File picture: Marcio Jose Sanchez/AP
File picture: Marcio Jose Sanchez/AP

Risk sentiment continues to weigh in on confidence

By Siphelele Dludla Time of article published Mar 16, 2020

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JOHANNESBURG - The slight rebound in global stocks experienced by the markets on Friday, following the worst trading day in decades, could be short-lived as risk sentiment continues to weigh in on confidence, economists warn.

South African stocks slightly recovered on Friday after the JSE All Share index plunged the most in more than 20 years on Thursday, losing nearly 10percent in a single day, pulled down by broad-based losses in platinum, gold, retail and banking sector stocks.

This, coupled with uncertainty over the coronavirus (Covid-19) pandemic and the US travel ban, saw a massive selling of most assets in a move into cash and liquid assets as panic grew in the markets. But stocks held firm on Friday as the oil price bounced back by more than 6percent after a more-than-30percent crash earlier in the week, offsetting some losses from coronavirus panic selling.

Brent crude gained 6.94percent to $35.13 (R567.74) per barrel.

The US and European markets also recovered slightly, but remained in negative territory after suffering their worst single-day loss since Black Monday in 1987 on Thursday.

The rand remained 0.21percent weaker at R16.21 against the dollar as global financial market risk-off continued to afflict the domestic currency.

The JSE All Share Index was 0.28percent lower at 44177points while the Top40 Index fell by 0.15percent to 39476 points.

FXTM’s Lukman Otunuga said there were no major factors why stocks were rebounding as the markets were just experiencing a technical bounce before potentially sinking lower.

Otunuga said the rebound in stocks was unjustified as risk aversion remained a key theme, adding that this should translate to further losses across global equities in the week ahead.

“The semblance of stability seen across stock markets on Friday is unlikely to last due to the growing panic sparked by the coronavirus outbreak,” Otunuga said.

“A technical bounce could be in play across the stock arena which could give way for steeper declines when bears return to the scene."

He said for as long as coronavirus fears and global growth concerns remained on the mind of many investors, the path of least resistance for stocks and riskier assets pointed south.

Investec’s Lara Hodes said the markets were still being dragged by the Covid-19 fears.

“Concerns and uncertainty surrounding the extent of economic impact of Covid-19 continues to dominate market sentiment, with a wholesale sell-off in risk assets,” Hodes said.


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