Picture: JSE
Picture: JSE

The JSE closed weaker on Monday, following a plunge in the Shanghai Composite Index as the coronavirus outbreak continues to weigh on the economic outlook of the world’s second-largest economy.

The Shanghai Composite fell nearly 8% earlier, as trading resumed in mainland China after the extended Lunar New Year holiday. This was the biggest daily fall for that index in more than four years.

Shanghai-traded oil, iron ore, copper and soft commodities contracts all posted sharp drops, playing catch-up with sliding global prices, Reuters reported. The new virus has created alarm because it is spreading quickly and much about it is unknown, with authorities’ drastic response likely to drag on economic growth.

Travel restrictions and business shutdowns in China are raising doubts about global growth prospects in the next few months, with one Chinese government economist saying that the crisis could cut first-quarter growth by as much as one percentage point, to 5% or lower, with the crisis hitting several sectors from mining to luxury goods.

Earlier, the Shanghai Composite ended the day down 7.72%, while Hong Kong’s Hang Seng firmed 0.17% and Japan’s Nikkei 225 lost 1.01%.

Soon after the JSE closed, the Dow was up 0.98% to 28,533.82 points. In Europe, the FTSE 100 was up 0.93%, France’s CAC 40 0.78% and Germany's DAX 30 0.61%.

“Outside of SA, market sentiment will remain influenced by coronavirus fears and impacts it may have on the global economy. Concerns over the virus outbreak shaving a chunk out of China’s GDP may hit the SA economy in terms of trade,” said FXTM senior research analyst Lukman Otunuga.

“Oil prices remain victim to demand-side fears and are expected to extend losses in the week ahead. On Friday, the US jobs report will be the main risk event and potential market shaker. A strong jobs report should boost the dollar, which is likely to punish emerging-market currencies including the rand,” he said.

The JSE all share weakened 0.45% to 55,828.5 points and the top 40 index 0.34%. Banks were flat while financials were down 0.49%, gold miners 2.52% and the platinum index 0.88%. Only industrials were marginally positive, up 0.2%.

Gold fell 0.92% to $1,1575.30/oz while platinum gained 0.27% to $969.09. Brent crude lost another 2.49% to $55.23 a barrel. It has dropped 16.32% in 2020, the biggest fall since 2018. January 2020 was its worst month since November 2018. The falls have been attributed to lower activity in China as a result of the virus.

The rand firmed on Monday, being the best performing of 24 emerging-market currencies tracked by Bloomberg. At 6pm, it had firmed 0.42% to R14.8866/$, 0.8% to R16.4648/€ and 1.7% to R19.3803/£. The euro was 0.33% lower at $1.1059.

Some analysts believe the rand’s gains came off an oversold position, as it was among the worst-performing emerging-market currencies last week due to a global risk-averse environment caused by the coronavirus.

Logistics and fleet management group Barloworld said on Monday it had agreed to buy two equipment businesses in Mongolia for about R3.252bn. These include purchasing 100% of Wagner Asia Equipment and 49% of SGMS in the mineral-rich country. The Wagner Asia Equipment business will be combined with the current Barloworld Russian business unit into a newly formed Equipment Eurasia unit.

Barloworld’s share price was down 0.21% to R93.20, and has now plunged 17.32% so far in 2020. January saw it fall 17.15%, its worst month since May 2018.

tsobol@businesslive.co.za