Trading Day – US Fed raises rates to 15-year high

The US Federal Reserve raised interest rates by 0.5% to the highest level in 15 years. While the increase broke a string of four straight 0.75% hikes, Fed Chair Jerome Powell made it clear in a hawkish speech that they expect to continue raising rates and keep them high for longer.

US markets snapped their 2-day winning streak after the Fed meeting. The S&P 500 closed 0.6% lower, while the Nasdaq fell by 0.8%.

The Nikkei 225 is down in early morning trade declining by 0.4%, while the Hang Seng fell by 1.1%.

Elon Musk has sold another $3.6 billion worth of Tesla shares.

In local news, Eskom CEO Andre de Ruyter has resigned effective from the end of March.

Here is the biggest news of the day.

• The US Federal Reserve raised interest rates by 0.5% to the highest level in 15 years. The Fed now targets a range between 4.25% and 4.5%. While the increase broke a string of four straight 0.75% hikes, Fed Chair Jerome Powell made it clear that their fight against inflation is far from over with a hawkish speech. “Inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases,” Powell said. “But it will take substantially more evidence to have confidence that inflation is on a sustained downward path.” The expected “terminal rate,” or point where officials expect to end the rate hikes, was put at 5.1%, according to the FOMC’s “dot plot” of individual members’ expectations. Officials also expect to keep rates higher through next year, with no reductions until 2024.
• Elon Musk sells another $3.6 billion worth of Tesla shares. Musk sold about 22 million more shares between Monday and Wednesday according to a filing on Wednesday night. Earlier this year, Musk told his millions of followers on social media that he had “no further TSLA sales planned” after 28 April. According to financial research firm VerityData, Musk has sold 94,202,321 shares so far this year at an average price of $243.46 per share for pre-tax proceeds of approximately $22.93 billion. Musk has a remaining 13.4% stake in Tesla, down from about 17% a year ago, according to Refinitiv data.
• DRA Global sells its treasury shares for R93 million. The company has entered into an agreement to sell 4 648 606 shares held in treasury to Apex Partners, an investment holding company with interests in diversified industrials. Following the sale, Apex Partners will hold a 8.54% stake in DRA.
• Eskom CEO Andre de Ruyter has resigned. De Ruyter will remain in his role until the end of March. A comprehensive search will be conducted to find a suitable successor, Eskom Chairman Mpho Makwana said in a statement on Wednesday. Chief Operating Officer Jan Oberholzer is also set to retire in April, leaving the state power utility with a potential leadership vacuum.
• South African inflation hits 5-month low, boosting the hope for a slowdown in rate hikes. The country’s headline Consumer Price Index (CPI) rose by 7.4% from a year earlier, down from a 7.6% reading in October. Economists and traders expect the central bank to continue raising rates next year, but at a slower pace. Forward-rate agreements starting in two months, show the market predicts the Reserve Bank will start to cool the pace of rate hikes, with traders pricing in an 80% chance of a 0.5% increase at the next Monetary Policy Committee meeting scheduled for 26 January.