Global markets found firmer footing as cooling US inflation, strong bank earnings and hopes for renewed diplomacy between the US and Iran helped calm investors despite ongoing geopolitical uncertainty.
Image: XINHUA
Global financial markets ended the week on a firmer footing as investors looked past renewed tensions between the United States and Iran and instead focused on encouraging inflation data from the US, strong corporate earnings and signs that diplomatic discussions may resume.
While geopolitical risks continued to influence commodity prices and currencies, improving inflation figures reduced expectations of another immediate interest rate increase by the US Federal Reserve, helping lift sentiment across global equity markets.
According to Anchor Capital, US consumer inflation rose by just 0.2% month on month in June, below both market expectations and the previous month's reading of 0.5%, while producer inflation increased by only 0.1%.
"The US CPI disinflation print, alongside weak payrolls, significantly reduces the probability of an imminent Fed rate hike. Markets are now pricing the first Fed cut by September," Anchor Capital noted.
The softer inflation data helped push Wall Street higher, with the Dow Jones Industrial Average climbing 0.8% to close above the 54 000 mark for the first time. The S&P 500 gained 0.4%, while the Nasdaq advanced 0.5%.
Financial stocks remained among the strongest performers after another round of robust earnings.
Morgan Stanley surged 5.2% after reporting earnings per share of $2.18, while Bank of America rose 3.4% and Citigroup gained 2.8% after both exceeded market expectations.
Despite improved sentiment in the US, South African equities moved lower.
The JSE All Share Index declined 0.8% to close at 111 060.50 as mining, banking and food counters came under pressure amid ongoing concerns surrounding developments in the Middle East.
Among the biggest losers were Anglo American, which fell 4.8%, South32, down 4.1%, BHP, which declined 3.5%, and Standard Bank, which lost 2.8%.
Technology counters continued to outperform, with Naspers gaining 4.7% and Prosus rising 4.1%, while Shoprite climbed 3% to reach a new record high after reporting strong full year sales growth.
Commodity markets remained sensitive to developments surrounding the Strait of Hormuz.
Brent crude oil rose to $78.25 a barrel before easing slightly to around $77.87 during early Friday trade after Washington indicated it remained open to renewed ceasefire negotiations with Iran.
Gold also strengthened, rising to $4 173.47 an ounce as investors continued to seek safe haven assets.
Anchor Capital noted that diplomatic signals from Washington had helped moderate market concerns.
"Washington signalled openness to renewed ceasefire negotiations with Iran, raising hopes that the week's re escalation may be a tactical episode rather than a full reversal of the peace agreement."
Asian markets traded lower on Friday morning as investors continued to monitor geopolitical developments.
Japan's Nikkei fell 0.5%, South Korea's Kospi declined 2.6%, while Hong Kong's Hang Seng Index dropped 1.3%.
The rand also remained under pressure as investors favoured the US dollar amid ongoing uncertainty.
At 05:30 SAST, the rand traded at R16.32 to the dollar, while the euro traded at R18.65 and the pound at R21.84.
Locally, economic data offered some encouragement.
South African mining production increased 6.5% year on year during May, marking a fourth consecutive month of annual growth, while manufacturing production rose 1.5% compared with the same period last year.
Internationally, other major economies also reported encouraging economic data.
The United Kingdom recorded monthly economic growth of 0.5% during May, its strongest reading in more than a year, while China's trade surplus widened to a record $116.1 billion as exports remained resilient.
Anchor Capital said global investors would continue balancing encouraging economic data against geopolitical uncertainty.
"Markets are now increasingly focused on inflation, corporate earnings and central bank policy, while remaining alert to any further developments in the Middle East that could disrupt energy markets and global growth."
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