The JSE lost for the sixth consecutive session on Friday, with the all share index down 8% this week and erasing 2023 gains, as prospects of more interest rate hikes in the US and a shaky Chinese economic recovery dampened market sentiment.
Fears of a deepening economic slowdown in China worried investors after a string of economic data for July significantly missed expectations.
The country’s property market continues to wobble, while prices are in deflation mode and the government said it will no longer publish statistics on youth unemployment, which has soared above 20% this year, reported Bloomberg.
On Thursday, China’s heavily indebted property developer Evergrande Group filed for Chapter 15 bankruptcy protection in a US court.
Investors are worried that weakening growth in the world’s second-biggest economy will impact global growth. .
Meanwhile, the 10-year US Treasury yield rose to its highest level since October 2022 on Thursday after the Federal Reserve’s July meeting minutes suggested further interest rate hikes could still be on the cards as inflation concerns linger. However, yields began to ease from their highs on Friday.
Stocks broadly have been retreating in August after a torrid first seven months of the year. That’s in part because a swift rise in bond yields is forcing a reassessment of how much to pay for stocks, reported Bloomberg.
“Yields are on the march in part because a string of data has shown the US economy remains resilient. While that suggests the economy may avoid a long-predicted recession, it also forces up expectations that the Federal Reserve may keep its main interest rate higher for longer,” said FXTM senior research analyst Lukman Otunuga.
“High rates work by slowing the economy and hurting prices for investments, so traders had been hoping that the Fed was done hiking rates and that it would begin cutting them early next year.”
“Sentiment towards the Chinese economy is worsening, with concerns that China’s property crisis may be deepening weighing on investor confidence,” said Otunuga.
The JSE all share index fell 1.74% to 73,080.87 points — the weakest level since March, with all major indices lower. The top 40 was down 1.83%.
For the year, the local bourse has all but erased gains, and is now just 0.04% firmer.
At 6pm, the Dow Jones Industrial Average was little changed, while markets were weaker in Europe.
At 6.23pm, the rand had strengthened 0.53% to R18.9624/$, 0.52% to R20.6191/€ and 0.45% to R24.1605/£. The euro was unchanged at $1.0874.
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