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Risk-off as investors rally into Treasury bonds

Mar 06 2020 19:47
*Musa Makoni
Traders work on the floor of at the closing bell o

Traders work on the floor of at the closing bell of the Dow Industrial Average at the New York Stock Exchange on October 31, 2018. (Photo: Bryan R. Smith, AFP)

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Global stocks including the JSE resumed their downtrend on Friday on the back of renewed fears over the spread of the coronavirus.

The fall in stocks was ignited by the fall in US Treasury yields as investors seek Treasury bonds in droves. The US 30-year Treasury yields fell to all-time lows while steep declines were also recorded for US 10-year yields. Stock declines on Friday started in Asian markets trading were the Hang Seng lost 2.32%, the Shanghai Composite Index lost 1.62%, while the Nikkei plummeted 2.72%. Steeper declines were recorded in Europe while US equity benchmarks opened lower despite better than expected US non-farm payrolls numbers for the month of February.

US non-farm payrolls seemed to take a backseat as markets did not react positively to the upbeat jobs number. The US economy added 273000 jobs in February, widely beating the forecasted number of 175000 jobs. The US unemployment rate also fell to 3.5% from a prior recording of 3.6%.

The US dollar held its gains against a basket of major currencies as well as emerging market currencies. The rand fell to a session low of R15.77/$ before it was recorded trading 0.55% lower at R15.70/$ at 17.00 CAT.

Purple Group

On the JSE, Anglo American Platinum [JSE:AMS] grabbed headlines after the company announced the shutdown of the Anglo Converter Plant (ACP) and declared force majeure. The share plummeted below of R1000 eventually closing 14.32% lower at R947.64. Anglo American PLC [JSE:AGL] was not spared as it lost 6.27% to close at R345.00, while fellow diversified miner South32 [JSE:S32] fell 5.37% to close at R21.68. Sasol [JSE:SOL] which had its debt rating downgraded to junk by Moody’s on Thursday, slipped by another 5.9% to close at R159.72. Financials were dragged by the weaker rand which saw declines being recorded for FirstRand [JSE:FSR] which lost 5.46% to close at R52.86, while ABSA Group [JSE:ABG] dropped 4.45% to close at R126.11. Losses were also recorded for Old Mutual [JSE:OMU] which lost 4.01% to close at R15.57, Discovery Ltd [JSE:DSY] which retreated 3.62% to close at R99.27, as well as Quilter [JSE:QLT] which closed at R28.29 after falling 4.1%.

Other PGM miners rose on the back of the news of the shutdown of the ACP. Northam Platinum [JSE:NHM] rallied 14.26% to close at R135.00, Impala Platinum [JSE:IMP] surged 12.8% to close at R141.00, while Sibanye Stillwater [JSE:SSW] closed at R37.36 after climbing 7.6%. Gold miners also advanced on the day with gains being recorded for Gold Fields [JSE:GFI] which added 3.38% to close at R111.20, while Harmony Gold [JSE:HAR] gained 3.03% to close at R62.59. Telecoms provider Telkom [JSE:TKG] advanced 6.17% to close at R31.85, while Blue Label Telecoms rallied 4.08% to close at R2.55. Gains were also recorded for RCL Foods [JSE:RCL] which rose 6.17% to close at R11.38, as well as Investec Property Fund [JSE:IPF] closed at R11.97 after gaining 3.19%.

The JSE All-Share index eventually closed 1.88% lower while the JSE Top-40 index lost 1.8%. The Financials index led the losses amongst the major indices as it lost 3.11%, while the Industrials and Resources indices lost 1.3% and 2.04% respectively.

Brent crude slipped even lower as news emerged that OPEC was struggling to get Russia to agree to cut its production. The commodity was trading 5.46% lower at $47.24/barrel just after the JSE close.

At 17.00 CAT, Platinum was up 4% at $902.26/Oz, Palladium was 0.14% firmer at $2548.79/Oz, while Gold had risen 0.69% to trade at $1683.92/Oz.

Musa Makoni is a trading specialist at Purple Group

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