JSE sags under the weight of fear

The JSE dropped for a second day this week on Wednesday, tracking global markets as concerns about the spread of the coronavirus weighed on sentiment.

The death toll for the coronavirus has now risen to more than 4,300 with more than 120,000 cases confirmed, according to the Johns Hopkins University coronavirus resource centre.

SA recorded six new cases on Wednesday, bringing the number of confirmed infections to 13. Markets have reversed earlier gains amid uncertainty regarding stimulus measures to combat the economic effects of the virus. The Bank of England cut its interest rate by 50 basis points in an emergency move on Wednesday.

The JSE all share fell 0.79% to 49,074.09 points and the top 40 lost 0.82%. Resources dropped 1.92% and banks 0.51%.

Shortly after the JSE closed, the Dow was down 4.35% to 23,939.64 points, while in Europe, the FTSE 100 had lost 1.41%, Germany’s DAX 30 0.63% and France’s CAC 40 0.47%.

Earlier, the Shanghai composite fell 0.94%, Hong Kong’s Hang Seng 0.63% and Japan’s Nikkei 225 2.27%.

The rand weakened more than 1% in intraday trade, making its performance the third worst among emerging-market currencies tracked by Bloomberg. At 5.45pm, it had weakened 1.13% to R16.1405/$, 0.89% to R18.1877/€ and 1.32% to R20.8132/£. The euro was flat at $1.1289.

“Given the lack of any action plan from the US with regards to economic support and coupled with the domestic economy still at the mercy of a failing power utility, it is going to be hard to convince anyone that the rand does not deserve to be where it is, maybe even weaker, but the terms of trade are still extremely good and this remains supportive,” said Standard Bank currency dealer Warrick Butler.

Gold added 0.96% to $1,653.50/oz and platinum 0.21% to $874.97. Brent crude lost 5.25% to $35.90. The price of oil plunged this week after Saudi Arabia revealed plans to drastically increase production after a failed supply cut agreement between Opec and Russia. It is down more than 20% this week and 45% for the year to date.

Swissquote Bank senior analyst Ipek Ozkardeskaya said: “Russia responded to Saudi Arabia’s threat to increase production by saying that it could also boost output by 500,000 barrels per day. If the world’s biggest oil producers go down that road, the consequences for medium-term oil prices could be dramatic. Though we believe that Russia may not be able to afford to let prices fall too much below the $30 level.”