Bond Yields Rise; Stocks Edge Lower as Metals Jump

22/02/2021 The bond selloff are continuing this morning as Treasury yields climbed and sovereign debt in Australia and New Zealand slid on concerns about faster inflation, tempering stock market optimism from positive vaccine news. Benchmark 10-year Treasury yields climbed to the highest in about a year. A gauge of Asian stocks edged lower, erasing earlier gains amid a surge in metals that could fan price pressures. Japanese shares outperformed while other key markets lagged. S&P 500 and European futures dipped after the U.S. index slipped on Friday. Copper hit the highest in more than nine years in a sign of optimism about the global recovery. Crude oil climbed toward $60 a barrel as the market assessed the fallout from the big freeze across Texas. Bitcoin notched another record over the weekend, spurring a rally in the shares of Asian cryptocurrency stocks. Tencent trades 2.3% lower in HK, with the JSE Top 40 futures indicating a lower start, down 165 points or 0.27%. The Rand is weaker at 14.76 vs the USD.

Locally the FTSE/JSE Africa All-Share Index closed up 1.3% to 67,464, mostly supported by miners, with, the platinum and gold sectors both in the green, with Naspers and Prosus also staging good gains. The banking sector was one of the few to end in the red after a profit warning from Absa spurred a sell-off. The Rand was down 0.3% to 14.63 per US$, with the Yield on 10-year govt rand bonds that rose 13.10 bps to 8.89%.
The hearings of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State will hear evidence relating to allegations of graft at the Passenger Rail Agency of South Africa from the former Minister of Transport Dipuo Peters.

  • S. African Stocks Rise for Third Week as Miners, Naspers Recover
  • Banks, Fund Manager Push to Solve $32 Billion Eskom Debt Crisis
  • Police Seize Suspected Covid-19 Treatment Drugs in South Africa
  • Absa Sees FY HEPS & EPS Falling by 55% to 60% y/y
  • Bond Exodus Spurs Almost $1 Billion Outflow: Inside South Africa
  • South Africa Vaccine Program Seen Slower After Astra Setback
  • Truworths Names Hermanus Gideon as Acting CFO
  • Santam Sees FY Heps Dropping 42% to 52% y/y
  • Massmart Sees 6b Rand Lost in FY Total Sales Due to Pandemic
  • Harmony Sees 1H Net Profit More Than Four Times Higher y/y
  • MEDIA SUMMARIES:
    ** Moneyweb: Discounter Pepco has all of Europe in its sights
    ** Business Day.za: Truworths to open new chain to take on Mr Price and Jet

EARNINGS:

  • Anglo American Platinum Ltd. (AMS SJ)
  • AngloGold Ashanti Ltd. (ANG SJ)
  • Liberty Two Degrees Ltd. (L2D SJ)
  • Sasol Ltd. (SOL SJ)
  • Super Group Ltd/South Africa (SPG SJ)

ECONOMIC DATA:

  • 10am: Bloomberg Feb. South Africa Economic Survey

CORPORATE EVENTS:

