STOCKS AND MARKETS

EMERGING market (EM) stocks fell on Friday, ending a four-session rally, as the aggressive spread of the coronavirus threatened to deepen a global economic downturn.

Major stock indices across the EM universe lost between 0.5 percent and 3.3 percent early on Friday as investors questioned if policy stimulus would be enough to arrest the economic damage from the epidemic, which continues to spread rapidly outside China.

On the JSE, the blue-chip Top40 index closed 1.8 percent lower to 46 759.72 points, while the broader all share index declined 1.65 percent to 52 064.72 points.

The rand bid at R15.6976 to the dollar at 5pm, 17 cents softer than at the same time on Thursday.

Italy last week announced the closure of all schools and universities for two weeks, while California declared a state of emergency to limit the spread of the virus which has infected more than 98000 people globally and caused over 3 300 deaths.

“Markets are struggling to balance the competing forces of more extensive Covid-19 containment measures, and of monetary and fiscal stimulus... (which) means that in the near term we expect market volatility to persist,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

MSCI’s index of emerging market stocks slipped 1.8 percent on Friday, but still recorded a weekly gain.

UBS analysts said EM shares had been outperforming developed market equities in recent days, given China’s success in containing the outbreak. They expected this to continue in the weeks ahead on lower EM equity valuations, and additional tailwinds from lower rates and a weaker dollar.

Rising expectations that the US Federal Reserve would deliver another rate cut later this month left the dollar index, which measures the greenback’s strength against a basket of six major currencies, languishing at two-month lows. That supported some currencies in the developing world.

Turkey’s lira rose 0.5 percent as Ankara and Moscow agreed to a ceasefire deal in Syria’s Idlib region after a recent surge in tensions raised the prospect of a direct clash between Russia and Turkey.

Russia and Turkey back opposing sides in Syria’s nine-year conflict, with Moscow supporting President Bashar al-Assad and Turkey backing some rebel groups. Several previous deals to end the fighting in Idlib have collapsed. The issue has steadily pressured the lira, outweighing a spate of recent economic data that pointed to a pick up in Turkey’s economy. I Reuters