Asia-Pacific Markets Retreat On U.S. Inflation Jitters

14/07/2021 Asian stock markets fell on Wednesday, following an overnight decline in Wall Street, as investors evaluated a surprise U.S. inflation jump that stirred the debate on how long Federal Reserve policy can stay loose. Shares retreated in Hong Kong and China. However, Tencent in better shape having advanced 1.60% as the deal to purchase the search engine, Sogou, was approved by China’s anti-monopoly regulator. S&P 500 futures edged down after the index slipped from a record, while both the Dow and Nasdaq 100 contracts were modest. U.S. CPI leaped ahead at a month-on-month pace of 0.9%, which pushed the annual rate of change up to 5.4% – highest inflation since 2008. Economists had anticipated that the latter would remain at May’s level of 4.5%. The 10-year U.S. Treasury yield eased to about 1.4% and the dollar trimmed earlier gains.

Gold gained after U.S. inflation data came in significantly higher than expected. Spot gold currently 5.27% stronger at $1813.57. Traders will be focused on Federal Reserve Chairman Powell’s testimony to Congress this week for further cues on monetary policy.

Oil down on Wednesday morning after data showing that China’s crude imports dropped in the 1H2021. Brent oil futures sliding 0.22% at $76.31, while WTI futures were down 0.29% to $74.93, after gaining 1.6% on Tuesday.

Here are some events to watch this week:
• China second-quarter GDP, key economic indicators Thursday
• Federal Reserve Chair Jerome Powell appears before the Senate Banking Committee to deliver the semi-annual Monetary Policy Report to Congress Thursday
• Bank of Japan interest rate decision Friday

On the local front: The JSE lost 0.3% to 67,088 points and the Top-40 gave up 0.23% on Tuesday. Banks and retailers tumbled on the JSE and the rand extended losses as ongoing riots in Gauteng and KZN provinces hurt sentiment, with a number of businesses suffering serious damage and others destroyed. The banking index plunged 4.45%, while food and drug retailers fell 2.95%, the most in more than eight months. Financials fell 3.17% and listed property 2.55%. The rand has shed 2.32% since Monday against the greenback, currently on the back 0.15% at R14.75/$. Yield on 10-year govt rand bonds rose 10.60 bps to 9.38%. Top-40 futures sliding 100 points.

EX DIV: DTC SJ, PMV SJ, and lots of ETFs and SATRIX products.

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European stocks eased on Tuesday, but British banks kept UK’s FTSE 100 afloat after a central bank move to scrap curbs on dividends. The pan-European Stoxx 600 index was up 0.03% , while the German Dax and the FTSE100 were down by just 0.01%. Barclays, HSBC, and Lloyds Banking Group rose between 1.3% and 1.5% after the Bank of England scrapped pandemic-era restrictions on dividends from top lenders. The FTSE100 futures and the DAX are both under the watermark -10points and -30 points respectively – IG. Markets in European region are likely to follow last night Wall Street retreat after frightening inflation data.

Wall Street closed lower on Tuesday as a key inflation report from the Department of Labor revealed that the cost of living in the US had jumped ahead of forecasts in June. At the close, the Dow was down 0.31% at 34,888.79, while the S&P 500 was 0.35% softer and the Nasdaq saw out the session 0.38% weaker at 14,677.65. JPMorgan beat quarterly estimates on Tuesday, with 2Q2021 earnings coming to $11.9bn, or $3.78 on a per share basis, exceeding estimates for a print of $3.21, while companywide revenues of $31.4bn also beat the $29.9bn predicted by analysts. Goldman Sachs, the lender reported net profits of $5.35bn or $15.02 per share for the three months ended 30 Jun. All three main benchmarks of U.S futures in the red, modestly though.

MSCI’s broadest index of Asia-Pacific ex. outside Japan fell 0.33%, as Chinese blue-chips dipped 0.88%, Hong Kong’s Hang Seng slipped 0.48% and Australian shares were 0.37% higher on a boost from miners and energy firms.
Japan’s Nikkei was down 0.23%. Mainland Chinese stocks had gained earlier this week, spurred by the central bank’s surprise cut in banks’ required reserve ratio (RRR) announced late on Friday. Australia extended a lockdown in Sydney by at least 14 days, after three weeks of initial restrictions failed to stamp out the biggest outbreak of COVID-19 this year in the country’s largest city. Japan’s economy will grow at a slower pace than initially expected in the third quarter, as fresh coronavirus emergency curbs in Tokyo, extending through the Olympic Games, weigh on consumption, a Reuters poll found.