The JSE broke a four-day losing streak and the rand firmed along with other emerging market currencies on Wednesday as a global recovery after Monday’s sell-off picked up steam.
Market participants are split on the interpretation of Monday’s plunge; some attribute it to growing concerns about a potential recession in the US economy, while others see it as a long-overdue correction in an overvalued market — in particular the so-called Magnificent Seven tech stocks, Apple, Amazon, Tesla, Microsoft, Meta, Alphabet and Nvidia.
Some analysts have pointed to the most recent weak jobs report from the US and other economic indicators, such as sluggish manufacturing and construction activity, as evidence of the world's biggest economy possibly heading towards a recession. They argue that the market is finally waking up to the reality of a slowing economy and the potential for a downturn.
Others commentators believe Monday’s sell-off was simply a case of a major market correction, driven by investor sentiment and technical factors rather than fundamental economic concerns.
Some experts also suggest the market is experiencing a “repricing” of risk as investors reassess their expectations for economic growth and interest rates, while others have cautioned that there may be more pain.
RMB head of forex execution Matete Thulare said sentiment in emerging markets remained fragile as concerns persist that the US could be heading for a recession — technically defined as two consecutive quarters of contraction in economic activity as measured by GDP.
“Adding to the fragile sentiment is Chinese data showing that its trade balance shrank in July by more than forecast, while exports were lower as eurozone trade tariffs on electric vehicles came to fruition,” Thulare added.
At 6.20pm, the rand had firmed 0.56% to R18.394/$, 0.61% to R20.09336/€ and 0.47% to R23.3766/£. The euro was little changed at $1.0921.
“Again, with little data out, we look for consolidation and ranges of R18.25/$ to R18.55/$ trade to continue for now,” Thulare said.
The JSE all share gained 1.18% to 80,364 points — with most major indices firmer.
At 6.40pm, the Dow Jones industrial average was 0.58% firmer at 39,222.39 points and the tech-heavy Nasdaq was up 1.1%. Markets in Europe rose more than 1.5%.
On commodity markets, gold gained 0.21% to $2,394.10/oz and platinum added 1.47% to $925.97/oz. Brent crude was up 3.21% at $78.51 a barrel.
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