01/07/2021 Asian stocks slipped this morning amid a firmer dollar as traders weighed signs that Covid-19 flareups are hampering some of the region’s manufacturing and looked ahead to a U.S. payrolls report. Japan and China were among the major equity markets posting modest losses. PMI indexes suggested curbs imposed to fight the virus had sapped output in parts of Asia. U.S. and European are higher after the S&P 500 completed one of the best first halves since 1998 for U.S. shares. The recent spread of the delta virus variant is tempering some of the optimism around the global recovery. The dollar advanced after its best month since March 2020 and Treasuries were steady. The payrolls report due Friday will provide a key gauge of economic progress, helping to shape expectations of when the Federal Reserve might start tapering stimulus. Elsewhere, oil climbed ahead of a meeting between OPEC+ producers on output policy and as a stalemate in Iranian nuclear talks drags on. Hong Kong is closed for a holiday, so no read through for Naspers and Prosus from Tencent. The JSE Top 40 futures has opened slightly higher, up 124 points or 0.21%, with the Rand weakening slightly, last at 14.30 vs the USD.
Here are key events
- China’s President Xi Jinping will deliver a speech as the nation marks the 100th anniversary of the founding of the Chinese Communist Party Thursday
- OPEC+ ministerial meeting Thursday (Today)
- ECB President Christine Lagarde speaks Friday
- The U.S. jobs report is due Friday
The FTSE/JSE Africa All-Share Index down 0.5% to 66,248.74, weighed down mostly by heavyweights Naspers and Prosus, shedding 1.2% and 1.4% respectively. Retailers were also lower after good gains the previous two sessions, with the resource sector 0.54% in the red. The banks sector managed to eked out a gain of 0.44%. The Rand was up 0.3% to 14.32 per US$, with the Yield on 10-year govt rand bonds that fell 5.70 bps to 9.26%.
South African Health Products Regulatory Authority holds briefing on Covid-19 vaccines registration and approvals as the country battles to contain a third wave of the coronavirus. The country of around 60 million people has administered over 3 million doses.
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- Northam Secures Further 1 Billion Rand of Funding Facilities
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- 11am: June Absa Manufacturing PMI, est. 56.5, prior 57.8
- June Naamsa Vehicle Sales YoY, est. 28.1%, prior 197.8%
- 1pm: May Electricity Production YoY, prior 25.6%
- 1pm: May Electricity Consumption YoY, prior 25.7%
- 10am: South African court rules on validity and scope of graft ombudsman’s investigation into whether President Cyril Ramaphosa misled Parliament with regards to donations made to his campaign to lead the ruling African National Congress in 2017
European stocks posted solid gains for the first half of 2021, but dipped slightly on the final trading day of the second quarter amid persistent concerns over the coronavirus pandemic and rising inflation. The pan-European Stoxx 600 provisionally closed down by 0.8% on Wednesday, with autos shares sinking 1.9% to lead the losses. The benchmark was still up over 13% year-to-date, however. European investors reacted to a host of economic data on Wednesday. U.K. first-quarter GDP was confirmed at -1.6% quarter-on-quarter, slightly below expectations, while business investment fell 10.7% quarterly as the country endured stringent lockdown measures. The Office for National Statistics also revealed that British household savings grew sharply during the period, lifting hopes of pent-up consumer spending as the economy reopens. Euro zone inflation cooled in June to 1.9% from 2.0% in May, in line with forecasts and the European Central Bank’s target of “close to but below 2%.” However, it is expected to spike above 2.5% again towards the end of the year, according to the ECB’s latest projections. Meanwhile, Ray-Ban manufacturer EssilorLuxottica is pushing ahead with its planned acquisition of Dutch eyewear chain Grandvision. EssilorLuxottica rose marginally, while Grandvision soared 14% on the news. Elsewhere, German biopharmaceutical company MorphoSys dropped to the bottom of the Stoxx 600, down 4.6%. At the opposite end of the benchmark, WM Morrison climbed 4.5% after a top shareholder said U.S. private equity firm Clayton, Dubilier & Rice should up its takeover offer for the British supermarket operator to around $9 billion.
