Stocks Drop as Treasuries, Crude Oil Hold Losses; Nasdaq 100 tumbled 3.1% and the S&P 500 fell 1.5%

19/03/2021 Asian stocks weakened Friday after U.S. shares fell from a record, with Treasury yields hovering around the highest levels in over a year as the Federal Reserve’s tolerant stance on inflation unnerved investors. Japan’s Topix rallied and the Nikkei 225 sank after the Bank of Japan said it will focus purchases of exchange-traded funds on the former gauge. MSCI Inc.’s Asia-Pacific stock index fell and China struggled. U.S. equity futures edged up after the Nasdaq 100 tumbled 3.1% and the S&P 500 fell 1.5%. U.S. Treasury yields steadied after a spike drove the 10- year benchmark to 1.75% for the first time since January 2020. Crude prices recovered slightly from a 7% plunge that owed partly to concerns that new virus-related curbs in Europe will sap demand. The dollar held its gains from the prior day. We in for a lower start, with the JSE Top 40 futures down 840 points or 1.3%, with Naspers and Prosus that could weigh as Tencent is trading 3.1% lower in HK. The Rand is weaker at 14.75 vs the USD.

The FTSE/JSE Africa All-Share Index closed up 0.4% to 66,739, mostly supported by platinum counters with Sibanya that rose 6.2%. The bank and retailer sectors came under pressure as the rand weakened, closing down 0.59% and 1.4% respectively. The Rand was down 1% to 14.80 per US$, with the Yield on 10-year govt rand bonds that rose 8.00 bps to 9.45 bps.
South Africa announced the preferred bidders to provide emergency power to boost supply as the state-run electricity utility continues to implement rolling blackouts that are weighing on the economy.

  • Platinum Giants Get Lifeline as Green Economy Boosts Demand
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  • South Africa Creates 1 Billion-Rand Fund for Black Farmers
  • Exxaro’s Tsengwa to Become Miner’s First Woman CEO in 2023
  • Watch Gold Miners as Spot Prices Gain Following Fed Decision
  • Fitch Revises South African 2021 GDP Forecast to 4.3%; Pvs. 3.6%
  • Sinovac May Supply South Africa With 5 Million Vaccines, BD Says
  • EU-U.K. Spat Escalates; Brazil, India Cases Spike: Virus Update
  • MTN Falls From 15-Month High as Post-Earnings Rally Fades
  • Top Iron Ore Miners’ Exports to Drop 15.2% in 1Q: Bernstein
  • Glencore to Sell 30% Stake in Bauxite Project to Mitsubishi
  • Nedbank Cut to Hold at SBG Securities; PT 139 rand
  • Shoprite Raised to Buy at SBG Securities; PT 178 rand
  • Bidvest Cut to Hold at Renaissance Capital; PT 187 rand
  • Exxaro to Pay Special Dividend and Plans Buyback on Tronox Deal

EARNINGS:

  • Northam Platinum Ltd. (NHM SJ)
  • RMB Holdings Ltd. (RMH SJ)

GOVERNMENT:

  • 9:30am: The Commission of Inquiry into allegations of state corruptions, led by Judge Raymond Zondo, resumes hearings in Johannesburg.
  • Talks resume at the bargaining council, where the government is set to respond to public sector demands for an above- inflation wage increase

BOND SALES/PURCHASES:

  • 12pm: South Africa to Sell 1.875% 2029 Linkers
  • 12pm: South Africa to Sell 2.25% 2038 Linkers
  • 12pm: South Africa to Sell 2.5% 2050 Linkers
  • 1pm: South Africa to Sell 4.44 Billion Rand 364-day Bills
  • 1pm: South Africa to Sell 1.4 Billion Rand of 91-day Bills
  • 1pm: South Africa to Sell 4.04 Billion Rand 273-day Bills
  • 1pm: South Africa to Sell 3.07 Billion Rand 182-day Bills

CORPORATE EVENTS:

