Stocks and U.S. Futures Fall Amid China, Fed Risks / Markets in mainland China, Japan and South Korea are closed for holidays

20/09/2021 Stocks and U.S. equity futures are down this morning amid a slump in Hong Kong property developers and jitters ahead of a Federal Reserve meeting that’s expected to hint at moving toward tapering stimulus. The dollar rose. Hong Kong shares tumbled, with a report suggesting Beijing could widen its crackdown on private industries to the city’s real-estate firms. Investors are also tracking the risk of contagion from the debt crisis at developer China Evergrande Group, which was on track to close at a record low market value. A Hong Kong gauge of property shares sank. The offshore yuan declined. Australian stocks and the nation’s currency weakened as iron ore extended losses below $100 a metric ton. U.S. equity futures were in the red after the S&P 500 slid the most in a month, a test for the psychology of buying the dip as the gauge jabs at its 50-day moving average. Ten-year Treasury yields have risen ahead of the Fed meeting this week where policy makers are expected to start laying the groundwork for paring stimulus. Japan and China are among key Asian markets closed for holidays. There’s no cash Treasuries trading in Asia.
Tencent trades 1.2% lower in HK. The Rand is weaker at 14.80 vs the USD, with the FTSE JSE Top 40 futures indicating a much lower start, down 1,140 points or -2.01%.
Metals and Mining stocks could be active with commodity prices lower across the board, as iron ore’s rout deepened and base metals dropped. * Iron ore extended its slump below $100 a ton as China stepped up restrictions on industrial activity in some provinces; futures in Singapore tumbled as much as 12% on Monday, before swiftly paring losses ** Watch iron ore-exposed miners like BHP, Anglo American, Rio Tinto and Ferrexpo, along with steel stocks like ArcelorMittal, SSAB, Evraz, Outokumpu and Voestalpine.
Here are key events to watch this week:

  • Canada federal election, Monday
  • Bank of Japan rate decision, Wednesday
  • Federal Reserve rate decision, Wednesday
  • Bank of England rate decision, Thursday
  • Fed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday
    On Friday the FTSE/JSE Africa All-Share Index closed down 0.7% to 62,863, with miners that weighed the most on the back of lower commodity prices which saw the resource index shedding nearly 4% at the end of the session. Naspers and Prosus were also in focus as the JSE’s quarter-end rebalancing capped indexes. Naspers gained 1.6% with Prosus that gave up 0.9% at the end. The Rand was down 1% to 14.74 per US$, with the Yield on 10-year govt rand bonds that rose 7.20 bps to 9.34%.
    Talks about reducing Eskom’s debt to a manageable level are taking too long, Chief Executive Officer Andre de Ruyter said.
  • Johannesburg Mayor Jolidee Matongo Dies in Car Accident: News24
  • Clothes Retail Giant Says Vaccines Key to South Africa Job Boost
  • Children Dying of Covid in South Africa Often Also Have HIV
  • Next Africa: COP26 Could Bring Carbon Credits and Coal Closures
  • AVI May Be of Interest to PepsiCo, Investec Says in Upgrade
  • South Africa Central Bank Rate at 3.50% by End-4Q21 (Survey)
  • South African Reserve Bank Sanctions Sanlam Life, Fedgroup Life
  • European Miners Test March Support Level as Iron Ore Slumps
  • Traders Watch Prosus, Naspers as JSE Rebalances Capped Indexes
  • Remgro Projected to Increase Dividend Next Week

EARNINGS:

  • Rand Merchant Investment Holdings (RMI SJ)

CORPORATE EVENTS:

