Rand tumbles to 3-week low, stocks fall as earnings disappoint

The rand weakened more than 2% on Thursday, falling alongside other emerging market currencies as a surge in global coronavirus infections spooked investors fearing a return of strict lockdowns.

At 1600 GMT the rand was 2.2% weaker at R16.91 per dollar, its weakest since July 10, a third consecutive day of losses, and the worst-performing EM currency on the day.

“We’ve actually been calling for the rand to start falling towards R17.00 in the past few days. It’s really overstretched, and now the elastics have snapped,” said Andre Botha, senior dealer at TreasuryOne. “The bad US data didn’t help.”

The rand kicked off the week below the R16.50 technical resistance level, buoyed by risk-taking from investors chasing high yields, but momentum evaporated as the week wore with COVID-19 infections locally and in big global centres climbing.

On Thursday, the United States reported another steep rise in positive cases, on top of dismal economic growth figures, wiping away the cheer from the central bank’s decision to keep lending rates pat.

The world’s No.1 economy contracted at its steepest pace since the Great Depression in the second quarter.

South Africa’s climbing coronavirus cases, at over 471,000, have also kept big bets on ice, while mounting fiscal pressures were underlined this week after the International Monetary Fund approved $4.3 billion in emergency financing, but warned of looming debt stresses..

Bonds weakened, and the yield on the benchmark instrument due in 2030 added 3 basis points to 9.25% in early trade.

The Johannesburg Stock Exchange’s Top 40 Index fell 1.52% to 51,451 points, and the broader All-Share Index closed 1.52% lower at 55,844 points.

Leading the decliners was steel-maker ArcelorMittal , tumbling 26% after it fell deeper into a half-year loss.

Sappi, the world’s largest manufacturer of wood pulp, fell 13% to R25.51 after it reported a loss of $73 million in the quarter ended June.

Anglo American dropped 2.45% after a 39% dive in profits in the first six months of the year during the strictest period of lockdown.

Troubled retailer Steinhoff, battling to recover from a massive accounting fraud, closed 2% lower after first-half losses more than doubled.