Stephen Gunnion
12 November 2008
Johannesburg — A DAY after markets rallied on news of China's $586bn stimulus package, stock markets, commodities and currencies fell as the global economic outlook deteriorated and more companies were downgraded.
In the US, General Motors (GM) faced an uncertain future as it awaited news of possible government aid.
The group does not have enough cash to see it through to year's end, and faces bankruptcy unless the government steps in. GM employs 3000 people in SA.
On Monday, Deutsche Bank downgraded the group from "hold" to "sell", and said the car maker's stock was worthless, setting the tone for yesterday's markets.
A sharp fall in Japanese exports, a rise in corporate bankruptcies and a steep fall in UK retail sales last month also weighed on sentiment.
In the US, coffee shop chain Starbucks reported poor fourth-quarter profits and cut its expansion plans and forecasts. Alcoa stock slumped after the aluminium producer slashed its global production capacity 350000 tons.
On the JSE, the all share index slumped 4,5% to 20098 as resources stocks reversed some of Monday's strong gains. The rand fell more than 3% to R10,35/$.
Nedbank forex head Dave Gracey said the good feeling that came out of the Chinese stimulus package dissipated fast as more US companies disappointed the market. Emerging-market currencies had followed equity markets weaker. Standard & Poor's revised outlook on SA's sovereign rating had added to the rand's woes.
David Peacock, a portfolio manager at Sanlam Private Clients, said JSE volumes were thinner than they were recently, indicating investors were still nervous.
Market volatility would go on until US and European data turned positive.
Peacock said it was encouraging that the US futures market's reaction to negative news, such as GM's downgrade, had not been worse. When the US corporate earnings season was over and all the bad news discounted, markets might settle down, he said.
In New York, the Dow Jones was trading 2,8% lower in early evening trade. London's FTSE 100 was down 3,5%.
The CAC 40 in Paris was 5% weaker.
With Reuters
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