Risk-off makes it a bad day at JSE

The JSE had its worst day in more than a week on Thursday amid global risk aversion as concern about a slow economic recovery from the coronavirus pandemic weighed on global market sentiment.

Global equities remained in negative territory on the day after US Federal Reserve (Fed) chair Jerome Powell warned of a lengthy period of economic weakness as Covid-19 and the shutting down of businesses weighed on the US economy. Powell added that the Fed could introduce more stimulus measures if required.

“There’s already unprecedented amounts of stimulus flowing around the financial system in a bid to avert a global depression, but we are already in a severe recession. Any hope of a Vshaped recovery is long gone and we’re in full damage limitation mode. Perhaps the reality is finally setting in, though who would be surprised to see equities marching higher again tomorrow?” said Oanda senior market analyst Craig Erlam.

Shortly after the JSE closed, the Dow was down 0.66% to 23,095.07 points. In Europe, the FTSE 100 dropped 2.86%, France’s CAC 40 1.85% and Germany’s DAX 30 2.09%.

The JSE all share dropped 2.07% to 49,113.06 points, the most since May 4, and the top 40 2.09%. Banks fell 5.07% and financials 4.43%.

Earlier in the day, the Shanghai Composite gave up 0.96%, Hong Kong’s Hang Seng 1.45% and Japan’s Nikkei 225 1.74%.

At 5.45pm, the rand was 0.38% weaker at R18.5940/$, 0.41% at R20.0739/€, 0.29% at R22.6700/£.

The euro fell 0.18% to $1.0796. The yield on the R2030 government bond was flat at 9.59%.

“The lockdown continues to put strain on the economy and will affect tax revenue collections in a big way the longer it lasts. This is being priced into bonds as can be seen by the steepening of the yield curve,” said Rand Merchant Bank’s Tebogo Mekgwe.

Late on Thursday, however, after facing widespread criticism on some of its lockdown regulations, the government published new regulations allowing for more e-commerce activity. Online stores can now sell almost all their products, with the exception of alcohol and tobacco.

Gold added 1.09% to $1, 732.33/oz and platinum 0.69% to $760.21. Brent crude was up 2.07% to $30.12 a barrel after a drop in US crude stockpiles.