Stocks Hover Near Record as Treasuries Held an Advance

09/06/2021 Asian stocks traded in narrow ranges Wednesday as investors digested data on price pressures to gauge the outlook for stimulus amid the recovery from the pandemic. Ten-year U.S. Treasuries held an advance. Shares slipped in Japan but edged up in China, where factory-gate inflation for May was at the highest since 2008. The nation is considering imposing a cap on the price of thermal coal to contain high energy costs. U.S. equity futures were little changed after the S&P 500 ended just shy of its May 7 record close, with European futures lower. The focus remains on Thursday’s report on U.S. consumer prices, which may affect perceptions of when the Federal Reserve is likely to start discussing tapering asset purchases. A gauge of the dollar dipped. Oil resumed its rally to top $70 a barrel in New York as investors grow more confident that the recovery from the pandemic will help demand after an industry report pointed to another draw in U.S. crude stockpiles. Bitcoin remains under pressure, trading around $33,000 after a retreat this week. Tencent trades flat to slightly lower in HK. The JSE Top 40 futures are indicating a flat start, with the Rand steady at 13.56 vs the USD.
Here are key events to watch this week:

  • Apple holds its annual Worldwide Developers Conference (WWDC) virtually for a second year, to announce new hardware and software and work with developers. Through June 11.
  • European Central Bank decision on Thursday and press conference with President Christine Lagarde.
  • Iran nuclear deal talks reconvene in Vienna Thursday.
  • U.S. consumer price index on Thursday.
  • Group of Seven leaders’ summit starts in Cornwall, England Friday.
    The FTSE/JSE Africa All-Share Index closed up 0.1% to 67,644, mostly supported by resources with Anglo American coal spinoff Thungela, jumping 32% in 2nd day of trading.The property sector also closed in the green up 1.7%, with banks also eking out small gains. Platinum and gold counters weighed the most with Amplats and Northam down 3.% and 2% respectively and Goldfiels and Anglogold shedding more than 1.5% on the day. The Rand was trading 0.6% weaker at 13.59 per US$, with the Yield on 10-year govt rand bonds that fell 5.00 bps to 9.03 %.
    South African business confidence is expected to have risen slightly in the second quarter as company executives turn cautiously optimistic about the economy’s recovery. The data is due to be released at 12 p.m.

NEWS:

  • South Africa Health Minister Takes Leave Over Tender Scandal
  • South African Economy Still Down From Pre-Pandemic Levels
  • Inequality Legacy Haunts South Africa’s Vaccine Rollout Plan
  • Anglo American Coal Spinoff Thungela Jumps in 2nd Day of Trading
  • South Africa Stocks Rise as Life Healthcare Surges on Biogen Win
  • Fin24: SARS tightening controls for those who want to leave SA’s tax net

EARNINGS:

  • 1:45 p.m.: Sanlam (SLM SJ), 3Q

ECONOMIC DATA:

  • 11:30am: May SACCI Business Confidence, prior 94.0
  • 12pm: 2Q BER Business Confidence, est. 37, prior 35

GOVERNMENT:

  • 11am: Electoral commission holds briefing about upcoming municipal votes
  • Linda-Gail Bekker, the co-lead investigator of the Sisonke trial that was used to vaccinate half a million health workers in South Africa against Covid-19, addresses the Cape Town Press Club

CORPORATE EVENTS:

