Stocks, U.S. Futures Climb on Earnings, China Step / S&P 500 rose 1.7%

15/10/2021 Stocks pushed higher Friday with U.S. and European equity futures, bolstered by robust corporate earnings and China’s move to loosen restrictions on home loans at some of its largest banks. Japanese equities outperformed amid a dip in the yen, while both Hong Kong and China gained, following the S&P 500’s best day since March. Results from major Wall Street banks beat estimates, U.S. producer prices advanced at the slowest pace this year and initial jobless claims fell, boosting sentiment. China is easing mortgage curbs amid growing concern about contagion from the China Evergrande Group debt crisis. The nation’s central bank added enough medium-term funds to keep financial-system liquidity at existing levels. The U.S. 10-year Treasury yield edged up and the dollar was steady.
Tencent trades 2% higher in Hong Kong. The Rand is slightly weaker but holding steady around 14.78 vs the USD. Crude oil headed for an eighth weekly gain, the longest such run since 2015. Base metals have soared, with European smelters the latest casualties in the global energy crisis. A gauge of six industrial metals hit a record high on the London Metal Exchange, with zink aluminum and copper all higher. Silver, platinum and palladium were all slightly lower, paring their advances this week.
The FTSE JSE Top 40 futures are indicating a better start, up 250 points or +0.42%.
Here are a few events still to watch this week:

  • Goldman Sachs Group Inc. reports earnings on Friday
  • U.S. business inventories, University of Michigan consumer sentiment, retail sales on Friday
    Yesterday the FTSE/JSE Africa All-Share Index closed up 1.3% to 66,846, mostly supported by resources with the index gaining a healthy 2.5%. Banks and retailers were lower as the rand started to weaken towards the close with the banking index giving up 0.31% and the retail index shedding 1.7%, with Woolworths the biggest loser down 1.6%. The Rand closed little changed at 14.79 per US$, with the Yield on 10-year govt rand bonds that rose 5.60 bps to 9.79 %.
    The National Treasury will offer 1.2 billion rand of inflation-linked bonds at its weekly auction. The sale of the same amount last week attracted more than 2 billion rand of bids. The five-year breakeven rate, seen as a gauge of investor expectations for price increases, was at 5.16% on Thursday after climbing to an 18-month high earlier this week.
  • Gold Gains as Traders Seek Haven Amid Persistent High Inflation
  • South African Building Industry in Line for More State Support
  • IHS Valued at $7 Billion After IPO Pricing at Lower Range
  • Old Mutual Cash Drive Boosts Infrastructure Fund to $1.5 Billion
  • South African Steelworkers Reject New Pay Offer; Strike Goes On
  • Coronation Assets Under Management Rise, Sees Higher FY EPS
  • South African Energy Minister Opposes Coal Ban for Climate Aid
  • Luxury Stocks Up as Investors Seek Shield From Supply-Chain Risk
  • PSG Drops Most in 15 Months; Board Decides Against Dividend
    ** South Africa Stocks Set to Outpace Global Peers, Prudential Says
  • De Beers’ Namibian Unit to Extend Life of Mines by Two Decades
  • Steinhoff’s South African Court Hearing Set for Jan. 24 to 28

GOVERNMENT:

  • 8am: Health Minister Joe Phaahla briefs reporters on government efforts in the fight against Covid-19 and the national vaccination rollout program
  • 2pm: Forestry, Fisheries and the Environment Minister Barbara Creecy hosts a virtual national stakeholder consultation in preparation for the Glasgow international climate change talks in November

BOND SALES/PURCHASES:

  • 11am: South Africa to Sell I/L Bonds
  • 11am: South Africa to Sell 1.875% I/L 2033 Bonds
  • 11am: South Africa to Sell 2% I/L 2025 Bonds
  • 12pm: South Africa to Sell 2.7 Billion Rand of 182-day Bills
  • 12pm: South Africa to Sell 1 Billion Rand of 91-day Bills
  • 12pm: South Africa to Sell 3.8 Billion Rand of 273-day Bills
  • 12pm: South Africa to Sell 4.2 Billion Rand of 364-day Bills

CORPORATE EVENTS:

