JSE slumps to a seven-year low

The JSE slumped to its weakest level since the middle of 2013 as the recovery in global markets in the wake of fresh stimulus measures in the US and Europe proved short-lived.

Risk aversion returned with a vengeance as data showed that coronavirus infections in Europe had surpassed those in China, while sentiment in SA was also dented as locally transmitted cases increased. Uncertainty over how fast local transmission of the virus is occurring has led to heightened concerns that the country faces a prolonged recession, weighing on the rand and stocks.

The all share index dropped 7.15% to 38,604.88 points and the top 40 dropped 7.12%. The platinum index plummeted 20.3%, gold miners 4.52%, resources 8.54%, industrials 4.08%, banks 14.9% and financials 12.27%.

Gold lost 2.37% to $1,491.98/oz and platinum 7.65% to $612.27. Brent crude plunged 9.37% to $26.12 a barrel.

The rand was under pressure, breaching R17/$ and falling to the lowest on record based on closing prices. It is down 21.9% against the dollar so far in 2020.

By 5.50pm, the rand had dropped 3.39% to R17.1018/$, 1.99% to R18.5672/€ and 0.88% to R20.093/£. The euro was down 1.32% to $1.0859. Britain’s pound reached its weakest level since 1985.

“The rand has breached R17/$ with ease as the sell-off on the back of the Covid-19 virus pandemic continues to wreak havoc across financial markets,” Peregrine Treasury Solutions treasury partner Bianca Botes said in a note.

“As the world braces for the anticipated global economic fallout of the pandemic, the continued sell-off also saw bond yields skyrocket as investors unloaded SA and other emerging market assets in a bid to derisk their holdings,” said Botes.

In an effort to mitigate the effect of the coronavirus on the global economy, the White House has proposed a $1-trillion stimulus package that could include $1,000 direct payments to households, as well as support for various industries.

Policymakers around the world are expected to announce their proposed economic stimulus measures, with the Reserve Bank due to announce its response measures on Thursday. Analysts expect the Bank to cut its repo rate by 50 basis points, based on a Bloomberg survey.