MARKET WRAP: JSE drops the most in seven months as global markets plunge
The JSE all share dropped 3.28% and the top 40 3.29%, with all the major indices down on the day
The JSE fell the most since March 27, the first day of SA’s hard lockdown, on Wednesday, falling for a third day as rising Covid-19 cases and tighter lockdowns in some countries sparked renewed fears about the global economic recovery.
Equity markets slumped for the second time this week as surging coronavirus cases in Europe and the US continued to weigh on sentiment, while the lack of an agreement on a US stimulus plan added further pressure. Both the White House and US House Democrats have now conceded that a deal is unlikely before the November 3 election.
The UK and France have reported the highest number of deaths since the first wave of the virus over the past few days, underlining the ongoing challenge Europe faces in containing its spread. France is reported to be readying new measures, which could include a one-month hard lockdown. Meanwhile, hospitalisations are also surging across the US and adding pressure to its healthcare system.
“Monday’s market sell-off resumed today. Sentiment has certainly turned sour as investors are fearing the effects of a second Covid-19 wave,” said Axi market analyst Milan Cutkovic.
“Whether markets will come to a dramatic crash, as seen in March, or are able to bounce back soon, will primarily depend on how quickly and decisively governments and central banks react to the wave of infections, which is bringing further restrictions on everyday life,” said Cutkovic.
The JSE all share dropped 3.28% to 52,308.14 points and the top 40 3.29%. Platinum miners plunged 7.38%, banks 4.54%, financials 4.28%, resources 4.51%, the gold mining index 3.5% and industrials 2.03%.
The Dow Jones industrial average was last seen down 2.87% to 26,674.32 points. In Europe, the FTSE 100 dropped 2.66%, France’s CAC 40 3.28% and Germany’s DAX 30 3.9%.
In his medium-term budget policy statement (MTBPS) tabled on Wednesday, finance minister Tito Mboweni said the debt to GDP ratio is expected to increase over the next few years, reaching 95% in the 2025/2026 fiscal year.
With the economic impact of Covid-19 being more significant than originally expected, the MTBPS raised its GDP contraction to 7.8% from 7.2% in the June emergency budget.
“One can best describe the contents of the [medium-term budget] in three categories: the good, the bad and the mysterious,” said Anchor Capital investment analyst Nolan Wapenaar.
“We highlight that global sentiment towards emerging markets is negative today, so it is difficult to say how much of this weakness is due to the budget and how much is due to global factors.”
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