By Andre Botha, Senior Dealer, TreasuryONE
The economic effects of Covid-19 became a stark reality yesterday with the release of a raft of Chinese data for January and February, which showed the sharpest fall in over 50 years. Industrial production fell 13.5%, Retail sales were 20.5% down, fixed asset investment dropped 24.5% while some 5 million jobs were lost as unemployment rose from 5.3% to 6.2%. This sparked a sell-off in EM markets and riskier assets and US stock futures turned negative after having closed well in the green on Friday.
Trading on Wall Street was halted immediately on the open as the Dow opened 8.00% down. The Dow yesterday recorded its biggest loss since “Black Monday” in 1987 when it fell 22.0% and closed 12.93% down (See graph). The Nasdaq and the S&P were 12.32% and 11.98% in negative territory at the close. The JSE All-share closed 7.6% down but at one stage was over 12.0% in the red. Asian markets have seesawed this morning and are currently trading in positive territory. The Philippines became the first country to halt trading on its equity market indefinitely.
The Rand started the day around 16.2100 levels before weakening up to the 16.6000 levels where it traded for most of the day. We are currently trading firmer this morning at 16.5250 in line with other EM currencies as markets seem to be taking a breather after yesterday’s carnage. The MSCI Emerging Market Currency Index fell to a 2 year low yesterday. The Dollar is steady against the Euro at 1.1178 and stronger against the Pound at 1.2255 this morning.
Commodity prices were routed yesterday in the so-called “dash for cash” as Gold fell $200, Platinum fell $200 and Palladium a massive $400. Gold hit a $1 456.70 low, Platinum a $558.00 low and Palladium a $1 486.50 low yesterday. Gold is currently trading at $1 497.20 while Oil is holding just above the $30.00 level.