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Johannesburg - New concerns about the world economy led to a bloodbath in the resources sector on the JSE on Wednesday morning.
By midday the Resources index was already more than 5% lower with the blue chip resources shares, Anglo American, BHP Billiton, Sasol and Glencore, all more than 5% lower on new 52-week lows. All the other major indices were also down.
The rand also weakened against the dollar, while bond yields rose on renewed economic concerns after the World Bank lowered its global growth forecast for 2015. Worldwide commodities were sharply lower, including oil which is heading for new lows.
READ: Rand slips on renewed global growth concerns
By midday on Wednesday the All-share index was already 1.46% softer than the previous day, while the Top 40-index which includes all the blue chips lost 1.69%. The Financial index was at that stage 0.62% softer and the Industrial index 0.80% down, but the real bloodbath was in the resources sector.
The Gold index slipped 3.15% when the gold price lost some ground, while the Resources index was a whopping 5.15% lower.
The World Bank predicted the global economy would grow only 3% this year, below a forecast of 3.4% made in June, with poor economic prospects in major and developing economies offsetting the benefit of lower oil prices.
The global price of Brent crude slipped more than 1% on Wednesday to $46.10 a barrel, which also put Asian markets under pressure.
READ: Asia markets hurt as oil extends losses
Weaker global economic prospects are bad news for resources as it will put a further damper on commodities demand, and above all on the prices of those commodities, some of which are already on record lows.
Confidence was also shaken by reports that South Africa may face a total blackout if Eskom experiences unforeseen problems. Analysts say chronic electricity shortages will continue to weigh on output and confidence.
READ: Eskom woes affect all - Sacci
A softer economy will also lessen the demand for oil at a stage when there is already a glut of oil in the marketplace. There are also indications that traders are selling oil short, which increases pressure on the price.
Oil tumbled 5% to near six-year lows before recovering ground on Tuesday, and Brent briefly traded at par to US crude for the first time in three months. So far this week, Brent has lost 7% and US crude 5%.
Sasol [JSE:SOL] and BHP Billiton [JSE:BIL], the two shares on the JSE which are the most affected by the weak oil price, both reached new 52-week lows on Wednesday morning. Sasol, which seemed to be consolidating over the past few days, at midday was 4.95% lower at R365.00. The share has now lost 39% of its value over the past three months.
BHP Billiton has also given up the slight gains of the past few days and at midday was 4.88% softer at R225.35; it has lost 35% over the past six months. The company will also be affected by electric shortages in South Africa as its aluminium, chrome and manganese smelters are big users of electricity.
The two big losers in the resources sector were Glencore [JSE:GLN] and Anglo American [JSE:AGL], among the biggest producers of copper - one the commodities hardest hit by the selloff in commodities. Copper traded at its lowest in more than half a decade.
Glencore lost a massive 8.77% to trade at a new low of R43.06 and Anglo American dropped to a low of R183.85, 7.98% softer than Tuesday’s closing price.
By midday the Resources index was already more than 5% lower with the blue chip resources shares, Anglo American, BHP Billiton, Sasol and Glencore, all more than 5% lower on new 52-week lows. All the other major indices were also down.
The rand also weakened against the dollar, while bond yields rose on renewed economic concerns after the World Bank lowered its global growth forecast for 2015. Worldwide commodities were sharply lower, including oil which is heading for new lows.
READ: Rand slips on renewed global growth concerns
By midday on Wednesday the All-share index was already 1.46% softer than the previous day, while the Top 40-index which includes all the blue chips lost 1.69%. The Financial index was at that stage 0.62% softer and the Industrial index 0.80% down, but the real bloodbath was in the resources sector.
The Gold index slipped 3.15% when the gold price lost some ground, while the Resources index was a whopping 5.15% lower.
The World Bank predicted the global economy would grow only 3% this year, below a forecast of 3.4% made in June, with poor economic prospects in major and developing economies offsetting the benefit of lower oil prices.
The global price of Brent crude slipped more than 1% on Wednesday to $46.10 a barrel, which also put Asian markets under pressure.
READ: Asia markets hurt as oil extends losses
Weaker global economic prospects are bad news for resources as it will put a further damper on commodities demand, and above all on the prices of those commodities, some of which are already on record lows.
Confidence was also shaken by reports that South Africa may face a total blackout if Eskom experiences unforeseen problems. Analysts say chronic electricity shortages will continue to weigh on output and confidence.
READ: Eskom woes affect all - Sacci
A softer economy will also lessen the demand for oil at a stage when there is already a glut of oil in the marketplace. There are also indications that traders are selling oil short, which increases pressure on the price.
Oil tumbled 5% to near six-year lows before recovering ground on Tuesday, and Brent briefly traded at par to US crude for the first time in three months. So far this week, Brent has lost 7% and US crude 5%.
Sasol [JSE:SOL] and BHP Billiton [JSE:BIL], the two shares on the JSE which are the most affected by the weak oil price, both reached new 52-week lows on Wednesday morning. Sasol, which seemed to be consolidating over the past few days, at midday was 4.95% lower at R365.00. The share has now lost 39% of its value over the past three months.
BHP Billiton has also given up the slight gains of the past few days and at midday was 4.88% softer at R225.35; it has lost 35% over the past six months. The company will also be affected by electric shortages in South Africa as its aluminium, chrome and manganese smelters are big users of electricity.
The two big losers in the resources sector were Glencore [JSE:GLN] and Anglo American [JSE:AGL], among the biggest producers of copper - one the commodities hardest hit by the selloff in commodities. Copper traded at its lowest in more than half a decade.
Glencore lost a massive 8.77% to trade at a new low of R43.06 and Anglo American dropped to a low of R183.85, 7.98% softer than Tuesday’s closing price.
