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Renewed fears that the coronavirus will harm global growth rocked commodity markets again yesterday, with oil and metals prices tumbling while gold soared toward $1 700 an ounce amid a flight to haven assets.
The JSE All Share was down 4,09 percent to 54 991,96 points — a loss of 2344,25 points. The Top 40 was down 4,33 percent to 49 354,74.
Meanwhile, the rand was down 0,86 percent to the dollar. As the deadly virus spreads more widely outside China, raising the threat of a global pandemic, finance chiefs and central bankers from the world’s largest economies said they see downside risks persisting.
That’s spurring fresh alarm in commodity markets that had started to recover from lows hit earlier in the month, when China’s virtual shut-down threw supply chains into chaos. With the International Monetary Fund cutting its global growth forecast and warning that it’s also looking at more “dire” scenarios, investors are concerned that risks to raw-material demand are worsening.
“Commodities are witnessing another risk-off day as coronavirus concerns boil up,” said Norbert Ruecker, head of economics at Julius Baer Group in Zurich.
“The oil market remains concerned about demand” while “the flight to safety pushes gold to new highs.”
Oil led the losses yesterday, tumbling more than 3 percent in London and New York. Until Friday, Brent crude had been in the longest run of gains in more than a year thanks to Chinese fiscal stimulus and new threats to supplies from Africa and Latin America.
Gold beckons
As they flee riskier assets, investors are searching for safety, sending gold prices to fresh seven-year highs, with bonds also advancing. Bullion prices have taken off this year, rising about 10 percent as concerns over the virus deepen and speculation mounts that the US Federal Reserve will ease monetary policy if the global impact worsens.
The gold price was at 1 675,59, up 1,95 percent. The JSE gold mining index was up 5,78 percent.
The spread of the Covid-19 to Italy and South Korea is threatening the rebounds in asset prices and that fear is driving gold prices higher,” said Howie Lee, an economist at Oversea-Chinese Banking Corporation in Singapore.
“Upward momentum is strong and interest in gold is set to remain high until the situation abates.”
Shares of some of the largest commodity companies were also affected by the sharp moves in prices. A gauge of South African gold producers climbed as much as 8,4 percent to the highest since 2002, led by Harmony Gold Mining Company yet BHP Group, the world’s biggest miner, slumped 5,4 percent in London, while BP Plc lost 3,5 percent.
Meanwhile, platinum was down 1 percent at 965,75. Anglo American Platinum was down 8,13 percent to R1 272,83 on the JSE, while Impala Platinum was down 7,53 percent to R151,33.
“Given the fact that relative to other assets, commodities still remain very low and particularly taking the burden of this reaction, then you would expect the recovery to be quite sharp as we go into the third quarter,” Wayne Gordon, executive director for commodities and foreign exchange, said in a Bloomberg Television interview.
Beijing is now pushing for people to get back to work, loosening the criteria for factories to resume operations, as it tries to find a balance between containing the virus and preventing a slump in the world’s second-largest economy. But it’s contagion outside China that’s worrying markets.
“The uncertainty around how cases outside of China evolve is likely to keep market participants nervous, and therefore markets are likely to remain volatile,” ING Bank commodity strategist Warren Patterson said.
Global effects
Asian and European equities slumped along with US futures, while the Australian dollar retreated along with the offshore Yuan.
South Korea, the hardest-hit country after China, had earlier raised its infectious-disease alert to the highest level after a 20-fold increase in cases.
The situation in Europe was also escalating, with Austria halting a train from Italy on concern there were two infected passengers on board. Italy — now the virus’s epicentre on the continent — cancelled the Venice Carnival and other events amid a rising case load. — Moneyweb.
Online Reporter