  • Earnings Calls: RMI SJ
    EU/UK
    European markets closed lower on Friday as global investors continued to weigh the prospect of slowing economic growth. The pan-European Stoxx 600 closed down by nearly 1%, having earlier been up by as much as 0.7%. Travel and leisure stocks added 1.1% to lead gains while basic resources fell 4%. The Stoxx 600 also saw a weekly decline of 1%, down for the third straight week. Investors in recent days have been reacting to softer U.S. inflation data which tempered expectations of imminent tapering of asset purchases by the Federal Reserve, and weak retail sales figures from China, which suggested a slowdown in the global economic recovery. Data on Friday showed that U.K. retail sales fell unexpectedly in August, dropping 0.9% month-on-month against a Reuters average forecast for a 0.5% rise. The fourth consecutive monthly decline marks the longest negative streak since records began. In corporate news, French automaker Renault announced Thursday that it will ax up to 2,000 engineering and support jobs in France amid a mass transition toward electric vehicles. In terms of individual share price movement on Friday, Sweden’s Dometic Group rose 1% after agreeing to a $677 million deal to buy U.S. drinkware manufacturer Igloo. At the bottom of the European blue chip index, British-listed mining giant Anglo American fell 8.2% after UBS and Morgan Stanley both downgraded the stock and cut their price targets.
    US
    Stocks dipped on Friday as investors remain cautious due to a resurgent Covid virus, a Federal Reserve meeting next week and a historical tendency for September to be a weak month for equities. The Dow Jones Industrial Average lost 166.44 points or 0.5% to close at 34,584.88, dragged down by a nearly 2.9% drop in Dow Inc. The S&P 500 shed 0.9% to 4,432.99 and the Nasdaq Composite lost 0.9% to close at 15,043.97. Mega-cap technology stocks were mostly in the red, with social media giant Facebook dropping 2.2% and Alphabet falling just shy of 2%. Apple lost 1.8%, and Microsoft slipped 1.7%. The Food and Drug Administration advisory committee on Friday rejected a plan to administer booster shots of Pfizer and BioNTech’s Covid-19 vaccine to the general public. Pfizer fell 1.3% and BioNTech dropped 3.6%. Moderna lost 2.4%. The Federal Reserve meets for two days next week and on Wednesday is expected to give further clues as to when it may start to slow its $120 billion in monthly bond purchases that have supported the recovery, but also perhaps aided in a jump in inflation. The U.S. 10-year Treasury hopped 4 basis points to nearly 1.37% on Friday.
    ASIA
    Hong Kong’s Hang Seng index led losses among Asia-Pacific markets in Monday trade, with shares of embattled Chinese developer China Evergrande Group continuing to drop. The Hang Seng index dropped 3.51% in Monday afternoon trade. Shares of China Evergrande Group in the city plummeted 14.17%. The Hang Seng Properties index dropped to a 52-week low, last trading nearly 7% lower. Shares of insurers listed in the city also plunged. AIA dropped about 5.2% while Ping An Insurance fell 7.43%. The S&P/ASX 200 in Australia fell nearly 2%, with shares of major miners declining: Rio Tinto dropped 3.69%, Fortescue Metals Group declined 3.73% while BHP slipped 4.16%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.63%. Markets in mainland China, Japan and South Korea are closed on Monday for holidays.
    COMMODITIES
    Gold sank to the lowest in more than five weeks as investors awaited a Federal Reserve meeting for clues on how and when the U.S. central bank will start tapering. Chair Jerome Powell faces a challenge at the gathering that ends Wednesday as he leans toward paring back stimulus, while trying to avert speculation that such a shift presages interest- rate increases. Spot gold dropped as much as 0.7% to $1,742.25 an ounce, the lowest intraday level since Aug. 12, and traded at $1,746.92 at 11:53 a.m. in Singapore. Silver and platinum fell to November lows, while palladium shed 3.6%. UBS Group AG last week cut its price outlook for both the platinum group metals used in catalytic converters as the semiconductor chip shortage weighs on car production.
    Oil dropped as the dollar strengthened and investors turned their attention to a Federal Reserve meeting this week that’s expected to signal moving toward scaling back stimulus. Futures in New York fell 0.8% toward $71 a barrel amid a broader decline in stocks, led by Hong Kong. The dollar rose for a third day, making commodities priced in the currency less attractive to investors.
    Copper prices in London fell on Monday as a stronger dollar made the greenback-priced metal more expensive, while investors were in wait-and-watch mode with a U.S. Federal Reserve meeting taking the spotlight in a week full of central bank events. Three-month copper on the London Metal Exchange fell 1.7% to $9,154.50 a tonne by 0242 GMT. Nickel eased 0.9% to $19,190 a tonne. Prices had neared seven-year highs on Friday as supply fears resurfaced after an Indonesian government official said the country was looking at taxes on exports of the stainless steel ingredient.