Advertise with

More evidence that the global economy is turning for the worst has led to a sudden turn-around in risk appetite across the globe.
More evidence that the global economy is turning for the worst has led to a sudden turn-around in risk appetite across the globe.

Global economic slowdown and trade war hit risk appetite


By Chris Harmse - Mar 12th, 11:18

More and more evidence that the global economy is turning for the worst and the more aggressive stance of the US on trade tariffs against China had led to a sudden turn-around in risk appetite across the globe. 

Together with this more bearish outlook of investors the news that the ANC government intends to nationalise the SA Reserve Bank by buying up all private owned shares, has led to a sell-off of local bonds and shares.

In reaction, the rand exchange rate had recorded one of its biggest losses in value for the year during last week. One can expect that a lot of election promises and noise up to the election on May 8 will contribute towards large volatility on the share, capital and exchange rate markets domestically.

The news that the Chinese exports that had tumbled by 20.7 percent year on year in February contributed a lot to negative sentiment on a global slowdown.

This news came barely a day after the European Commission had scaled down economic growth prospects for Germany, the biggest economy in Europe to a growth rate of only 1.1 percent in 2019, down from the previous estimate of 1.8 percent. The Commission also forecast that the Euro Area will grow by only 1.3 percent in 2019, down from the previous forecast of 1.9 percent. Analysts now also started to discount the US growth prospect more on the downside.
Related Articles

The more and more negative sentiment on global growth prospects had led to a big sell-off by offshore players on the JSE.

This although South African stocks are the cheapest on record relative to their emerging market peers. Foreign investors had been net sellers of South African stocks for 11 consecutive days last week.

The news that the ANC government imminently aimed at nationalising the South African Reserve Bank had thrown further oil on the negative foreign sentiment. Since the beginning of the year, offshore selling of South African shares had skyrocketed to R25.4 billion.

On the JSE shares prices continued to come under pressure. Although the Alsi index total return is still 6.23percent up for the year-to-date it still lags by -2.8percent over the last year.

During last week the Alsi had lost 714 points or 1.3 percent. The Resources 10 index gave up 2 percent, Financials were down by 2.5 percent, while the Industrial 25 index was traded down by 0.3 percent. The listed Property index had ended the week flat gaining a mere 1 point or 0.2 percent.

The rand exchange rate remained under pressure last week. The currency had depreciated 35 cents (2.4 percent) against the dollar at one stage during last Friday morning but did strengthen somewhat to R14.41/$ on Friday evening.

Against the pound, the rand had traded above the R19 on Friday morning, but also had strengthened strongly on Friday afternoon to levels around R18.74, around 6cents stronger than the previous Friday. Against the Euro, the rand ended the week flat on R16.20 against R16.18 the previous week.

This coming week investors will look out for the release of South-Africa’s business confidence index for the fourth quarter 2019. Statistics SA will also publish the latest mining and manufacturing production numbers. Globally attention will shift to the latest inflation figures for most developed and emerging market countries.

Read more about: us | trade | global economy | exchange rate | economy | china

Related News

Shoprite earnings take knock on non-SA operations
20/08/2019 - 10:39
Shoprite’s shares fell to their worst level in more than three years after Africa’s largest food retailer reported a 20% drop in earnings and said it saw no immediate prospects of its troublesome non-SA operations returning to profitability.

Alibaba results beat estimates on cloud, e-commerce growth
19/08/2019 - 14:08
China’s Alibaba Group Holding Ltd reported better-than-expected quarterly revenue and profit, aided by growth in its e-commerce and cloud computing businesses.

Truworths profit at nine-year low as profit plunges over 70%
16/08/2019 - 11:52
Shares in Truworths slumped to a nine-year low on Friday morning after the fashion retailer reported a 74% slide in profits amid difficult trading environments in SA and the UK.

Retail boost could steer SA away from a recession
12/08/2019 - 12:37
A rebound in economic growth in the second quarter of the year will likely see SA avert its second recession in two years.

Nestlé and Starbucks tie-up heads to China
08/08/2019 - 09:31
Nestlé plans to introduce its first range of Starbucks-branded products in China, as part of a global tie-up that will help bolster the Swiss company’s proprietary Nespresso capsules in one of its fastest-growing markets.