The JSE extended the previous session’s losses on Friday, falling the most in two months as fears of a potential recession in the US and geopolitical tension weighed on sentiment.
New economic data reignited concerns about a potential recession and the possibility that the US Federal Reserve may have left it too long to cut rates.
Key indicators this week pointed to a slowdown: initial jobless claims surged to their highest level since August 2023, while the US ISM manufacturing index fell to 46.8%, a reading below expectations and a signal of economic contraction, reported Bloomberg.
The data came after the Fed kept interest rates unchanged this week, while chair Jerome Powell signalled the potential for an interest rate cut at the September meeting, but only if the data pointed to a weakening labour market.
Meanwhile, the data released on Friday showed nonfarm payrolls for July came in way weaker than expected, while the unemployment rate rose to the highest since October 2021.
“Risk of a hard landing scenario in the US has increased. The US ISM Manufacturing PMI for July worsened than expected, reflecting the sharpest contraction in US factory activity since November 2023, fuelling medium-term risk-off concerns,” said Oanda senior market analyst Kelvin Wong.
“These weak data points [including the manufacturing employment contracting at its steepest pace since June 2020] have increased the risk of a further softening of the US labour market which suggests its economy is likely to be on the brink of a hard landing or recession.
“The hesitant Fed in enacting its first interest rate cut at the late part of the US economic cycle where a downturn may have already materialised added fuel to the current risk-off episode,” said Wong.
The JSE all share fell 1.62% to 80,538 points — pushed lower by all major indices, with the precious and industrial metals indices both falling more than 2%. The top 40 was down 1.69%.
For the week, the all share was just 0.72% weaker, with major indices mixed.
At 5.15pm, the Dow Jones industrial average had fallen 2.32% to 39,411 points, with markets across Europe and Asia all weaker.
The rand held steady for most of the day, reaching an intraday best of R18.1039/$ as “weaker than expected US ISM assisted in the rand strengthening to R18.10/$”, said RMB head of forex execution Matete Thulare. “However, the rand reversed its gains due to tension in the Middle East.”
At 6.15pm, the rand had weakened 0.02% to R18.2781/$, 1.34% to R19.9392/€ and 0.55% to R23.3844/£.
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