  • Earnings Calls: KARO US
  • Sales Results: MDC LN
    EU/UK
    European stocks closed higher on Thursday with investors around the world reflecting on the latest inflation data and earnings out of the U.S. The pan-European Stoxx 600 climbed 1.2% by the close, with basic resources adding 3.3% to lead gains as all sectors finished in positive territory. Global investors were digesting the latest U.S. inflation data which rose higher than expected in September, increasing pressure on the Federal Reserve to raise rates sooner rather than later. In terms of individual share price movement, Shares of SoftBank-backed British e-commerce company THG climbed 10.6%, attempting to rebound from a sharp slump earlier in the week after a capital markets day that backfired. Toward the bottom of the European blue chip index, Danish bioscience company Chr Hansen dropped 6.7% after missing third-quarter profit expectations. Danish health care company Demant fell 4.9% after a voluntary recall by its Cochlear implants business.
    US
    U.S. stocks rallied Thursday after better-than-expected earnings reports from Walgreens Boots Alliance, UnitedHealth, Bank of America and other major companies. The S&P 500 rose 1.7% to 4,438 in its biggest jump since March. The Dow Jones Industrial Average jumped 534 points, or 1.6%, to 34,912. The Nasdaq Composite added 1.7% at 14,823. The three averages are now on track to close the week higher, with the S&P 500 and the Dow roughly 2% off their record highs and the Nasdaq Composite about 4% behind. Eight members of the S&P 500 reported earnings and all eight beat earnings-per-share expectations from Wall Street. Walgreens Boots Alliance was the top performer in the Dow and S&P 500, rallying 7.4% after the drugstore chain beat earnings expectations. The company announced it would become majority owner of primary-care company VillageMD with a $5.2 billion investment and make health care its growth engine. Dow constituent UnitedHealth also popped 4.2% after the company’s quarterly results topped estimates. Bank of America, Morgan Stanley and Citigroup saw their shares rise 4.5%, 2.5% and 0.8% respectively, after beating earnings expectations. Wells Fargo shares declined 1.6% despite an earnings beat. Meanwhile, falling rates boosted technology stocks. The benchmark U.S. 10-year Treasury yield dipped, typically benefiting high-growth names as lower rates lift the value of companies’ future earnings. Big Tech stocks Microsoft, Apple and Google-parent Alphabet each gained at least 2%, providing the market with support. Caterpillar was among the Dow’s biggest gainers after Cowen initiated coverage of the equipment maker with an outperform rating. UPS rose after an upgrade from Stifel, which cited upcoming holiday demand. A lower-than-anticipated number of weekly jobless claims added to the positive market sentiment. Initial unemployment insurance claims last week totaled 293,000 – the first time the tally fell below the 300,000 level during the pandemic-era. September’s producer price index came in lighter than expected, also helping sentiment. Wholesale prices rose 0.5% from the month prior versus the 0.6% Dow Jones estimate.
    ASIA
    Shares in Asia-Pacific rose in Friday trade following overnight gains on Wall Street with the S&P 500 jumping nearly 2%. The Taiex in Taiwan surged 2.3%, leading gains among the region’s major markets, as shares of Taiwan Semiconductor Manufacturing Company rose more than 4.5% following earnings release a day earlier. TSMC on Thursday reported a net profit of 156.3 billion Taiwan dollars (around $5.57 billion) for the third quarter ended Sept. 30, above expectations of a 149 billion Taiwan dollars average of analyst estimates compiled by Refinitiv, according to Reuters. In Hong Kong, the Hang Seng index was 0.83% higher by the afternoon. Hong Kong stocks returned to trade on Friday after stock markets in the city were closed for two days. Mainland Chinese stocks advanced, with the Shanghai composite up 0.29% while the Shenzhen component gained 0.503%. In Japan, the Nikkei 225 climbed 1.35% while the Topix index advanced 1.41%. South Korea’s Kospi gained 0.89%. Australian stocks edged higher as the S&P/ASX 200 rose 0.76%. Shares of Qantas Airways jumped around 2% after the New South Wales government announced Friday that quarantine requirements will be scrapped for fully vaccinated international travelers from Nov. 1. MSCI’s broadest index of Asia-Pacific stocks outside Japan traded 1% higher.
    COMMODITIES
    Gold headed for the biggest weekly advance since May as investors weighed concerns over inflation with speculation that monetary tightening could begin earlier than expected. Spot gold steadied at $1,795.31 an ounce and is up 2.2% this week. Silver, platinum and palladium were all slightly lower, paring their advances this week.
    Oil prices rose 1% on Thursday after top oil producer Saudi Arabia dismissed calls for additional OPEC+ supply and the International Energy Agency said surging natural gas prices could boost demand for oil among power generators. The market largely shrugged off an unexpectedly large increase in U.S. crude inventories as refiners cut production in a generally slower period for those facilities. Brent crude futures settled up 82 cents to $84 a barrel, a 1% gain, and its highest settle since October 2018. U.S. West Texas Intermediate (WTI) crude futures ended up 87 cents to $81.31 a barrel, notching another seven-year closing high.
    Base metals wavered near a record as a global energy shortage curbed supply, piling pressure on manufacturers and fueling concerns about persistently high inflation. An index of six base metals on the London Metal Exchange rose to an all-time peak on Thursday, led by zinc’s surge to the highest since 2007 as European smelters joined Chinese plants in curtailing output due to a power crisis. Aluminum, one of the most energy-intensive commodities, extended gains on Friday to trade near a 13-year high and copper held above $10,000 a ton.
    Iron ore steadied in Singapore as investors weighed waning demand in China against Rio Tinto’s downgraded forecast for shipments. Prices in Dalian slid 1.2%.