Stocks Decline as Yields Flag Inflation Worries

29/09/2021 Asia stocks declined Wednesday as rising bond yields stoked fears about inflation and as China Evergrande Group’s debt crisis intensified.
MSCI Inc.’s gauge of Asian stocks dropped more than 1% and is headed for its first quarterly slide in six. Japan fell more than 2%. Hong Kong and China also dropped on the deepening debt crisis at China Evergrande Group. U.S. futures are higher after the S&P 500 closed 2% lower the most since May with concerns over the debt-ceiling impasse in Washington adding to investor concerns. The Nasdaq 100 tumbled the most since March as technology shares fared worse than economically sensitive stocks amid rising Treasury yields.

The local market held up relatively well compared to the rest of the world, the JSE was buoyed by a weaker Rand as Investors headed for the dollar as inflation concerns stoke fears that interest rate increases are due soon. The JSE All Share closed down 0.64% at 63784 with top gainers APN, SOL and ABG gaining 5.66, 5.36 and 4.08 percent respectively. The JSE’s stocks trading ex-dividend this morning include, ARI 2000, BVT 310, BTI Gbp 53.90, EXX 2077, MFL 8, MTM 15, SHP 353 and TRL 11. We in for a tough start after the routing in the US overnight, Tencent trading 2.55% lower and Asian markets lower across the region. However, US Futures are better, the Dow futures are up 205 points, S&P + 27 points and the Nasdaq futures up 91 points, IG Markets Top 40 Index is down 188 points.

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European stocks are expected to open in mixed territory on Wednesday as markets become nervous after a rate induced sell-off in the U.S. in the previous session. The FTSE is seen opening 2 points lower. Germany’s DAX 14 points higher and the CAC 40 14 points higher according to IG data. European market attention will be on central banks today with U.S. Federal Reserve Chairman Jerome Powell, European Central Bank President Christine Lagarde, Bank of Japan Governor Haruhiko Kuroda and the Bank of England’s Governor Andrew Bailey all speaking at the ECB Forum on Central Banking today. Elsewhere, the pound traded around the lowest since January as expectations of higher rates were offset by surging energy prices and panic-buying that are keeping investors cautious. Yesterday’s closing levels: FTSE – 0.50%,CAC – 2.17% and the DAX -2.09%.
Overnight in the US, the markets were caught up in an interest rate induced sell-off as the Nasdaq dropped 2.83% its worst day since March. The S&P 500 shed 2.04% and the Dow lost 569.38 points or 1.63%. The Dow and S&P are now down 3% for September and the Nasdaq is down more than 4.5%. The debt ceiling debate in Washington also weighed on equities, as well as continued concern about supply chain issues and rising consumer prices. Federal Reserve Chair Jerome Powell said Tuesday to the Senate Banking Committee that inflation could persist longer than expected as a result of supply chain issues and reopening pressures.
Asia-Pacific stocks are lower this morning following the overnight tumble on Wall Street, in Japan, the Nikkei 225 slipped 2.45% while the Topix index dropped 2.47%. South Korea’s Kospi declined 1.87%. Mainland Chinese stocks also saw sizable losses as the Shanghai composite shed 1.79% and the Shenzhen component fell 1.412%. Hong Kong’s Hang Seng index declined 0.45% by the afternoon. Hong Kong-listed shares of China Evergrande Group, however, surged 10.11% after the developer announced it will sell a $1.5 billion stake in Shengjing Bank to a state-owned asset management firm. Chinese tech shares in Hong Kong also declined, with Tencent plunging 2.5% and Alibaba slipping 2.52%. The Hang Seng Tech index fell 2.21%. In OZ the ASX 200 is 1.27% lower with the mining Index down 1.01%.
Oil prices fell for the second straight day as doubts re-emerged over demand, with Covid-19 cases continuing to rise worldwide and gasoline shortages in some regions. U.S. crude oil, gasoline and distillate inventories rose last week, according to market sources, citing American Petroleum Institute figures on Tuesday. Crude stocks rose by 4.1 million barrels for the week ended Sept. 24. Gasoline inventories rose by 3.6 million barrels and distillate stocks rose by 2.5 million barrels, the data showed. Brent – 1.71% $ 77.80, WTI – 1.71% $ 73.99.
Gold prices are a tad higher but still near a seven-week, pressured by a rise in the dollar and U.S. Treasury yields on growing expectations of an earlier-than-anticipated interest rate liftoff. Spot Gold + 0.36% $ 1740, Platinum + 0.33% $ 971 and Palladium + 0.97% 1897.
Heres what the rest of the week holds:
• Japan’s ruling party votes to elect leader, Wednesday.
• Central bank chiefs Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) participate in an ECB Forum panel, Wednesday.
• House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday.
• China Caixin manufacturing PMI, non-manufacturing PMI, Thursday.
• Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday.