Stephen Gunnion
21 November 2008
Johannesburg — GOVERNMENTS around the world took more steps yesterday to soften the blow of the global economic turmoil as stocks plunged and commodity prices and currencies weakened.
Concern about job losses and dwindling hope for economic respite wiped 7% off the value of stocks on the Tokyo and Seoul markets after the US slumped 5% on Wednesday when the US Federal Reserve said the economy would contract in the first half of next year.
The rand sank to R10,66/$, and JSE share prices fell 5%, with heavyweight Anglo American shedding 10% and BHP Billiton 11% as the deteriorating outlook for global economies wreaked havoc.
European markets also weakened, despite talk of a € 130bn economic lifeline to be unveiled next week.
As the carnage swept world markets:
German Economy Minister Michael Glos said the value of the European Union's package would be € 130bn, but European Commission president Jose Manuel Barroso said no decision on the amount had been taken.
Glos said: "What we need is a co-ordinated European Union response, big enough, bold enough to work in the short term, yet strategic and sustainable enough to turn the crisis into an opportunity in the longer term."
The JSE's all share index closed at 17814, its lowest since December 2005. The platinum index slumped 16,5% as Northam Platinum fell 25%, Anglo Platinum lost 16% and Impala Platinum sank 17%.
"This feels like we are at the final capitulation that everyone is talking about because the selling is relentless," said Mpho Mojalefa, head of dealing at BJM Private Client Services.
Mojalefa said there had been a rise in redemptions by foreign investors, particularly hedge funds and mutual funds. The uncertain outlook on the US car industry was hammering platinum shares. Also weighing on shares was an announcement by Impala Platinum that it was suspending plans to buy back shares, and would review its capital expenditure to preserve cash.
Ion de Vleeschauwer, chief currency dealer at Bidvest Bank, said the rand -- trading at R10,65/$ in early evening trade -- was reacting purely to the "chronic weakness" of stock markets globally.
Foreign investors liquidating their South African equity portfolios were adding pressure. Other currencies, including the euro, sterling and the Australian dollar, had also weakened sharply against the dollar, he said.
London's FTSE 100 was down 3,%, and the Paris Cac-40 was 2,8% lower. US shares extended losses when Wall Street opened as new worries about widening unemployment added to investors' list of concerns about the US economy.
After earlier retracing some its losses, the Dow Jones ended 5,56% lower at 7552,29.
The share price of Citigroup, which said this week it would cut 52000 jobs, slumped a further 21% after falling 25% on Wednesday. With Bloomberg, AP
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