MARKET WRAP: Markets thrown into disarray on renewed US-China jitters
The JSE and rand take a pounding as global risk aversion dominates markets after Canada arrests Huawei CFO for possible extradition to the US
Global risk aversion was the order of the day on Thursday resulting in both the rand and the JSE coming under substantial pressure.
Just days after Chinese and US leaders agreed to put a moratorium on their months-long trade battle, Canada arrested Huawei CFO Meng Wanzhou. She faces possible extradition to the US on charges of breaking sanctions against Iran. China has called for her immediate release.
The arrest has created uncertainty over the agreement reached at the weekend between US President Donald Trump and Chinese counterpart Xi Jinping.
At 6.13pm the rand had lost 2.24% to the dollar, at R14.1505, while the benchmark R186 government bond weakened to 9.05%, from Wednesday's close of 8.96%. Against the euro, the rand had fallen 2.69% to R16.1309 and 2.75% to the pound to R18.1181. The euro was at $1.1365 from $1.1345.
Earlier, data from the Reserve Bank showed that SA’s current account deficit had worsened to 3.35% of GDP in the third quarter from 3.4% previously. Analysts said the number was expected and had little effect on local markets, with the China-US concern the big news of the day.
“What these [current account] numbers tell us is that SA’s vulnerability to external factors has increased, though not significantly. We are still relying on external sources of funding to balance our books,” ETM Analytics market analyst Halen Bothma said.
The JSE all share closed 1.75% weaker, with banks and financials the biggest losers, down 3% and 2.29% respectively. Industrials fell 2.08%, while platinum and gold miners made good gains in the risk-off environment.
FirstRand fell 3% to R65.25, Standard Bank 3.29% to R172.80, Absa 3.36% to R154.14 and Nedbank 3.14% to R257.87.
Among financials, Old Mutual was the biggest loser, slumping 4.9% ti R21.35, while Sanlam relinquished 3.05% to R74.50.
Bidvest lost 4.02% to R201.50 and Imperial Logistics 3.28% to R62.19.
Asian markets fell in the morning on the news of Meng's arrest. This was followed by a tumble in European and US bourses. All of the Dow, the FTSE 100, the CAC 40 and the Dax 30 had lost upwards of 3% by 6.45pm local time on Thursday.
Brent crude was not spared from the global market rout as oil cartel Opec’s summit got under way in Vienna. Brent crude slid 4.39% to $58.99 a barrel in early afternoon trade amid reports that major oil producers were struggling to reach a deal to reduce output. It remained at similar levels into the evening.
Platinum gave up 1.47% to R$786.81/oz while gold managed to eke out a 0.33% gain to $1,237.