Stocks Climb, Futures Steady on Earnings Optimism

22/07/2021 Asian stocks climbed Thursday after solid company earnings boosted Wall Street, easing concerns about peak economic growth and coronavirus flareups. The dollar held a decline. An MSCI Inc. gauge of Asia-Pacific shares rose for a second day, led by cyclical sectors like materials and energy, though technology also pushed higher. Hong Kong and Australia outperformed, while Japan is shut for a holiday. European contracts advanced and U.S. futures edged up after the S&P 500’s biggest back-to-back increase in two months. Ten-year Treasury yields headed toward 1.3% as the recent bond rally fizzled. A 20-year debt auction fared poorly. Cash Treasuries won’t trade in Asia due to the Japan holiday. Oil held a two-day gain to trade around $70 a barrel.. Tencent trades 0.2% higher in HK. The Rand is stronger at 14.54 vs the USD, with the FTSE JSE Top 40 futures indicating a better start up 312 points or 0.54%.
Miners and steelmakers could be active on as iron ore futures extended losses with investors continuing to assess the demand outlook for the second half. Dalian and Singapore futures down, having declined oncWednesday amid reports of China pushing steel firms to cap output, while some iron ore transport is said to have been disrupted by flooding in China’s Henan province.
Here are some key events to watch this week:

  • European Central Bank rate decision Thursday
  • Bank Indonesia rate decision Thursday
  • U.S. existing home sales Thursday
  • The Tokyo Summer Olympics begin Friday
    Yesterday the FTSE/JSE Africa All-Share Index up 1.3% to 66,558.46. The Rand was up 0.2% to 14.58 per US$, with the Yield on 10-year govt rand bonds that fell 0.90 bps to 9.34%.
    South African Reserve Bank’s Monetary Policy Committee is expected to keep its benchmark rate unchanged at 3.5%, according to median of 18 economists’ estimates compiled by Bloomberg. Governor Lesetja Kganyago is scheduled to announce monetary policy decision in speech from 3pm.

NEWS:

  • South Africa Considering Payment of Relief Grant After Riots
  • Pfizer Partners With Biovac to Boost Africa’s Vaccine Supply
  • South Africa’s Zuma Requests Prison Leave for Family Funeral
  • Traders Hold South Africa Rate-Hike Bets Even as Inflation Slows
    EQUITY PREVIEW:
  • MultiChoice’s ‘Excessive’ Nigeria Fine May End Up Lower: PSG
  • Sappi Says Impact From Riots on 4Q Ebitda About 220m Rand
  • South Africa Stocks Lifted by Rand Hedges as Anglo, Naspers Gain
  • Gold Declines as Bond Yields Gain and Stocks Extend Rebound
    MEDIA SUMMARIES:
  • TechCentral: Naspers invests R34-million in SA insuretech start-up Ctrl
  • News24: Covid-19: Surge in hospitalisations as deaths climb by 596
  • Business Day.za: Ramaphosa among leaders targeted in Pegasus spyware case, says report
  • Fin24: SA’s largest crude oil refinery to restart after shutdown during unrest

GOVERNMENT:

  • Western Cape Premier Alan Winde holds briefing on Covid-19 vaccine rollout

CORPORATE EVENTS:

