Stocks in Asia and US & European Futures Up as Traders Mull Fed, Evergrande

23/09/2021 Stocks gained along with U.S. and European futures Thursday as traders weighed the debt woes of China Evergrande Group and the prospect of a reduction in Federal Reserve stimulus as early as November. Equities in China and Hong Kong rose modestly, while European and U.S. contracts climbed after the S&P 500 pushed higher for the first time in five sessions. Evergrande’s stock rallied before paring the advance, signaling concerns remain about the crisis-hit developer’s more than $300 billion of liabilities. A liquidity injection by China’s central bank aided sentiment. Chair Jerome Powell said the Fed could begin scaling back asset purchases in November and complete the process by mid-2022. Officials also revealed a growing inclination to raise interest rates next year. The Treasury yield curve flattened. Elsewhere, oil advanced, gold was lower and Bitcoin traded near $44,000.
Tencent trades 2.8% higher in HK. The Rand is hovering around the 14.72 level vs the USD, slightly better than yesterday, with the FTSE JSE Top 40 futures indicating a better start, up 420 points or +0.72%.
Here are key events still to watch:

  • Bank of England rate decision, Thursday
  • Fed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday
    Yesterday the FTSE/JSE Africa All-Share Index closed up 1.6% to 63,353, with all sectors ending in the green. The Rand up 0.8% to 14.73 per US$, with the Yield on 10-year govt rand bonds that rose 1.20 bps to 9.44%
    South African Reserve Bank’s Monetary Policy Committee is expected to keep its benchmark rate unchanged at 3.5%, according to median of 19 economists’ estimates compiled by Bloomberg. Governor Lesetja Kganyago is scheduled to announce monetary policy decision in speech from 3pm.
  • Sasol Improves 2030 Emissions Target, Sets Net-Zero Ambition
  • S. Africa Court Shelves Black Mining Ownership Rule Changes
  • World’s Biggest Climate-Warming Gas Site Turns to Green Hydrogen
  • S. Africa Court Rules Race-Based Tourism Fund Criteria Unlawful
  • IBM Wins Africa Cloud Deals as Banks Quicken Switch to Digital
  • S. Africa’s Hyprop Soars as Investors Cheer Delta City Mall Deal
  • South Africa’s Sasol Gains as Surging Oil Price Lifts Sentiment
  • Absa Mulls New Black Ownership Deal With Up to 8% of Bank Stock
  • Spar Sales Increase 3.9% in Trading Update for 48 Weeks to Aug.

GOVERNMENT:

  • 11am: Deputy Minister in the Presidency Pinky Kekana delivers speech on economic freedom at event commemorating Heritage month
  • Congress of South African Trade Unions holds central committee meeting which will be addressed by President Cyril Ramaphosa

BOND SALES/PURCHASES:

  • 11am: South Africa to Sell 2.7 billion rand of 182-Day Bills
  • 11am: South Africa to Sell 3.8 billion rand of 273-Day Bills
  • 11am: South Africa to Sell 4.2 billion rand of 364-Day Bills
  • 11am: South Africa to Sell 1 billion rand of 91-Day Bills

CORPORATE EVENTS:

