Johannesburg - Global bourses narrowly avoided collapse on Friday - the 79th anniversary of Black Thursday, the beginning of the market crash of 1929.
European stocks markets lost more than 10% early in the trading day, but managed to recover somewhat by the end of the day, AFP reports. Germany's benchmark DAX index closed 4.96% lower, or 224 points, at 4 296, after being down more than 10% at one point. The French CAC40 closed 3.54% at 3 194. It also traded over 10% lower during the trading day.
Britain's FTSE 100 closed down 5.0% after the Office for National Statistics said third quarter economic output fell 0.5%, putting the country on the brink of recession, which is technically defined as two quarters of negative growth. The previous quarter's growth was 0.0 percent.
Russia's two exchanges were shut down early because of excessive losses and officials said they wouldn't resume trading until Tuesday - the MICEX was 14.2 percent lower and the RTS down 13.7 percent. Japan's Nikkei 225 stock average closed down 9.6% to 7 649.
Wall Street joined world stock markets in a selloff Friday, with the Dow Jones industrials dropping about 330 points by midday. The growing belief that the world will suffer a punishing economic recession has investors dumping stocks.
The pullback in the US wasn't as steep as some on Wall Street had feared given the massive declines seen overseas amid grim corporate news, AP reports. Earlier, a decline in index futures before the market opened was so steep that selling halts were imposed.
Rand improved
The JSE's all-share index had lost almost 6% by the end of trade, and it is now down over 40% over the year to date, in line with most global markets. According to news service I-Net Bridge, the rand was bid at R11.1307 to the dollar at 15:50 from a previous close of R11.0050 - with an intraday worst level so far of R11.7561 and a best level so far of R10.7349. It was bid at R14.0922 to the euro from a previous R14.2642 and at R17.4255 against sterling from R17.9212 before.
A currency trader told Fin24.com that the slight improvement in the rand could be linked to talk that the Australian Reserve Bank planned to introduce more liquidity into the market to support the Australian dollar, with the talk resulting in the Australian dollar strengthening slightly against the Japanese yen and US dollar.
"Because Australia and SA are viewed as similar markets, the rand has moved up a tad, but you can't read too much into this. Rand volatility is being exacerbated by the liquidity crisis and these moves can't be taken too seriously."
According to veteran market watcher David Shapiro of Sasfin, markets are experiencing the symptoms of a panic drive, where investors who have geared themselves on the way up now have to undo that, showing signs of stress.
"Also, if you are panicking and you need money right now, you will sell your inheritance, and that's what is happening," he said.
Shapiro likened the situation to the biblical story of Esau who exchanged his birthrights for a plate of soup. "When he was full he would have regretted it, but he was desperate, just like people today are desperate."
He said that right now the stock prices are cheap, and if investors were prepared to wait they would make money. With markets like these, however, this would take a lot of courage, he said.
Shapiro said investors were waiting for the market to bottom out (go as low as it can) to find some good bargains, and then hopefully see markets pick up again.
Black Thursday
On October 24 1929 - known as Black Thursday - the US stock market fell 9% and trading volume was about three times more than the normal daily volume for the first nine months of the year, according author Harold Bierman Jr in a book entitled 'The causes of the 1929 stock market crash - a speculative orgy or a new era'.
The day after the crash, the New York Times reported that "880 issues on the New York Stock Exchange, lost between $8bn and $9bn".
Bierman said that the common view then was that the stock market was too high, which is similar to the performance of markets globally in the early part of 2007.
"The stock market index hit a high of 386 in September 1929, and by November it had dropped to 230, a fall of 40%. And by the time, the crash had completed in 1932, and stocks had lost more than 70% of their value," he said.
Back then, the bursting of the speculative bubble led to further selling as people who had borrowed money to buy shares had to cash them in a hurry when their loans were called in.
Media reports show that The Dow did not return to pre-1929 levels until late 1954. Its July 8 1932 level was lower than what it had been since the 1800s.
Shapiro said the world "has changed", and that people can't compare the markets than to what they are like now.
"Back then they never had the internet, they never had globalisation, or any input or help from governments. I find it very difficult to look back and compare it to today, because the circumstances are so different," he said.
"Even though this is worse than the 1987, 1998 and 2000 [market crashes], governments have responded to it - even though it was a little late - and the medicine is just taking longer than expected to get through the whole system," he said.
- Fin24.com