The crisis in the United States sub-prime mortgage market was the hot topic on the JSE just after midday on Wednesday as the local bourse, together with its global counterparts, followed Wall Street south. With commodities also taking strain, the local bourse was hit by a double whammy.
By 12.16pm, the all-share index slid 2,61%. The resources and gold-mining indices both gave up 2,65%, while the platinum-mining index plunged 3,04%. Industrials and financials fell 2,44% and 2,72% respectively, while the banks index was 3,12% in the red.
The rand was bid at 7,48 per dollar from 7,40 when the JSE closed on Tuesday, while gold was quoted at $642,80 a troy ounce from $650,50/oz at the JSE’s last close.
“It was definitely the sub-prime issue in the SUS that instigated this,” a dealer said. “We’ve got a situation where equity markets are scared. The yen also ticked up a bit and that, together with the fall in the US, took Asian markets lower.”
He added that commodity prices had also fallen and this had further knocked resources shares.
“Because equity markets are under pressure, we’ve seen quite a lot of losses taken by commodity prices to facilitate the losses, as opposed to the obverse when people come into commodities as a safe haven,” the dealer explained.
He said that while there had been a bit of a dead-cat bounce, the JSE’s correction of a couple of weeks ago had never really ended.
“The market was overheated and needed a catalyst to spark things off. The sub-prime issue is not that big, but it came at the right time and the right place. Markets are teetering on the brink at the moment and are taking a battering. I think they will come off further.”
On the resources index, London-listed Anglo American tumbled 2,38% or R8,41 to R344,49. BHP Billiton dropped 2,7% or R4 to R144.
Petrochemicals group Sasol slumped 2,92% or R6,50 to R216,20.
AngloGold Ashanti slid 3,59% or R11,50 to R309 and Gold Fields weakened 2,64% or R3,35 to R123,50.
DRDGOLD dived 11,4% or 49 cents to R3,81.
Impala Platinum plunged 3,17% or R6,50 to R198,50 and AngloPlat was off 2,73% or R28 to R997.
Kumba Iron Ore was 3,47% or R4,50 weaker at R125.
Among industrials, London-listed brewer SABMiller was down 3,07% or R4,80 to R151,60 and Swiss-listed luxury goods group Richemont lost 1,94% or 79 cents to R39,93.
Pulp and paper producer Sappi sagged 4,15% or R4,10 to R94,80.
Cellular network operator MTN Group surrendered 3,28% or R2,95 to R87 and media group Naspers was 3,14% or R5,48 lower at R169,02. Caxton plummeted 9,09% or R1,50 to R15.
Transport and logistics group Imperial was 3,76% or R5,79 lower at R148,01.
On the financial front, London-listed Old Mutual fell 3,15% or 76 cents to R23,34. Sanlam was 2,37% or 45 cents softer at R18,50.
Standard Bank slid 3,35% or R3,42 to R98,58, FirstRand pulled back 3,23% or 74 cents to R22,17, Absa surrendered 3,15% or R4,20 to R129,30 and Nedbank was 2,5% or R3,30 in the red at R128,51.
According to AFX, US stocks plunged on Tuesday, driving the Dow Jones industrials down more than 240 points to their second-biggest drop in almost four years, as troubles piled up for sub-prime lenders.
Investors, bracing for a wilting economy, fled the already deflated sub-prime mortgage sector on more news that lenders New Century Financial Corp, Accredited Home Lenders Holding Company and General Motors Acceptance Corporation’s residential unit are facing financial problems. The Mortgage Bankers Association bolstered the belief that the struggles are widespread after it said new foreclosures surged to an all-time high in the last quarter of 2006.
All three major stock indexes were knocked down about 2%.
Sub-prime lenders provide mortgages to people with poor credit. Though they are a relatively small part of the US economy — their difficulties raise larger concerns about the housing market, which until its slowdown in recent years was a big source of money for consumers. That, coupled with the Commerce Department’s report on Tuesday that US retailers eked out a meagre 0,1% rise in sales last month, led Wall Street to reconsider whether Americans’ buying power will withstand an economic slowdown.
The Dow fell 242,66, or 1,97%, to 12Â 075,96. Broader stock indicators also fell by their largest amounts in two weeks. The Standard & Poor’s 500 index fell 28,65, or 2,04%, to 1Â 377,95, and the Nasdaq composite index slid 51,72, or 2,15%, to 2Â 350,57. — IFP