Johannesburg - The news that China's manufacturing activity is currently at its lowest level since August 2012 sent world markets in a downward spiral again on Tuesday morning.
The JSE, which was remarkably resilient on Monday despite volatile international markets, lost about 1.5% in morning trade on Tuesday and the All-share index was approaching the 49 000 level again.
By midday the All-Share index was 1.56% softer at 49 191 points and the Top 40 index traded 1.68% lower at 43 603 points. Technical analysts said on Tuesday morning that 44 000 points has become an important resistance level to be breached for the market to establish upward momentum again.
Financial shares were again the big losers, with the Financial 15 index losing 2.05% by midday and the Industrial index 1.58% down. The Resources index lost 1.14%, but the Gold index gained 2.05% on the back of a higher gold price as fears over the world economy sent investors into safer assets.
The Shanghai stock market dived 3.20% after China's statistics bureau said its purchasing managers' index of manufacturing activity came in at 49.7 last month, its lowest since August 2012.
While the figure is better than last week's preliminary private reading from Chinese media group Caixin - which hit a six-and-a-half-year low - it is still below the 50-point mark that indicates contraction.
The indices are seen as key barometers of the Asian giant's economic health, a major driver of global growth. The rest of the Asian markets followed Shanghai lower, with Tokyo's Nikkei index 3.84% down and the Hang Seng index in Hong Kong losing 2.2% by midday.
Major European markets were also more than 2% lower after Wall Street gave up some of last week’s recovery on Monday.
Traders are keeping an eye on the release of a crucial US jobs report on Friday, which could play a key role in the Federal Reserve's decision whether to raise interest rates next month. That adds to market uncertainty, as there are fears a rate hike in the US will further jolt confidence in the global economy.
"Investors are concerned about the strength of the global economy, which is why you're seeing a sell-off in various stock markets," said Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank in Tokyo.
Naspers [JSE:NPN], the share on the JSE with probably the biggest exposure to the Chinese economy through its interest in Chinese internet giant Tencent, dropped sharply on Tuesday morning and traded 4.19% lower at R1 646.97. The share price has so far been quite resilient despite concerns about the Chinese economy, gaining 6.05% over the past seven days before Tuesday morning’s drop.
The company said at its annual general meeting in Cape Town last week that the downturn in the Chinese economy will have only a limited effect on Tencent’s activities.
WATCH: Why Naspers is not worried about Tencent
Among the other giants in the industrial sector SABMiller [JSE:SAB] traded 0.40% lower at R613.01 and Richemont [JSE:CFR] was 0.61% softer at R98.26.
Although the last few days' strong rally in the oil price lost steam on Tuesday morning due to some profit-taking, Sasol [JSE:SOL] continued to improve. The share price, which gained more than 10% over the previous seven days, gained another 1.68% to R432.50.
Glencore [JSE:GLN], which lost 34.05% over the past 30 days, was again a big loser in the resources sector on Tuesday and at midday was 5.47% lower at R29.02. In earlier trade the stock reached a 52-week intraday low of R28.44. BHP Billiton [JSE:BIL] lost 1.83% to R221.79 and Anglo American [JSE:AGL] 2.28% to R143.50.
Standard Bank [JSE:SBK] was once again the most widely traded share in the financial sector in terms of value, and lost 1.50% to R143.93. Among the other busy shares, FirstRand [JSE:FSR] lost 2.42% to R51.63 and Old Mutual [JSE:OML] 2.44% to R38.76.