  • Earnings Calls: L2D SJ, SOL SJ

EU/UK
European markets closed higher on Friday as investors reacted to a fresh batch of corporate earnings and economic data, as well as comments from U.S. Treasury Secretary Janet Yellen calling for fiscal stimulus. The pan-European Stoxx 600 ended the session up 0.5%, with basic resources shares surging 2.8% to lead the gains as most sectors and major bourses closed in positive territory. U.K. Prime Minister Boris Johnson will chair a virtual meeting of leaders of the G-7 major economies on Friday, and is expected to outline an ambition to cut the time to develop new vaccines by two-thirds to 100 days. Meanwhile, Germany’s regulator on Thursday declared that the AstraZeneca-University of Oxford vaccine was “highly effective” and said negative side-effects are short-lived. Investors are also reacting to a slew of economic data, most notably February’s closely-watched Markit flash PMI (purchasing managers’ index) readings out of France, Germany and the euro zone. The euro zone flash composite PMI, combining manufacturing and services activity, climbed to 48.1 in February from 47.8 in January. However, any reading below 50 indicates a contraction in business activity. Germany’s composite PMI reading came in at 51.3, up from 50.8 in January, with anything above 50 representing an expansion. A surge in manufacturing activity offset a contraction in services. French activity weakened to 45.2, down from 47.7 in January, as lockdown measures hit the country’s dominant services sector.asia
US
Stocks came under pressure Friday afternoon, reversing early gains. The Dow Jones Industrial Average finished the day up less than 1 point at 31,494 after climbing more than 150 points earlier in the session. The S&P 500 finished down 0.19% at 3,906 while the Nasdaq Composite gained less than 0.1% to finish at 13,874. Though the major indexes traded higher for most of the morning, a combination of rising interest rates and profit taking in some of the market’s largest technology companies appeared to dampen optimism after noon. For the week, the S&P 500 lost 0.71% while the Nasdaq shed 1.57%. The Dow fared better with a slight gain of 0.11%. Cyclical stocks outperformed the broader market with the materials, energy and industrials sectors up 1.8%, 1.7% and 1.6%, respectively. Utilities and consumer staples stocks were among the biggest laggards. Small-cap stocks, which also tend to track the ups and downs of the broader economy, clinched solid gains Friday at the expense of some of the market’s largest members. The Russell 2000 added 2% while Facebook, Amazon, Netflix, and Microsoft all fell. Apple ended the week down 4%.
ASIA
Stocks in Asia-Pacific are mixed in Monday morning trade as China left its benchmark lending rate unchanged over the weekend. Mainland Chinese stocks were lower by the afternoon, with the Shenzhen component down 1.3% and Shanghai component fractionally lower. Hong Kong’s Hang Seng index gained 0.46%. In Japan, the Nikkei 225 rose 0.96% while the Topix index gained 0.83%. South Korea’s Kospi traded lower at 0.05%. Meanwhile, the S&P/ASX 200 in Australia rose fractionally. MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed. China kept the one-year loan prime rate (LPR) unchanged at 3.85%, largely in line with expectations of traders and analysts in a Reuters snap poll. The five-year LPR was also kept steady at 4.65%. The LPR is a lending reference rate set monthly by 18 banks.
COMMODITIES
Gold steadied after a weekly decline amid optimism over the efficiency of some Covid-19 vaccines and rising bond yields, while investors awaited testimony from Federal Reserve Chair Jerome Powell. Spot gold gained 0.1% to $1,786.61 an ounce by 5:24 a.m. in London, following last week’s 2.2% drop. Silver, palladium and platinum all rose.
Brent oil resumed gains as the market assessed the fallout from the big freeze across Texas, with Goldman Sachs Group Inc. predicting prices will advance into the $70s in coming months. Futures in London rose back near $64 a barrel on Monday after faltering at the end of last week as U.S. production slowly resumed following an easing of temperatures.
Iron ore in Singapore surged above $170 a ton, moving closer to a record as investors bet a global economic recovery would boost steel demand. Iron ore gained as much as 3.3% on the Singapore Exchange to $174.05 a ton, and was at $170.90 by 11:30 a.m. local time. The contract reached a record high of $176.20 a ton in December. Dalian iron ore futures in China rose 2.4%, while rebar futures in Shanghai advanced 2.1% and hot-rolled coil gained more than 3%.
Base metals stormed higher on Monday, with copper rallying above $9,000 a ton on bets that increased demand driven by the recovery from the pandemic will spur a historic deficit, putting the economic bellwether on course for a record run of monthly gains. Nickel topped $20,000 a ton.
Some key events to watch this week:

  • Fed Chair Jerome Powell delivers the central bank’s semi- annual monetary policy report to the Senate Banking Committee on Tuesday.
  • EIA crude oil inventory report is out Wednesday.
  • Bank of Korea monetary policy decision is out Thursday.
  • Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.