05/10/2021 Asian shares drifted lower on Tuesday following a broad sell-off on Wall Street as multi-year high oil prices gave markets jitters. Oil prices climbed, hitting their highest levels in at least three years at a time when supply chain disruptions are already putting pressure on economic activity. OPEC and its allies, OPEC+, said on Monday it would maintain an agreement to increase oil production only gradually, ignoring calls from the U.S. and India to boost output as the world economy recovers from the coronavirus pandemic. MSCI’s broadest index of Asia-Pacific ex. Japan dropped as much as 1.7%, falling for a third consecutive session. Japan stocks were down, alongside Australia, while Hong Kong edged up. Fantasia Holdings Group Co., another Chinese property developer, failed to repay a dollar bond due Monday. European and U.S. contracts were in the green, reversing earlier losses, after technology shares led a Wall Street slump overnight.
Gold declined after a three-day gain as the U.S. dollar and Treasury yields edged higher, with investors weighing concerns over higher inflation and slower growth. Gold futures were down 0.60% to $1,758.95, after climbing to $1,770.41, its highest since Sep. 23, on Monday. The dollar, which normally moves inversely to gold, was up on Tuesday. Silver, platinum and palladium all fell.
Oil extended gains on Tuesday after rallying to the highest level since 2014 following a decision by OPEC+ to maintain its planned gradual increase of supply, despite the market facing an energy crunch. Brent crude was up by 19 cents or 0.23% at $81.45 at the time of the writing. U.S. WTI oil rose 10 cents or 0.12% to $77.70, after gaining 2.3% the previous session. OPEC+ announced that it would stick to its prior plans to raise output by 400,000 barrels a day in November, instead of the 800,000 b/d some had anticipated.
Here are some events to watch this week:
• Rate decision in New Zealand on Wednesday
• Reserve Bank of India monetary policy decision on Friday
• The U.S. Labor Department releases unemployment and job creation data Friday
The local bourse closed firmer amid mixed global markets on Monday, with hotel stocks and miners performing best. The All-share gained 0.74% to 64,129 points and the Top-70 0.85%. The precious metals and mining index rose 3.66%, resources 2.51% and industrial metals 1.57%. Banks fell 1.34% and financials 1.06%. Sasol marched ahead to bag 6.74% at the close, to R294.50c as crude breaks $80/barrel, while Aspen was the biggest losers on the Top-40, slipping 5.72% to R255.00, as concerns around the pandemic ease and as some investors lock in gains following a sharp rally in the South African drugmaker. Rand 15.08/$, Tencent in Hong Kong on the backfoot 1.58%, Top-40 futures -81points on IG markets.
National Union of Metalworkers of South Africa, NUMSA, is scheduled to begin a strike over pay, which could have repercussions for the nation’s car-manufacturing industry.
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• 9:15am: Sept. Standard Bank South Africa PMI, est. 50.1, prior 49.9
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• PwC releases 13th annual SA Mine Report, highlighting trends and issues in the South Africa’s mining industry
• Solidarity Fund Chief Executive Officer Tandi Nzimande speaks on future of fund; restarting South Africa’s economy
European markets closed in the red on Monday after as a surprise decision by OPEC+ to gradually raise crude oil output cut a morning rally short. The pan-European STOXX 600 index fell 0.47% Major regional bourses were all lower alongside; the FTSE100 slipping 0.23% at the closing bell, the DAX falling 0.80%, alongside the CAC-40 giving up 0.61%. Banks, automakers and luxury stocks were the top decliners on fears of a slowdown in global growth as the world’s second largest economy deals with fresh COVID-19 restrictions, a property sector slowdown and regulatory clampdowns. Kering and LVMH, which draw a major portion of their revenue from China, fell 1.9% and 1.5% respectively.
Wall Street started the first week of Q4 trading with losses amid a rotation out of tech stocks and rising bond yields. At the close, the Dow was down 0.94%, while the S&P 500 was 1.30% weaker and the Nasdaq saw out the session 2.14% softer. US-China tariffs were also back in the spotlight after Beijing failed to live up to promises made as part of the pair’s phase one trade deal. Factory orders grew 1.2% in August after rising 0.7% in July, ahead of forecasts for a 1.0% uptick in factory orders. Apple, Nvidia, Amazon and Microsoft traded lower, while Facebook was down as much as 4.89% after server errors saw Instagram and WhatsApp all fail to work.
Japanese shares tumbled to one-month lows on Tuesday as spikes in oil prices stoked further worries about inflation and monetary tightening globally. Nikkei share average fell 2.40%. Australian shares retreated ahead of a central bank rate decision, with technology and healthcare stocks leading the decline after Wall Street closed sharply lower overnight on concerns over rising bond yields. The benchmark ASX 200 index was down 0.4%. Hong Kong’ Hang Seng remained flat 0.09%.