Global Markets Weaker As Traders Continue To Digest The Fed’s Change Of Stance

21/06/2021 Asian stocks slid on Monday as market participants mulled the implications of a surprise hawkish shift by the U.S. Federal Reserve, last week, while the Treasury yield curve flattened further with 30-year yields dropping below 2%. Japan’s Nikkei led declines, dropping almost 4.0%, dipping below 28,000 for the first time in a month, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1% in early trading. European and U.S. stock futures declined. Oil prices rose on Monday, underpinned by strong demand during the summer driving season and a pause in talks to revive the Iran nuclear deal.

Brent crude gained 33 cents to $73.86 a barrel, while U.S.WTI crude was at $72.05 a barrel, up 38 cents. Gold futures were up 0.42% to $1,772.27. The yellow metal was boosted by retreating U.S. Treasury yields.

Here are some events to watch this week:
• Bank of England interest rate decision Thursday
• European Central Bank President Christine Lagarde addresses the European Parliament Monday
• Fed Chair Jerome Powell testifies at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs Tuesday
• St. Louis Fed President James Bullard, Dallas Fed President Robert Kaplan and New York Fed President John Williams are among Fed speakers, as traders weigh up the central bank’s messaging shift, which has the potential to whiplash assets

The JSE was weaker on Friday, with its global peers mixed, as caution persisted in the markets after Federal Reserve officials signalled an unexpected shift in tone on Wednesday indicating two rate hikes in 2023 – while also raising its inflation forecast for 2021 by one percentage point to 3.4%. The local bourse slipped 1.43% to 65,635 points at the close on Friday, with the blue-chip Top-40 1.48% weaker at the end of the day. Financials dropped 2.24%, banks 2.1%, resources 1.66% and industrials 1.19%. The rand is on the backfoot 0.40% to the dollar at R14.40/$. Tencent 3.15% weaker in Hong Kong (we got NPN/PRX earning today)

NEWS:
• South Africa Ready for Global Policy Tightening, Kganyago Says
• South Africa’s Labor Law Architect Mboweni Sees Need for Change
• South African Stocks Deepen Weekly Slump With Miners in Retreat
• South Africa Central Bank Rate at 3.50% by End-3Q21 (Survey)
• South Africa Deploys Army to Help Manage Virus in Commercial Hub
EQUITY PREVIEW:
• Absa’s Strategy Is Paying Dividends, Valuation Attractive: BofA
• Capitec Sees 1H Earnings Per Share Ex-Items Increasing Six-Fold
MEDIA SUMMARIES:
• Business Day.za: RMB boss urges government to intensify reforms
• Business Day.za: Covid-19 jabs for education sector to begin next week
• Moneyweb: The devastating effect of lockdowns on SA’s wine industry
• Moneyweb: Mediclinic opts for own power too
• Fin24: Kusile power station to be completed by 2025 within its R161bn budget, says Mabuza
EARNINGS:
• Naspers Ltd. (NPN SJ)
• Prosus NV (PRX NA)

EU/UK/US
London stocks closed into negative territory on Friday, weighed down by inflation concerns and disappointing retail sales data. UK official data revealed an unexpected 1.4% fall in May retail sales against forecasts of a 1.5% to 1.6%. The FTSE 100 ended the session down 1.9%. The pan-European STOXX 600 index ended 1.6% lower in its worst day in five weeks, with bank and energy stocks leading declines. Over in Germany, the May producer price index (PPI) rose 1.5% against April outstripping the 0.7% consensus forecast. Germany’s DAX closed 1.78% weaker.

Wall Street stocks were in the red at the open on Friday, setting the Dow Jones on a course for its worst week since January. The rotation out of value and cyclical stocks accelerated on Friday, after St. Louis Fed President James Bullard said inflation risks may warrant the central bank to raise interest rates next year. Value stocks ended a painful week as the blue-chip Dow Jones fell in all five sessions, claiming its worst week since October. The Dow closed 1.58% weaker on Friday, the S%P500 retreating 1.31%, alongside the Nasdaq 0.92% weaker. U.S. futures pointed to further selling when Wall Street reopens – all three major benchmarks are pointing downwards.

ASIA
The MSCI world equity index (which tracks shares in about 45 nations) fell another 0.21% on Monday, extending its retreat from a record intraday high reached Tuesday. The CSI300 index fell 0.6%, while the Shanghai Composite Index dipped 0.2%. Hong Kong slipped 1.64%, while Japan’s Nikkei is 3.67% down. MSCI’s Asia ex-Japan stock index was weaker by 1.39%. China kept its benchmark lending rate for corporate and household loans unchanged for the 14th straight month at its June fixing on Monday, in line with market expectations.