Market commentary

Wall Street closed in the green on Friday, with US stocks seeing notable gains. The S&P 500 rose by 0.90%, the Dow climbed by 290 points, and the Nasdaq surged by 1.50%. Investor sentiment was buoyed by the prospect of the US Federal Reserve (Fed) implementing further rate cuts, particularly in light of this week’s softer-than-expected data on core inflation, producer prices, and retail sales. Markets are also focused on President-elect Donald Trump's inauguration, scheduled for today, as they seek potential insights into upcoming policy shifts. Corporate earnings reports were another focal point on Friday, with Truist Financial’s shares rising over 4.50% after it posted earnings and revenue surpassing analysts’ expectations. Apple shares rose by 1.30%, partially recovering from a 4% drop on Thursday, triggered by news that it had slipped to third place in smartphone sales in China last year.

The Johannesburg Stock Exchange (JSE) gained on Friday, adding more than 1% as investor sentiment remained buoyant following the release of encouraging US economic data. The FTSE/JSE All Share Index gained 1.25%, reaching 84 700 points, while the Top 40 index rose by 1.30%. The focus shifts to Donald Trump's inauguration for his second term, as investors eagerly anticipate possible policy changes under his leadership. In the currency markets, the South African rand continued its positive momentum. By 17H50, the rand had strengthened by 0.42% to R18.70/$, by 0.37% to R19.26/€, and by 0.60% to R22.81/£. Meanwhile, the euro remained largely unchanged at $1.03.

Across the Atlantic, the UK’s FTSE 100 rose by over 1.50%, surpassing the 8 500 mark and edging closer to a record high. This rally was primarily driven by mining stocks, with Glencore shares surging by around 4% amid reports of merger discussions with Rio Tinto, a deal that could potentially become the largest in the industry’s history. Anglo American also saw a gain of more than 3%. This positive momentum came despite concerning economic data from the UK. December retail sales unexpectedly fell by 0.30% month-on-month, contrary to expectations of a 0.40% increase. Earlier in the week, UK GDP data for November showed weaker-than-expected growth, while inflation eased to 2.50%, below the forecasted 2.70%.

In the Eurozone, markets also saw positive movement. The STOXX 50 rose by 0.80%, extending its rally for a third consecutive session and reaching levels not seen since 2000. The STOXX 600 gained 0.70%, reaching its highest point since October. Optimism was driven by softer-than-expected core inflation data from the US and cooling inflation in the UK, which led to expectations that major central banks, particularly the Fed, may continue to reduce interest rates this year. Additionally, China’s economic growth exceeded expectations, meeting its 2024 growth target of 5%. The mining sector outperformed, buoyed by reports of merger talks between Glencore (up 3.20%) and Rio Tinto (up 1.50%), potentially creating the largest merger in the industry’s history.

In Asia, the mood was more subdued. Japan's Nikkei 225 Index fell by 0.31% to close at 38 451, while the broader Topix Index lost 0.33% to finish at 2 679, marking its lowest intraday level in over a month. These declines followed losses on Wall Street, spurred by a sell-off in major technology stocks. Investor attention also turned to the upcoming monetary policy decision from the Bank of Japan, after Governor Kazuo Ueda signalled on Wednesday that the central bank may raise interest rates at its next meeting. In corporate news, Nintendo’s stock plummeted by 4.30% following the announcement of its new Switch 2 console, scheduled for release later this year.

Meanwhile, in China, the Shanghai Composite Index rose by 0.18% to close at 3 242, and the Shenzhen Component gained 0.60% to finish at 10 161. Both indices closed higher for the week, buoyed by positive economic data. China’s economy grew by 5.40% year-on-year in the fourth quarter of 2024, accelerating from a 4.60% expansion in the third quarter and exceeding expectations of 5%. December’s industrial production and retail sales also outperformed forecasts, while new home prices declined at a slower pace.

In the commodities markets, WTI crude oil futures rose above $79 per barrel on Friday, recovering some of the losses from the previous session, and heading toward a fourth consecutive weekly gain. Gold was also on an upward trajectory, trading at around $2 710 per ounce and approaching a one-month high. Gold was on track for a third weekly gain, supported by recent US economic data, including softer-than-expected core inflation and disappointing retail sales figures, which raised expectations that the Federal Reserve may implement multiple rate cuts this year.