  • Earnings Calls: NHM SJ
  • Sales Results: IPF SJ

EU/UK
European stocks closed mostly higher on Thursday as investors monitored bond yields and vaccination programs across the region. The pan-European Stoxx 600 closed up by about 0.4% after a choppy trading session. Basic resources stocks were the top performers, climbing 2%. Germany’s DAX was the standout performer in the region and rallied to a record high during Thursday’s trade. The EMA concluded its safety review into the coronavirus vaccine developed by AstraZeneca and the University of Oxford, deeming it safe and effective after fears that it may cause blood clots. The Bank of England kept interest rates and its bond buying program unchanged, following the Fed’s lead with a cautious tone on the prospects for future rate hikes. Earnings came from Generali, Hugo Boss, Rolls-Royce, WPP, Morrisons and John Lewis Partnership. German pharmaceutical company Sartorius saw its shares jump 8.2% after raising its 2021 guidance, with spin-off Sartorius Stedim Biotech gaining 6.2%. At the bottom of the European blue chip index, Swiss online pharmacy Zur Rose Group fell 12.6% after its full-year earnings report.
US
Technology shares led the U.S. stock market lower last night as a spike in bond yields fueled concern about equity valuations and prompted investors to sell growth-focused high flyers. The Nasdaq Composite dropped 3% to 13,116 for its worst day since Feb. 25 as Apple, Amazon and Netflix all fell more than 3%. Tesla slipped nearly 7%. The S&P 500 slid 1.5% to 3,915, falling from a record closing high reached in the previous session. The Dow Jones Industrial Average fell 153 points, or 0.5%, to 32,862 after hitting a new intraday record earlier in the day amid a rally in bank stocks. The 10-year Treasury yield jumped 11 basis points above 1.75% at its session high, reaching its highest level since January 2020. Bank stocks outperformed as higher interest rates tend to improve their profit margins. U.S. Bancorp and Wells Fargo popped 3.3% and 2.4%, respectively. JPMorgan jumped 1.7%, while Bank of America gained 2.6%. Investors also digested a mixed bag of economic data. Weekly initial jobless claims totaled 770,000 for the week ended March 13, worse than an estimate of 700,000, according to economists polled by Dow Jones. Meanwhile, the Philadelphia Federal Reserve’s manufacturing index showed a reading of 51.8, well exceeding Dow Jones consensus of 22.0 and hitting the highest level for the gauge since 1973.
ASIA
Asia-Pacific markets mostly fell this morning as investor sentiment turned cautious, following an overnight selloff stateside. Australian shares traded lower, with the benchmark ASX 200 closed down 0.56% at 6,708 — the index retraced some of its earlier losses of more than 1%. The energy and materials sectors declined 2.03% and 1.41%, respectively, while the heavily-weighted financials subindex finished down 0.31%. The Nikkei 225 in Japan declined 1.29% while the Topix index reversed losses to trade up 0.12%. Japan’s central bank concluded its two-day monetary policy meeting. It announced a raft of measures that included a decision to widen the range at which the 10-year Japanese government bond yield is allowed to fluctuate from the target level to between plus and minus 0.25%. South Korea’s Kospi fell 0.68% while the Kosdaq turned around losses to gain 0.24%. Tech names sold off as shares of Samsung Electronics fell 0.84%, SK Hynix declined 2.11% and LG Electronics lost 1.93%. In Hong Kong, the Hang Seng index fell 1.82% while Taiwan’s Taiex was down 1.16%. Chinese mainland shares also declined: The Shanghai composite was down 1.78% and the Shenzhen component lost more than 2.6%.
COMMODITIES
Gold fell a second day as bond yields surged, with some investors shrugging off the Federal Reserve’s dovish message and betting that the central bank will allow inflation to overshoot amid an economic rebound. Spot gold fell 0.3% to $1,731.94 an ounce by 12:22 p.m. in Singapore, after dropping 0.5% on Thursday. Silver and platinum both retreated. Meanwhile, palladium has surged 13% this week, the most in a year, on estimates for a larger-than-expected deficit after biggest producer MMC Norilsk Nickel PJSC cut its 2021 output targets following flooding at its Arctic mines.
For those who had been tracking oil’s technical indicators this month, the message was clear: Crude prices had risen too quickly, too fast. OPEC+’s decision to rein in production earlier this month, hedge funds piling into the most bullish positions in over a year and an attack on a Saudi Arabian oil complex all worked to propel Brent crude past $70 a barrel for the first time in more than a year. Prices rose well above the upper Bollinger band that signaled a pullback was all but inevitable. Meanwhile, fuel refiners along the U.S. Gulf Coast were struggling to recover from a deep freeze last month and the pace of oil exports had slowed, weighing on near-term demand. And so on Thursday, oil’s 30%-plus rally this year came crashing down. West Texas Intermediate crude futures plunged as much as 9.9%.
Copper headed for a weekly drop, extending its retreat from a nine-year high as inflation fear rattles global markets. Copper fell as much as 1.1% to $8,958 a ton on the London Metal Exchange before trading at $8,994.50 as of 10:10 a.m. The metal closed at $9,412.50 on Feb. 25, the highest since August 2011. Aluminum declined 0.4% to $2,207.50.
Iron ore futures headed for a third weekly decline as rising port stockpiles in China pointed to a slowdown in consumption amid output restrictions at some steel mills. The most-active iron ore contract in Singapore dropped 2.9% to $155.50 a ton by 11:35 a.m. local time. Futures in Dalian fell 3.3% to head for a weekly decline.