The JSE All Share index fell by 1.3 percent to 66 366 index points by lunchtime as the increasingly negative outlook on the global economy pressured demand for South African resources.
Platinum miners Impala, Northam and Anglo Platinum fell 8.3 percent, 4.8 percent and 4.7 percent, respectively, amid lower prices for bullion and base metals.
The rand also weakened to its lowest in six weeks, touching R17.17 to the US dollar as the greenback held strong after the US Federal Reserve suggested it would keep raising interest rates to tame inflation.
The markets are pricing in a 75 basis-point rate hike by both the Fed and European Central Bank at their respective next monetary policy meetings, raising global growth fears, which has seen a move into both the dollar and the euro.
The rand was also weakened by slowing manufacturing output in China as figures pointed to a second contraction in factory activity, exacerbated by the new Covid lockdowns and prolonged energy rationing for manufacturers.
China has placed millions of its citizens under renewed lockdown in the cities of Shenzhen and Guangzhou after fresh outbreaks of Covid-19 as the government persists in its hardline policy on containing the virus.
TreasuryONE currency strategist Andre Cilliers said the rate hikes and global growth fears were driving risk aversion in the markets.
“Emerging markets currencies are taking heavy strain while both the pound and the yen are under pressure,” Cilliers said.
“A sustained break above R17.20 will open up a potential move to R17.35 in the short term, although the local currency looks oversold at current levels but will remain at the mercy of the dollar.”
Meanwhile, Moody’s Investors Service has reduced growth forecasts for G20 economies and now expects real GDP to rise 2.5 percent in 2022, down from a May projection of 3.1 percent.
For 2023, Moody’s also cut its forecast to 2.1 percent from 2.9 percent.
Madhavi Bokil, senior vice-president at Moody’s, said global monetary and financial conditions would remain fairly restrictive through 2023.
“Central banks will require decisive proof that high inflation no longer poses a threat to their policy objectives before letting up on their tight monetary stance,” Bokil said.
“The challenging global economic environment of today will be resolved with a sharp and disinflationary slowdown in economic growth.”
BUSINESS REPORT