Stocks on the JSE suffered one of the worst weeks this year, plunging for the fourth day in a row on Friday to another two-month low, as the latest US non-farm payrolls report triggered further rate-hike worries.
The JSE All Share index plunged 1.6% to end Friday at 76 454 index points, its biggest daily decline since early January, bringing the bourse’s losses to about 2.3% for the week.
Almost all sectors were trading in the red on Friday, led by logistics, property, renewables, tech, industrials, financials stocks, and resource-linked stocks.
Equities were already under pressure amid lingering concerns that higher interest rates would trigger a global recession.
This as investors were digesting the US jobs data and the possibility of faster interest rate hikes by the Federal Reserve in its upcoming meeting.
US Fed Chairman Jerome Powell has opened the door for interest rate hikes to again accelerate to increments by 50 basis points as the US economy, particularly the labour market, remains too strong.
Data on Friday revealed that the US economy unexpectedly created 311 000 jobs in February, well above market forecasts of 205 000, and following a downwardly revised 504 000 in January.
But at the same time, fears of a US banking collapse also rattled global markets after US tech-industry lender SVB Financial Group collapsed after it failed to raise capital in a share sale to shore up its balance sheet.
But analysts have calmed investor fears, saying that SVB doesn’t portend a wider banking crisis and that the net impact on the real economy will be next to nothing.
“SVB does not represent the wider US banking sector, albeit the plummet in SVB stock clearly hit sentiment,’ said Neil Wilson, chief market analyst at Markets.com.
“It seems as though SVB was just gripping the wrong end of the stick with regards to rising interest rates, parking way too much of its assets in long-dated bonds which it thought safe but are now worth a lot less.”
Back home, the rand remained subdued at R18.32 against the US dollar, but better than the R18.61 it traded to the greenback during the week after S&P Global Ratings lowered its outlook on South Africa’s junk-rated debt to stable from positive.
In an unscheduled announcement on Wednesday, S&P cited the disastrous effects of loadshedding on businesses across the country as one of the core reasons for the outlook change.
Concerns over ongoing loadshedding persist in South Africa despite the appointment of a new minister of electricity.
The new minister, Dr Kgosientsho Ramokgopa said he believed the government will be ambitious in its plans to stop loadshedding, but he was not yet ready to say when that is expected to happen.
Anchor Capital’s co-chief investment officer Nolan Wapenaar said the rand was trading on global events, and Eskom’s assault on the currency was secondary for now.
Wapenaar said the global markets would be most likely dictated by where US interest rates go, but the market was already pricing in about a 70% probability of a 50 basis US rate hike later this month, with two further hikes of 0.25% after that.
“If we are moving towards peak rates but not quite there yet, then phase into risk assets; you can never pick the bottom,” Wapenaar said.
“The rand is likely to hover around these levels for a while but, in time, should eventually recover some of the losses like it has done every time in the past.
“In the short term, anything is possible, and a strong US jobs report and inflation print will see the rand test its all-time COVID lows, while a more sanguine print would auger well for a bit of recovery. Only time will tell.”
BUSINESS REPORT