MARKET WRAP: JSE falls in risk-averse trade as China virus spreads
The JSE all share lost 1.49%, its biggest slide in more than two months, and the top 40 1.53%
The JSE’s losses deepened substantially for the week on Tuesday, with global markets falling as investors abandoned risk assets on concern over the outbreak of a deadly virus in China.
The JSE all share lost 1.49% to 57,976.4 points, its biggest slide in more than two months, and the top 40 1.53%. Banks gained 0.33%, while financials relinquished 0.21%, gold miners 3.3% and the platinum index 8.79%.
Global markets suffered broad-based losses over the outbreak of a new coronavirus in China, with investors fearing its potential economic effects. Reports of further deaths caused by the severe acute respiratory syndrome (SARS) type virus, and confirmation that it can be spread through human contact, sent a ripple of risk aversion through markets, with Asian and European stock exchanges all coming under pressure.
Chinese officials confirmed that the Wuhan virus can be transmitted between humans after it has already killed six people and infected more than 300, and has spread to Thailand and Australia.
Moody’s Investors Service downgraded Hong Kong’s credit rating one notch to Aa3 from Aa2, changing its outlook from negative to stable. Hong Kong has suffered months of pro-democracy protests.
Earlier, the Shanghai Composite was down 1.41%, Hong Kong’s Hang Seng 2.81%, and Japan’s Nikkei 225 0.91%.
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US stock index futures followed Asian and European markets lower on the day as worries about the fallout from the new virus, and a gloomy growth outlook from the International Monetary Fund (IMF), looked set to stall a record rally on Wall Street, reported Reuters. The Dow was last seen down 0.23% to 29,279.60.
Soon after the JSE closed, in Europe, the FTSE 100 had fallen 0.66%, France’s CAC 40 0.77% and Germany’s DAX 30 0.15%.
On Monday, the IMF lowered its growth forecasts for the SA economy for 2020 and 2021, citing structural constraints and deteriorating public finances. The fund also cut its 2020 global growth forecast to 3.3% from 3.4% previously, due to the sluggish outlook for the global economy.
Importantly though, growth is still forecast to be stronger than the 2.9% recorded in 2019 with risks less skewed to the downside given preliminary signs that the slump in manufacturing and global trade is starting to bottom, National Australia Bank analyst Tapas Strickland said in a note.
Investors are also keeping an eye on developments at the World Economic Forum (WEF) in Davos, and the European Central Bank’s first policy meeting of the year this week.
FXTM senior research analyst Lukman Otunuga said earlier that caution from Asia was likely to hit European markets as the WEF in Davos, Switzerland, got underway. “Business leaders, financial heavyweights and politicians from across the globe will discuss key issues revolving around climate change and sustainable business. There could be some movement across stock markets if global trade developments and geopolitical risks are discussed during the summit,” Otunuga said.
At 5.44pm, the rand had strengthened 0.24% to R14.4667/$ and 0.25% to R16.0504/€. It was 0.05% weaker at R18.8785/£. The euro was little changed at $1.1093. The R2030 government bond was a little weaker, with the yield rising one basis point to 8.99%. Bond yields move inversely to their prices.
Gold was down 0.23% to $1,1,577.31/oz and platinum 1.86% to $1,004.15/oz. Brent crude fell 0.28% to $64.94 a barrel.