Asian Stocks Lower as Dow falls from record; Dollar Edges Up Ahead of Fed

17/03/2021 Asian stocks weakened Wednesday as investors assessed the strength of the economic recovery against the risk of a shift in the Federal Reserve’s dovish policy projections. Benchmark Treasury yields hovered near their highest levels in over a year. Modest declines across regional stock indexes weighed on MSCI Inc.’s Asia-Pacific gauge. China swung between gains and losses, while South Korea’s index underperformed. Equity futures in Europe and the U.S. ticked lower after a weaker close for the S&P 500 Index snapped three sessions of record-breaking gains. Apple Inc. and Microsoft Corp. lifted the tech-heavy Nasdaq 100. The Treasury 10-year yield held around 1.61% heading into day two of the Fed’s meeting, after a 20-year bond auction drew strong demand. Market-implied inflation expectations are at 12- year highs, and oil was steady below $65 a barrel. The dollar was stronger versus most major peers. We in for a flat to slightly better start, with the JSE Top 40 futures up 130 points or 0.2%, although Naspers and Prosus could weigh as Tencent is trading down 1.1% in HK. The Rand is weaker, last at 14.90 vs the USD.

The FTSE/JSE Africa All-Share Index closed down 0.4% to 67,289, mostly weighed down by the banking sector that shed 2.08% during the session. Platinums were the star of the day adding 2.2%, with gold that also eked out a 0.49% gain. Shoprite closed 4.4% higher after reporting of results. The Rand was little changed at 14.87 per US$ as of 8:12 pm last night, with the Yield on 10-year govt rand bonds that fell to 9.20 bps.
Statistics South Africa announces January retail-sales data at 1pm, with expectations for a 2.4% year-on- year decline, after a 1.3% slide in December.

  • Talks to resume between South Africa government and public sector over wage increases
  • Shoprite Eases Africa Push to Focus on Domestic Market Gains
  • South Africa Approves Pfizer-Biontech Vaccine for Local Use
  • Africa CDC Reviewing Use of AstraZeneca Covid-19 Vaccine
  • Johannesburg Platinum Stocks Jump After Nornickel Cuts Forecasts

EARNINGS:

  • Nedbank (NED SJ), FY
  • Remgro (REM SJ), 1H
  • Curro (COH SJ), FY
  • Libstar (LBR SJ), FY

ECONOMIC DATA:

  • 10am: S&P Global Ratings webinar about pandemic impact on SA insurers
  • 11:30am: South African Chamber of Commerce and Industry will release trade conditions survey for December & January

EU/UK
European stocks closed higher on Tuesday as market attention focused on the global economic recovery and the latest meeting of the U.S. Federal Reserve. The pan European Stoxx 600 finished up 0.8%, with autos climbing 2% to lead gains while oil and gas stocks fell 1%. Market focus is on the Federal Reserve which kicked off its two-day meeting yesterday, followed by a statement and briefing from Chairman Jerome Powell later today. Coronavirus vaccine news remained in focus in Europe after Germany, Spain and France also suspended use of the AstraZeneca-University of Oxford vaccine over blood clot concerns. Volkswagen is targeting 5%-6.5% operating margin this year and 7%-8% in the ensuing years, as it eyes cost cuts and an ambitious expansion into the electric vehicle market. Shares of the world’s second-largest automaker surged 6.7%. German car battery manufacturer Varta soared more than 14% to lead the Stoxx 600 after announcing that it will start producing battery cells for electromobility. Zalando and French telecoms company Iliad gained 5% and 4.5% respectively after strong full-year results. At the bottom of the European blue chip index, German biotech firm MorphoSys dropped 10% after its full-year earnings report.
US
The Dow fell from its record high and snapped a seven-day winning streak on Tuesday ahead of the Federal Reserve’s upcoming policy announcement. The Dow Jones Industrial Average fell about 129 points, or 0.4%, to 32,825. The S&P 500 slipped 0.2% after setting a record high intraday and finished at 3,962.71, while the tech-heavy Nasdaq Composite clung to a gain of about 0.1% to close at 13,471. The S&P 500 and Dow are still close to record highs, but there’s growing concern among investors that interest rates may continue to climb, snuffing out the comeback for equities. The market fell to its session lows when the benchmark 10-year Treasury yield briefly rose above 1.62% in afternoon trading. The market on Tuesday was supported by megacap tech stocks, with Apple and Google-parent Alphabet each rising 1.3% and 1.4% and Amazon adding 0.3%. February retail sales fell by more than expected, down 3%, data released Tuesday showed, reflecting in part a month marked by severe weather across the United States. However, January’s retail sales figures was revised upward to a 7.6% jump from a 5.3% increase, so the markets largely ignored the number.
ASIA
Asia-Pacific markets traded mixed on Wednesday as investors wait for the outcome of the U.S. Federal Reserve’s two-day policy meeting later in the day. Australia shares deepened their losses as the ASX 200 fell 0.82%, with most sectors trading lower. The energy and materials subindexes declined 1.5% and 1.42%, respectively as oil and mining stocks broadly struggled for gains. Major miners Rio Tinto and BHP were down 1.44% and 1.53%. The Nikkei 225 in Japan traded near flat while the Topix index was fractionally lower. South Korea’s Kospi also extended losses, falling 0.86%. Chinese mainland shares were mixed: The Shanghai composite was near flat but the Shenzhen component traded up 1.08%. Elsewhere, Hong Kong’s Hang Seng index eking out a 0.29% gain.
COMMODITIES
Gold steadied as the Federal Reserve wraps up its two-day meeting later today, with investors watching for guidance on monetary policy amid expectations of a strong recovery from the pandemic. Spot gold added 0.2% to $1,735 an ounce. Silver steadied and platinum declined. Palladium was little changed after surging 4.3% on Tuesday as MMC Norilsk Nickel PJSC cut output targets.
Oil climbed following a sustained slide that dragged prices below $65 a barrel, with investors waiting for reports that will provide a snapshot on global demand and the health of the U.S. economy. Futures in New York added 0.7% after losing 1.9% over the past three sessions.
Copper snapped a four-day rally as exchange inventories rose and traders awaited the Federal Reserve’s decision on U.S. interest rates this week. Stockpiles at warehouses tracked by the London Metal Exchange jumped 12% to a two month high on Tuesday. The metal for three-month delivery on the LME fell 2% to settle at $8,960.50 a metric ton at 5:51 p.m. in London. All other main base metals were lower, with zinc sliding 1.7% from the highest close in more than two weeks as Chinese stockpiles rose.
Iron Ore Prices Falter Even as China’s Main Steel Hub Reopens
Some key events to watch this week:

  • Fed Chair Jerome Powell will likely reaffirm his no-tightening policy stance at the Fed policy meeting Wednesday.
  • Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.
  • Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.