Global stocks hold firm after bloodbath

Trader Michael Urkonis, center, works on the floor of the New York Stock Exchange, Tuesday, March 10, 2020. Stocks, Treasury yields and oil are clawing back some of the plunge they took a day before, when the S&P 500 had its worst drop in more than a decade. (AP Photo/Richard Drew)

Trader Michael Urkonis, center, works on the floor of the New York Stock Exchange, Tuesday, March 10, 2020. Stocks, Treasury yields and oil are clawing back some of the plunge they took a day before, when the S&P 500 had its worst drop in more than a decade. (AP Photo/Richard Drew)

Published Mar 11, 2020

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JOHANNESBURG - Global stocks held firm yesterday after the markets rebounded from Monday’s bloodbath as international central banks mooted stimulus packages to mitigate against losses caused by the coronavirus (Covid-19) and the oil price crash. 

The JSE All Share Index recovered by 2.46 percent in intra-day trade yesterday to close the day 1.32 percent higher at 49 466 points after closing Monday in the red, 6.57 percent lower at 48 820 points. Covid-19 and the oil price crash created a perfect storm for the markets on Monday, seeing gains being wiped from all major stocks and currencies in a matter of hours. 

The US has proposed a major relief package to combat the economic damage of the coronavirus outbreak, including possible tax cuts, while the EU said it was looking at loosening state aid rules to help struggling businesses. Australia said it was preparing a multibillion-dollar stimulus package, while the Bank of Japan said it would work with the government to do whatever was needed.

ActivTrades’ technical analyst Pierre Veyret said this sudden change in investors’ trading stance stemmed from renewed confidence in the financial system after US President Donald Trump spoke on new “major steps” to boost the economy. 

“On the other side of the world, investors also welcomed a second monetary and fiscal package from the Bank of Japan, echoing what is going to be discussed today in Washington,” Veyret said. 

“Investors were also pleased to see the Russian Energy Minister soften his tone by announcing Russian companies may also boost oil output by 300 000 to 500 000 barrels per day, while a new Opec+ meeting will be organised for not later than May or June. “This helped investors regain confidence in financial markets and explains today’s gains on almost every benchmark.” Neil Wilson, chief market analyst for Markets.com, said that yesterday saw some tentative recovery. 

Wilson said there was a definite sense that capitulation like Monday was by its very nature overdone. “It’s also true that the shock of the oil price drop probably exerted undue influence on investor sentiment given weaker oil prices should help boost global growth,” Wilson said. “However, the news on coronavirus is not improving and the trajectory across European nations is all too similar to Italy,” he said. 

The rand also saw a 1.19 percent further recovery yesterday to R15.90 against the dollar in intra-day trade. By 5pm it was at R16.0512 against the dollar, 10 cents lower than the previous day at the corresponding time. 

The local currency had weakened to its four-year low to R17 against the dollar in the early hours of Monday morning in thin Asian market trade. South Africa recorded substantial net outflows from foreign holdings in its bond market on Monday, to the value of R6.2 billion compared to average daily net foreign sales of R500 million so far this year. Brent crude oil also rallied 3.30 percent to $37.55 (R604) yesterday after plunging 30 percent on Monday as Saudi Arabia effectively declared a price war in the oil market.

BUSINESS REPORT 

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