South African stocks plummeted nearly 7% on Wednesday following severe drops in overseas markets amid renewed fears of a global economic slowdown even after massive bank bailouts, traders said.
Resources and platinum miners were the hardest hit, falling by more 11% and 13% respectively, as fears of global economic slowdown hit platinum group metals prices and other base metals.
Gold’s safe-haven status remained firmly intact, but gold shares were unable to capitalise at the end of the day.
Most benchmark stocks traded in negative territory all day, extending to a broad-based sell-off in the late afternoon after weak United States retail sales data heightened concerns about the world’s largest economy.
“We are seeing a massive sell-off across the board after the US retail sales fell to their worst level in three years,” said Martin Lentsoane, a trader at Cortex Securities.
US retail sales took the sharpest drop in three years during September, falling by 1,2% as a weak job market and the credit crunch scared consumers and slowed the big engine of the economy.
Wednesday’s losses on the local bourse pretty much wipe out gains achieved in the past two days following coordinated actions from world governments and central banks to pump liquidity in frozen credit markets.
While investors worldwide have welcomed swift coordinated moves by world governments and central banks to contain the credit crisis, traders and analysts say the rescue packages won’t suddenly improve the earnings outlook for crippled banks across the world.
“The credit crisis is under control, but that doesn’t remove worries on global economic slowdown,” one Johannesburg-based trader said.
The all-share index ended down 6,99%, or 1 545 points, at 20 571.87, weighed by an 11,14% decline in resources and a 13,35% crash in the platinum mining index. The gold mining index reversed by 1,43%.
Banks fell by 1,26%, financials were down 2,91% and industrials gave up 4,62%.
The rand was bid at R9,41 to the dollar from R8,97 when the JSE closed on Tuesday, while gold was last quoted at $845,80 a troy ounce from $841,35/oz at the JSE’s last close.
Platinum was at $984,50/oz, down 3,24% from its overnight close.
In the US, stocks slid and the Dow Jones Industrial Average was down by more than 270 points after dire retail sales and inflation data and lacklustre corporate earnings indicated that governments could not rescue the economy along with the banking system, Dow Jones Newswires reported.
The Dow Jones Industrial Average was recently off 342 points, or 3,6%, at 8 976. The technology- focused Nasdaq Composite Index was down 3,1% at 1 723. The S&P 500 was down 4,5% at 953, and the small-stock Russell 2000 was off 4,2% at 532. — I-Net Bridge