US MARKETS BOUNCE ON DEBT CEILING TALKS

07/10/2021 Stocks in Asia are higher along with U.S. futures this morning, bolstered by progress on the debt-ceiling impasse in Washington and a rebound in Chinese technology shares. Treasuries dipped as traders await key jobs data. MSCI Inc.’s index of Asia-Pacific stocks was on track for its biggest gain since Aug. 31. Hong Kong jumped as a technology gauge bounced from a record low. U.S. and European futures rose after the S&P 500 and Nasdaq 100 swung higher on a possible deal to boost the debt ceiling into December. Russia’s offer to ease Europe’s energy crunch and President Joe Biden plans to meet virtually with Chinese President Xi Jinping also aided sentiment, as did the European Central Bank’s study of a new bond-buying program to prevent any market turmoil when emergency purchases get phased out. Crude oil retreated from a seven-year high partly in the wake of growing U.S. inventories. In cryptocurrencies, Bitcoin fluctuated between $54,000 and $55,000. Chinese markets are shut for a holiday and reopen on Friday.
Locally the JSE closed weaker in line with global markets as rising energy prices fuel concerns about accelerating inflation and subsequent interest rate hikes. The All-Share closed down 0.86% but 545 points off its mid-session lows. We should be in for a positive start as Wall St had a big bounce to close up on the session, US Futures are higher, Tencent is up 4.03% and IG Top 40 is up 825 points. South African President Cyril Ramaphosa will be among speakers at a conference on plans for a multibillion-dollar infrastructure pipeline.
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ECONOMIC DATA:
• 8am: Sept. Net Reserves, est. $55.3b, prior $55.7b
• 8am: Sept. Gross Reserves, est. $58.1b, prior $58.4b
• 8am: Sept. Central Bank Bond Holdings
• 1pm: Aug. Electricity Production YoY, prior 3.5%
• 1pm: Aug. Electricity Consumption YoY, prior 2.9%
European markets are set to bounce back at the open in rollercoaster week for stocks. A higher open for Europe will continue a trend of wild trading swings already seen in October. Yesterday, negative sentiment characterized European market trades as U.S. Treasury yields briefly spiked, with inflation concerns weighing on global markets. Sentiment turned positive after the benchmark U.S. 10-year Treasury yield retreated from more than three-month highs on Wednesday and U.S. stocks staged a comeback from their lows as investors bought the dip in technology names. FTSE – 1.15%, CAC – 1.26%, DAX – 1.46%.
Overnight in the US, the Dow rose 102.32 points, reclaiming a 459-point loss from earlier in the session. The S&P advanced 0.4%, after falling as low as 1.27% and the Nasdaq rose 0.5%, after dropping as much as 1.2%. The bounce came after Senate Minority Leader Mitch McConnell offered a short-term suspension of the U.S. debt ceiling to avert a national default and economic crisis, which economists have warned could be disastrous. On Tuesday Treasury Secretary Janet Yellen warned that they U.S. should “fully expect” a recession if that happens. On the data front, ADP reported private companies hired faster than expected last month, despite worries about the delta variant. Private jobs rose by 568,000 for the month, better than the Dow Jones estimate from economists of 425,000, initial jobless claims and consumer credit are due out today. US Futures: Dow + 110 pts, S&P + 19 pts and Nasdaq + 85 pts.
Shares in Asia-Pacific are up across the region, with Hong Kong stocks leading gains. the Hang Seng is up 2.41% as shares of Chinese tech giants Tencent and Alibaba rose 4.03% and 5.54%, respectively. Hong Kong-listed shares of Chinese Estates, formerly a major shareholder of embattled developer China Evergrande, surged more than 30% after announcing yesterday that it had received an offer to be taken private. The Nikkei is up 0.75% and the ASX 200 + 0.70% . MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.52% higher. Chinese Mainland markets remain closed for holiday.
Oil prices dropped nearly 2% yesterday after hitting a multi-year highs, as an unexpected rise in U.S. crude inventories prompted buyers to take a breather after recent torrid gains. The latest surge in the crude prices had been underpinned by the refusal of the OPEC+ to boost output and concern about tight energy supplies globally. On Monday, OPEC+ chose to stay with a plan to increase output gradually and not boost it further as the United States and other consumer nations have been urging. U.S. crude inventories rose by 2.3 million barrels last week, against expectations for a modest dip of 418,000 barrels. Notably, U.S. production increased to 11.3 million barrels per day, recovering from storm-related shut-ins more than a month ago to rebound near pandemic-level highs but still far from the 13-million bpd record set in 2019. Brent – 0.10% $ 81.00, WTI – 0.59% $ 76.97.
Gold prices are slightly softer this morning as the dollar held firm and investors moved to the sidelines ahead of the U.S. payrolls report that is expected to provide clues on the Federal Reserve’s tapering timeline. Gold – 0.26% $ 1758, Platinum – 0.73% $ 981 and Palladium + 0.95% $ 1910.