Picture: MICHAEL BRATT
Picture: MICHAEL BRATT

The JSE slipped more than 1.5% to a one-month low on Monday, extending losses to a third-consecutive session, amid mounting concerns over a faltering global economy.

The fall on Monday was led by local miners, which came under pressure as Asian equity markets posted their worst one-day losses so far in 2019 .  Mining shares had been responsible for the local market pushing higher last week, despite sharp losses for equity markets in the US and Europe.

The JSE’s platinum index, which has pushed higher for the past 13 weeks, fell more than 4% on Monday, its worst performance since July 2018.

The pressure on miners was particularly concerning, given that they had been responsible for much of the gains on the all share so far in 2019, said Sasfin Wealth deputy chair David Shapiro.

There could be a few days of sell-offs of local and international equities, Shapiro said, adding said he was more concerned about the domestic equity market than international stocks.

Despite caution over a slowing global economy, US corporate results for the March quarter could show a different picture of business conditions, Shapiro said.

Disappointing eurozone data

Global caution has  increased after last week’s disappointing eurozone economic data, which helped prompt a broad sell-off of risky assets, such as equities.

Part of the reason for caution was the inversion of the US treasury yield-curve on Friday, which economists believe points to recession. An inverted yield curve refers to the yield on longer-dated bonds falling below that of shorter-dated bonds, implying the market is taking a dim view of future economic activity.

“This development will psychologically encourage further anxiety and rocket fears that the global economy is heading for another downturn, if recent economic releases across the globe have not already provided indications that the downturn has arrived,” said FXTM global head of currency strategy Jameel Ahmad.

As the JSE closed the rand was 1% firmer against the dollar at R14.3475, while the euro had strengthened 0.25% to $1.1324. The benchmark R186 government bond was bid at 8.72% from 8.74%.

The all share closed 1.32% lower at 55,367.1 points. The only index to close higher was gold — up 0.68% — as investors piled into safe-haven assets.

The rand on Friday closed above the psychologically important R14.50/$ handle for the first time in 2019. On Monday it recovered slightly, boosted by reassurances by the Turkish central bank that it had not intervened to support the Turkish lira, but was willing to do so.

The lira had come under pressure last week after data showed a sharp drop in Turkey’s net foreign reserves, though the Turkish central bank has since given an explanation for the decline, markets remain sceptical, said Rand Merchant Bank analyst Nema Ramkhelawan-Bhana.

Given forthcoming risk events this week, including the Reserve Bank interest rate decision on Thursday, and the Moody’s Investors Service announcement on Friday, traders should become comfortable with the rand trading at about R14.50/$, said Ramkhelawan-Bhana.

gernetzkyk@businesslive.co.za