JSE, rand swept up in global risk selloff
A rout in the riskier corners of the global market deepened, with stocks plunging and traders rushing to the safety of bonds as concerns about a slowdown in the world’s largest economy intensified.
“The economy is not in crisis, at least not yet,” said Callie Cox at Ritholtz Wealth Management. “But it’s fair to say we’re in the danger zone. The Fed is in danger of losing the plot here if they don’t better acknowledge cracks in the job market. Nothing is broken yet, but it’s breaking and the Fed risks slipping behind the curve.”
Treasury 10-year yields dropped two basis points to 3.77%. The dollar fell as the prospect of Fed easing dimmed the greenback’s appeal. A gauge of perceived risk in the US corporate credit markets saw its biggest-one day spike since March 2023, after Silicon Valley Bank collapsed. Cryptocurrencies reeled from a bout of risk aversion in global markets, at one point sending Bitcoin down more than 16%. Commodities from copper and gold to oil plunged.
“There are times to go for the gas, and there are times to go for the brake — I’m inclined to ratchet down exposures and roll strikes,” Pasquariello wrote in a note to clients. He added that it’s difficult to think that August will be one of those months where investors should carry a significant portfolio risk.
“This doesn’t look like a ‘recovery’ backdrop that was hoped for,” Matejka wrote. “We stay cautious on equities, expecting the phase of ‘bad is bad’ to arrive,” he added.
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