  • 8:30am: Investec pre-close briefing hosted by CEO (INL SJ)
  • 1pm: Sibanye Stillwater Investors’ Day on Platinum-Group Metals (SSW SJ)
    EU/UK
    European stocks closed higher on Wednesday as tensions eased over embattled Chinese property developer Evergrande and global investors awaited the outcome of the latest meeting of the U.S. Federal Reserve. The pan-European Stoxx 600 index provisionally closed up 1%, with banks leading the gains to rise 3.1% as most sectors and major bourses ended the session in positive territory. Among the top performers in the index was Entain, its share price up another 5.1%, having already climbed 18% in Tuesday’s session after the gambling firm received a more than $20 billion takeover proposal from U.S.-based DraftKings. At the opposite end of the benchmark, German IT firm Bechtle was the worst performer, down 7%. Data out Wednesday showed euro zone consumer confidence rising to 1.3 points in September versus August to -4.0, better than the -5.8 expected by economists, Reuters reported.
    US
    U.S. stocks rallied on Wednesday after the Federal Reserve indicated it doesn’t see an imminent rollback of the monetary stimulus that has been supporting the economy throughout the pandemic. The Dow Jones Industrial Average advanced 338.48 points, or 1%, to 34,258.32, snapping a four-day losing streak. The blue-chip Dow closed well off its high, however, as it jumped 520 points earlier in the day. The S&P 500 added nearly 1% to 4,395.64 amid a 3.2% jump in the energy sector. The index also posted its first positive day in five. The Nasdaq Composite gained 1% to 14,896.85. The Fed did not give a specific timeline on when it may begin moderating its purchases. “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the Fed’s post-meeting statement said. Helping sentiment overnight was word from Evergrande that its real estate group would pay the interest on time on a mainland-traded bond denominated in yuan. Commodity-related stocks led the comeback Wednesday as fears eased about ripple effects from Evergrande. Devon Energy surged 6.8%, while APA jumped nearly 7.2%. Diamondback Energy, Hess and Marathon Oil all popped more than 5%. China-exposed Wynn Resorts bounced about 2.6%. FedEx shares tumbled more than 9% after profit fell at the shipper last quarter because of rising labor costs. FedEx also cut its forecast for the full year.
    ASIA
    Shares in Asia-Pacific were mostly higher in Thursday trade as investors in Asia-Pacific continue monitoring the situation surrounding China Evergrande Group. Hong Kong’s Hang Seng index rose 0.69% after losses earlier in the week. It had returned to trade after a holiday on Wednesday. Shares of China Evergrande Group in the city jumped more than 10%, paring some gains after soaring more than 20% earlier. That was also after days of losses — although its year-to-date plunge is still more than 80%. Reuters reported Thursday that China Evergrande Group’s chairman said the firm’s top priority is to help wealth investors redeem their products, though questions remain over whether the embattled Chinese developer will pay the interest due on a dollar-denominated bond on Thursday. Shares of other Hong Kong-listed Chinese property developers were also up: China Vanke jumped 4.75%, while Sun Hung Kai was up nearly 1%. Country Garden soared 7.57%. Meanwhile, Hong Kong-listed shares of HSBC rose 2.06%. Those gains came after HSBC’s CEO said he does not see direct impact from Evergrande’s debt problems on the lender, according to Reuters. Mainland Chinese stocks were also higher, with the Shanghai composite climbing 0.58% while the Shenzhen component advanced 0.782%. South Korea’s Kospi, returning to trade from holidays earlier in the week, slipped 0.37%. The S&P/ASX 200 in Australia edged 0.98% higher. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5%. Markets in Japan are closed on Thursday.
    COMMODITIES
    Gold declined for a second day after the Federal Reserve indicated it could start reducing stimulus in November, while some concerns about the China Evergrande Group debt crisis eased. Spot gold fell 0.2% to $1,764.44 an ounce at, after dropping 0.4% on Wednesday. Silver retreated, while platinum and palladium steadied.
    Oil steadied after a two-day gain, with U.S. crude stockpiles shrinking to the lowest level since 2018, tightening the market as it faces a global energy crunch ahead of the crucial winter demand period. Futures in New York traded above $72 a barrel after climbing more than 2% on Wednesday. Nationwide U.S. crude inventories fell for a seventh week, although gasoline stockpiles unexpectedly rose, according to government data.
    Iron ore traded above $100 a ton as traders expected China’s peak autumn demand to support the steel-making raw material’s rebound. The raw material has been on a roller-coaster ride this year. On Wednesday, it stormed past $100 a ton as some of the concerns over China Evergrande Group abated after its onshore property unit reached an agreement with yuan bondholders on an interest payment. In Singapore, iron ore futures fell 2.5% to $105.05 after surging 15% on Wednesday. In China, iron ore was down 2%, while steel futures declined. Meanwhile, base metals were mixed, with copper down 0.5% to $9,236.50 a ton.