revises US economic growth
JOHANNESBURG - THE LOCAL market steadied yesterday on investor risk sentiment after the Federal Reserve sharply revised the US economic growth, inflation and employment projections for this year.
The Federal Open Market Committee (FOMC) on Wednesday committed to its current monetary policies but predicted there would be stronger growth of 6.5 percent for 2021.
The FOMC kept rates near 0 percent and reiterated that hikes were only likely in 2023 as they maintained their dovish stance.
The committee, however, revised inflation higher to above 2 percent this year than had previously been expected, while employment numbers were expected to remain below their target levels.
The FTSE/JSE All Share Index traded higher, rising 0.37 percent to 66 739 points by 5pm, boosted by resources and gold stocks.
Bullion rose to $1 731.55 (about R25 605) an ounce, buoyed by the weaker dollar as the Fed’s keeping rates on hold reduced the opportunity cost of holding the metal, which has no yield.
FXTM’s chief market strategist, Hussein Sayed, said investors got the best possible outcome from the meeting, as the Fed’s greenlight had resumed risk-taking.
Sayed said that given this kind of environment, the ingredients for higher equity markets remained in place.
“You have a rapid economic recovery coming out from an induced coma, a Federal Reserve unwilling to pull back from emergency measures and a large amount of US fiscal stimulus finding their way into equities by retail investors.”
The rand strengthened to a threeweek high, firming 0.13 percent to R14.75 against the dollar, having touched R14.62 in early morning trade.
TreasuryONE’s currency strategist, Andre Cilliers, said emerging-market currencies had firmed after the Fed’s meeting, with the rand being the star performer.
“The rand is currently trading off its closing levels as the dollar recovers from last night’s closing levels in New York,” Cilliers said.