Nicola Mawson
Stock markets across the globe started to recover yesterday after Monday’s shock that caused a worldwide bloodbath across bourses.
Locally, the JSE’s All-Share Index ended the day slightly down 0.19% at 79 430.05 points after Monday’s negative 1.19% close. The rand see-sawed between its opening at R18.48 to the dollar and a low of R18.58, before its R18.50 late afternoon trade.
Analysts have marked Monday’s rout as a knee-jerk reaction to less than favourable data coming out of the US as growth in the labour market slowed, resulting in the Goldman Sachs Group pegging the chance of a US recession at 25% – up from a previous 15%.
Japan’s Nikkei 225, which on Monday experienced its worst rout since 1987 on news that the lending rate was going up 25 basis points, closed 10.23% up yesterday, while the Kospi in South Korea – where sell trading was halted on Monday – closed 3.3% higher yesterday.
Other indicators also ended in green. After being in the red by 3% at 7.30am South African time, the S&P 500 was up 1.48% by 5pm. The Nasdaq, over the same period, went from negative 3.43% to a 1.35% up. Other key markets such as the FTSE also started to reverse the calamitous trading day.
As André Botha, head of execution dealing at TreasuryONE, put it yesterday a “day of consolidation”. Botha added that the “sell-off in equity markets did spook both the currency and commodity markets, but a sense of calm entered the market, with markets trading sideways”.
Botha said the markets would take their direction from further data releases in the short term as they look to indications of strength of the US economy.
“Should further disappointing data be released, we could be in for a volatile time, and should the data prints be an anomaly we could see the markets return to where they were before markets went into a selling frenzy. Even though the losses from yesterday have not been recuperated, there has been a slight improvement in sentiment,” Botha said.
RMB said in a client note “that a rebound in global risk appetite this morning as trading started, once again pushed the US to the rand-level below the 50-day moving average”.
Johann Els, Old Mutual’s chief economist, said he wasn’t too concerned, even though market volatility would continue, including for the local currency. “Market volatility isn’t good for the rand, but the rand has been a better performer than many other emerging market currencies in this environment.”
At the same time, Els predicted that once better US numbers are out and investors realise that the US is not heading into a recession, markets will settle. “Slower growth isn’t a recession, and there’ll be numbers out of the US that support that view.”
Nolan Wapenaar, co-chief investment officer at Anchor Capital, noted that the slower growth in jobs in the US was “softer than expected, but hardly represents the catastrophic loss of jobs we saw heading into previous financial crises”.
He said, “US fundamentals indicate a slower economy and a softer landing but not an all-out economic crash. In our view, the price action on global bonds, domestic bonds, and the rand was too extreme in this regard.”
Monday’s crash, Wapenaar said in a note, reminded him of the classic comedy, The Hangover, in which a group of friends ended up doing some rather absurd things. “It sounds a lot like financial markets on Monday, no one is sure what happened, but it probably was rather stupid.”
BUSINESS REPORT