JSE down 5% on fear of deep crisis

The numerous stimulus measures by central banks across the globe have done little to ease panic in global markets, with the JSE ending its worst day in almost a week.

Global equities were in a sea of red on Monday as the spread of the coronavirus prompted several countries to enforce travel bans. The US Federal Reserve announced its plans to support the credit market on Monday amid worries about the effects the virus will have on the economy.

“Within the next couple of weeks, we will get to know how severe the upcoming economic crisis will be. The scariest scenario is that it turns into a credit crisis, which will break the financial system,” said FXTM chief market strategist Hussein Sayed.

“Leverage has skyrocketed over the past several years with inflows into US corporate and emerging-market debt at very high levels. With most investors trying to withdraw their money from these asset classes, it could soon turn into a very deep financial crisis,” Sayed said.

Shortly after the JSE closed, the Dow was down 3.72% to 18,460.13 points. In Europe, the FTSE 100 dropped 3.72%, France’s CAC 40 2.89% and Germany’s DAX 2.34%.

Earlier, the Shanghai Composite dropped 3.11% and Hong Kong’s Hang Seng 4.86% while Japan’s Nikkei 225 rose 2.02%.

The JSE all share fell 4.98% to 38,267.21 points and the top 40 4.43%. Banks dropped 9.89% and the property index 16.54%.

At 5.30pm, the rand had weakened 1.02% to R17.7775/$ and 1.79% to

R19.16403/€ while it was flat at R20.4671/£. The euro had firmed 0.80% to $1.0779.

“The rand is still likely to be volatile, with risks to the downside until the Covid-19 pandemic peaks globally, with shutdowns to economic activity underpinning risk off, and so the threat of a further deterioration in the exchange rate,” said Investec economist Annabel Bishop.

“The global recession may well prove more severe than that of the global financial crisis, which is also worrying market players,” she said.

Gold added 2.97% to $1,541.40/oz and platinum 3.11% to $622.29. Brent crude shed 5.83% to $25.84 a barrel.

The R2030 government bond was weaker, with the yield rising 68 basis points to 12.39%. Bond yields move inversely to their prices.