Dow rises 200 points, S&P 500 hits record high as Wall Street wraps up strong first half of 2021. The S&P 500 climbed to a record high on the final day of June to close out a strong first half of the year for Wall Street. The Dow Jones Industrial Average rose about 210 points, boosted by strong days for Walmart, Boeing, and Goldman Sachs, to 34,502.51. The S&P 500 nudged up 0.1% to 4,297.50 for its fifth-straight record close. The Nasdaq Composite lagged, ticking down roughly 0.2% to 14,503.95. Wednesday was the last day of the second quarter and final day of the first half of 2021. The S&P 500 has risen 14.4% year to date, while the Nasdaq Composite and the Dow have each gained more than 12%. For the quarter, the S&P 500 climbed 8.2%. Investors have shrugged off high inflation readings and have kept buying stocks on the hopes an economic comeback from the pandemic would continue and the Federal Reserve would mostly maintain its easy policies. The three biggest winner in the Dow this year so far is Goldman Sachs, which rose nearly 2% on Wednesday and is up more than 40% for the year. American Express and Walgreens Boots Alliance are each up more than 30% year to date. The gains came as nearly 60% of U.S. adults have received a COVID-19 vaccine, allowing the economy to reopen at a rapid pace. Still, new variants of the virus have raised some concerns that more restrictions such as mask wearing would have to be reinstituted because the pace of vaccinations has slowed. Pending home sales jumped in May to their highest level since 2005. However, mortgage demand fell last week, the Mortgage Bankers Association said Wednesday, with high prices and low supply appearing to squeeze out some potential buyers. The readings came after a jump in home prices, reflected in the S&P CoreLogic Case-Shiller index, spurred homebuilder stocks higher on Tuesday. Elsewhere, the Instituted for Supply Management’s Chicago purchasing managers index came in lower than expected for June but still showed expansion. Payroll firm ADP reported that private payrolls rose 692,000 in June, beating expectations. However, the firm’s May number was revised down.
Shares in Asia-Pacific slipped in Thursday morning trade as investors reacted to the release of Chinese economic data. Mainland Chinese stocks were lower in morning trade as the Shanghai composite declined 0.12% and the Shenzhen component slipped 0.308%. A private survey released Thursday showed Chinese factory activity growth slowing in June. The Caixin/Markit manufacturing Purchasing Managers’ Index for June came in at 51.3 on Thursday, a lower reading than May’s 52.0. PMI readings above 50 represent expansion, while those below that indicate contraction. PMI readings are sequential and show month-on-month expansion or contraction. China’s official manufacturing PMI for June, released Wednesday, showed slower factory activity growth. Elsewhere, the Nikkei 225 in Japan shed 0.39% while the Topix index fell 0.32%. The headline index for large manufacturers’ sentiment in the Bank of Japan’s quarterly tankan business sentiment survey released Thursday came in at plus 14, up from a plus 5 reading in March. South Korea’s Kospi dipped 0.4%. Australia stocks also edged lower, with the S&P/ASX 200 falling about 0.4%. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.29% lower. Markets in Hong Kong are closed on Thursday for a holiday. The Japanese yen traded at 111.04 per dollar, sharply weaker than levels below 110.6 seen against the greenback yesterday. The Australian dollar changed hands at $0.7485, having slipped from above $0.756 earlier in the week.
Gold steadied after posting the biggest monthly decline in more than four years, with investors weighing concerns over the highly contagious Covid-19 variant as they await a key U.S. jobs report. Bullion was hit last month by the Federal Reserve’s hawkish shift and the stronger dollar, and has now established a trading base below $1,800 an ounce. Spot gold rose 0.2% to $1,772.71 an ounce at 10:28 a.m. in Singapore. Prices tumbled 7.2% in June, the most since November 2016. Silver steadied, while palladium and platinum dropped.
Oil rose toward $74 a barrel in Asia as the market waited for a meeting later today at which OPEC+ will decide on production levels. Futures in New York edged higher after closing up 0.7% on Wednesday. A familiar dynamic has emerged in the alliance, with Russia and Kazakhstan proposing boosting supply while Saudi Arabia and its Gulf Arab allies favor a more cautious approach, according to delegates.
Copper gained for the first time in five sessions after the demand outlook for commodities was bolstered by new manufacturing data from China. China’s official manufacturing purchasing managers’ index was little changed at 50.9 in June, suggesting its economic recovery was stabilizing at a solid pace. Copper rose 0.4% to settle at $9,374.50 a metric ton on the London Metal Exchange at 6:01 p.m. local time, posting a gain of 21% for the first half of the year. Aluminum rose 27% in the first six months of the year. Tin, which has faced a severe supply squeeze, surged 54% in the first half and is on course for its biggest annual gain since the present LME contract began trading in 1989.
Aluminum in London extended its retreat from the highest close in almost 10 years amid global inflation concerns and signs that Covid-19 flareups are hampering manufacturing in some Asian economies. Malaysia saw its PMI slip to the lowest in more than a year, while Vietnam, which also has been battling a recent resurgence of the virus, slipped to 44.1, below the 50 level that marks the dividing line between expansion and contraction. Aluminum fell as much as 1.1% to $2,496.50 a ton on the London Metal Exchange before trading at $2,501.50 as of 12:25 p.m. Shanghai time. The metal closed on Tuesday at its highest since August 2011. Other metals were also lower, with nickel down 0.9%. In ferrous markets, rebar fell 0.4% to 5,128 yuan on the Shanghai Futures Exchange, while iron ore in Singapore rose 0.4% to $212 a ton.