  • Annual General Meetings: BYIT LN
    EU/UK
    European stocks closed higher Wednesday, as investors tracked another batch of quarterly earnings and shrugged off Covid-19 fears. The pan-European Stoxx 600 provisionally closed up by 1.7%, with travel and leisure stocks adding 3.7% to lead gains as all sectors and major bourses entered positive territory. Markets in Europe extended gains from the previous session, following a sharp sell-off on Monday as traders worried the fast-spreading Covid delta variant could impact the global economic recovery. earnings came from Daimler, SAP, Julius Baer and Novartis, while Royal Mail released a trading update. SAP shares fell 2.5% by the close despite raising its outlook for the second time this year, as a strategic push toward cloud computing began to bear fruit. At the bottom of the Stoxx 600, Dutch chemicals company Corbion fell 8.4% after Barclays cut the stock to “underweight.” At the top of the index, Swedish outdoor and transportation equipment manufacturer Thule Group surged 12.2% after a strong second-quarter earnings report. British fashion retailer Next jumped 7.5% after smashing second-quarter sales forecasts and British media company Future climbed 9.2% after raising its full-year guidance. Daimler kept its profit margin outlook unchanged but warned that the global semiconductor shortage will continue to dent car sales into 2022. The German carmaker’s stock climbed slightly.
    US
    U.S. stocks climbed higher on Wednesday as equities continued their rebound from a one-day rout to start the week. Better-than-expected earnings reports from Dow members Coca-Cola and Johnson & Johnson added to the bullish sentiment. The Dow Jones Industrial Average rose 286.01 points, or 0.83%, to 34,798.00. It’s sitting less than 1% away from a record. The S&P 500 gained 0.82% to 4,358.69. The Nasdaq Composite climbed 0.92% to 14,631.95. The bond market, specifically the 10-year Treasury yield, is driving the equity markets. On Wednesday, the 10-year yield rose 8 basis points to 1.29% (1 basis point equals 0.01%). The yield dropped to a new 5-month low on Monday, before stabilizing on Tuesday. Stocks that would benefit most from a continued swift economic reopening climbed on Wednesday after rebounding from the Monday sell-off in the prior session. Shares of Carnival were up 9.4%. Las Vegas Sands was up 3.4%. Energy stocks led the continued rally as oil continued to rebound after falling below $70 a barrel on Monday. The Energy Select SPDR rose 3.4%. Dow member Coca-Cola gave an early boost to market sentiment after reporting quarterly revenue that topped pre-pandemic 2019 levels and raising its full-year forecast. Coca-Cola shares gained more than 1%. Fellow Dow member Johnson & Johnson’s stock traded nearly flat even after the drugmaker reported better than expected second-quarter earnings and revenue and also raised its 2021 guidance. Moderna joined the S&P 500, giving the stock a 30% boost from a week ago. Its shares gained nearly 4.5%. Verizon shares are up slightly after reporting better-than-expected revenue and subscriber growth and raising its full-year outlook. Shares of Chipotle rose 11.5% as the Mexican fast-food chain reported quarterly revenue that surpassed pre-pandemic levels as dine-in customers returned to its restaurants. Netflix reported disappointing third quarter subscriber guidance after the bell on Tuesday. The streaming giant said it expects 3.5 million net subscribers in the third quarter, nearly 2 million below analysts’ estimates. The company also reported earnings that missed expectations. Netflix shares were last down 3.2%. About 85% of S&P 500 companies that have reported so far have beaten estimates, according to FactSet.
    ASIA
    Shares in Asia-Pacific were higher in Thursday trade, with markets in Japan closed for a holiday. Hong Kong’s Hang Seng index was among the biggest gainers regionally, rising 1.77% by the afternoon. Shares of China Evergrande Group surged 9.25%. Those gains came after the indebted developer announced it has solved legal disputes with China Guangfa Bank, according to Reuters. Mainland Chinese stocks edged higher, with the Shanghai composite climbing 0.33% while the Shenzhen component rose fractionally. South Korea’s Kospi gained 1.07% in afternoon trade. Elsewhere, the S&P/ASX 200 in Australia advanced 1%. Shares of major miner BHP soared nearly 3% after the firm announced Thursday the signing of a nickel supply agreement with Tesla. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.17%. Still, concerns over the coronavirus situation in Asia-Pacific may continue to weigh on regional sentiment on Thursday. Australia’s two largest states on Wednesday reported sharp increases in new Covid infections, while Indonesia saw record high deaths from the virus, according to Reuters. The Japanese yen traded at 110.13 per dollar, weaker than levels below 109.5 seen against the greenback earlier this week. The Australian dollar changed hands at $0.7359, still above levels below $0.732 seen yesterday. Markets in Japan are closed on Thursday for a holiday.
    COMMODITIES
    Gold dropped as the rebound in Treasury yields and U.S. stocks damped demand for the haven asset. Bullion is heading for its first weekly drop since mid-June, with investors weighing the need for further stimulus as some countries forge on with re-openings while others grapple with the spread of the delta variant. Spot gold fell 0.2% to $1,799.83 an ounce by 10:58 a.m. in Singapore, and prices are down 0.7% this week. Silver, palladium and platinum all steadied.
    Oil prices gyrated after a two-day gain that was powered by a drop in U.S. fuel and distillate stockpiles and a broader market rally. West Texas Intermediate eased 0.2% to just above $70 a barrel, after climbing almost 6% over the previous two sessions. Investors are weighing signs of continued robust demand for oil products, including gasoline, against the waves of disruption triggered by the spread of the delta coronavirus variant. In addition, China has been supplying crude from its strategic reserves to local refiners in a bid to cool prices.
    Copper headed for a third daily gain, buoyed by the return of risk appetite after recent investor jitters over coronavirus spikes. Copper on the London Metal Exchange rose 0.3% to $9,370 a ton by 1:24 p.m. Shanghai time. Zinc also rose, while aluminum was steady. In China, import premiums for copper have rebounded to their highest since early May.
    Iron ore futures extended losses as investors assessed the strength of demand in the second half amid China’s increasing efforts to cut steel output and rising ore supply. China has repeatedly warned steel firms to cap output below last year’s record. With output jumping 12% from a year ago in the first half, mills are under more pressure to cut production through the rest of the year. Iron ore in Singapore dropped 4.3% to $192.60 a ton. Prices in Dalian fell 4.1% after closing 4.8% lower on Wednesday, while steel rebar futures and hot-rolled coil slid in Shanghai. Floods in China’s Henan province have disrupted transportation of iron ore at two of the 11 mills surveyed, according to Mysteel, affecting steel output of about 20,000 tons a day. In the Zhengzhou area, most mills have suspended scrap steel collection, and production at some blast furnaces was halted in Anyang after mills were flooded, the researcher wrote. While the floods have weakened supply and demand for steel in Henan, but a recovery is expected in the short term, according to Shanghai Securities News, citing analysts.