  • Annual General Meetings: Sanlam
    EU/UK
    European stocks closed slightly higher Tuesday after revised euro zone growth data showed the region’s economy contracted by much less than expected in the first quarter of the year. Revised data from the EU’s statistics office Eurostat showed gross domestic product (GDP) in the 19-member euro zone contracted 0.3% quarter-on-quarter, compared with the last estimate predicting a 0.6% contraction. However, data showing an unexpected fall in Germany’s industrial output in April weighed on sentiment. The pan-European Stoxx 600 index finished Tuesday’s session up about 0.1% higher. Travel shares led the gains, climbing 1.8%, while auto shares fell 1.1%. Inflation may look like a problem that will go away, but is more likely to persist and lead to a crisis in the years ahead, according to a warning from Deutsche Bank economists. In a forecast that is well outside the consensus from policymakers and Wall Street, Deutsche issued a dire warning that focusing on stimulus while dismissing inflation fears will prove to be a mistake if not in the near term then in 2023 and beyond.
    US
    The S&P 500 finished Tuesday’s session near the flatline as the benchmark once again failed to refresh its all-time high from May. The broad equity benchmark rose less than 1 point to 4,227, sitting 0.3% below its record high of 4,238 reached on May 7. The Dow Jones Industrial Average dipped 30 points, or 0.1%, to 34,599, while the tech-heavy Nasdaq Composite gained 0.3% to 13,924. Tesla erased earlier gains and fell nearly 0.3% even after an increase in deliveries. The electric car maker delivered 33,463 China-made vehicles in that market in May, a 29% jump from April. Airline stocks turned higher after the Centers for Disease Control and Prevention eased travel recommendations for 61 countries, including Japan, France, South Africa, Canada, Spain and Italy. United Airlines climbed nearly 0.8%, while Delta jumped about 2.1%. An upgrade from Jefferies on optimism about international and business travel also boosted Delta shares. Boeing shares gained slightly after Southwest Airlines said it is upsizing its order for the smallest 737 Max model by nearly three dozen planes amid an improvement in travel demand. The Reddit-fueled trading mania seemed to have spread to other stocks, notably Clover Health and Wendy’s on Tuesday. The health care start-up soared as much as 100% and closed the day up about 86%, while shares of the fast food chain rallied 25.8%. The U.S. Securities and Exchange Commission said on Monday it’s watching ongoing volatility in the market and vowed to protect retail investors. On the data front, job openings in April soared to a new record high, with 9.3 million vacancies coming amid the economic recovery. The standard set in April was well above the 8.3 million in March that itself was a new series high going back to 2000 for the Labor Department’s Job Openings and Labor Turnover Survey.
    ASIA
    Shares in major Asia-Pacific markets were mostly lower in Wednesday trade, as investors reacted to the release of Chinese inflation data. Mainland Chinese stocks were higher by the afternoon, with the Shanghai composite climbing 0.4% while the Shenzhen component advanced 0.185%. Hong Kong’s Hang Seng index dipped roughly 0.1%. On the economic data front, official data released Thursday showed China’s producer price index for May jumped 9% from a year earlier, against expectations in a Reuters poll for a 8.5% increase. The country’s consumer price index in May rose 1.3% from a year earlier, lower than an expected 1.6% rise in a Reuters poll. In Japan, the Nikkei 225 shed 0.33% while the Topix index dipped 0.2%. South Korea’s Kospi also declined 0.56%. The S&P/ASX 200 in Australia fell 0.23%. MSCI’s broadest index of Asia-Pacific shares outside of Japan slipped 0.19%. Meanwhile, the World Bank on Tuesday upgraded its growth forecast, with the global economy now expected to grow 5.6% in 2021. That compared against an earlier forecast in January for a 4% global economic expansion in 2021.
    COMMODITIES
    Gold steadied as investors await Thursday’s U.S. inflation report for further clues on when the Federal Reserve is likely to start discussing tapering asset purchases. Bullion is hovering below $1,900 an ounce. Spot gold was little changed at $1,893.52 an ounce at 12:10 p.m. in Singapore, after dropping 0.3% on Tuesday. Prices climbed to $1,916.64 last week, the highest intraday level since Jan. 8. Silver and platinum both ticked higher, while palladium slipped.
    Oil extended gains above $70 a barrel after an industry report pointed to another draw in U.S. crude stockpiles, reinforcing optimism around the demand recovery. Futures in New York rose 0.6% after settling above the threshold on Tuesday for the first time since October 2018. The American Petroleum Institute reported crude inventories fell by 2.11 million barrels last week, according to people familiar with the data. Oil is also being aided by a weaker dollar, while the market for Middle Eastern crude is showing signs of strength.
    Copper prices rose on Wednesday, supported by supply worries and promising demand outlook, but high factory gate prices in China raised concerns of price curbs by the government. Three-month copper on the London Metal Exchange edged up 0.1% to $9,972.50 a ton, while the most-traded July copper contract on the Shanghai Futures Exchange rose 0.6% to 71,840 yuan ($11,234.48) a ton.
    Iron ore futures pared gains in Singapore after China’s soaring factory inflation fanned fears more measures might be put in place to control commodity prices. Surging commodity costs drove China’s producer price index to 9% in May, its highest level since 2008. Futures in Singapore jumped as much as 2.6% to $205.90 a ton before paring gains to trade at $202.10, while contracts in Dalian also rose 2.6%. Rebar and hot- rolled coil contracts advanced in Shanghai.