Asian Markets Slip As Inflation Flag Growth Fears, Crude Oil Retreats, US-China Tensions Flare

28/10/2021 Markets in Asia are down this Thursday morning over concerns that the economic recovery from COVID-19 will be hit as increased inflation forces central banks to tighten their monetary policies. Both the U.S. ten-year and 30-year treasuries sustained their respective rallies. China’s Evergrande Group’s next coupon payment deadline on Friday is also fast approaching. Commodity prices including aluminium, iron ore, and crude oil, dropped. China officials plan to cap coal prices. Shares slipped in China, Hong Kong, and Australia, while Japan underperformed regional peers. Global stocks are still near all-time peaks, supported by robust corporate earnings so far. US. Federal Communications Commission revoked China Telecom’s authority to operate in the US, designating the company as a national security threat. This raised the spectre of retaliation by Beijing and an escalation in the countries’ simmering trade row. U.S. futures steady in positive territory, while European contracts are marginally up.

Oil prices pulled back for a second straight day on Wednesday after official figures showed a surprise jump in U.S. inventories of crude. Crude inventories rose by 4.3 million barrels last week, U.S. Energy Department data, more than double the 1.9 million-barrel gain forecast by analysts. Brent crude dropped $1.87, or 2.21%, to $82.71 a barrel this morning, a two-week low. Texas light-sweet slipped $1.60, or 1.91%, to $81.07 a barrel, after dropping 2.4% on Wednesday.

Gold advanced 0.15% at $1799.50 and resource-linked currencies struggled in a sign of cautious investor sentiment. Bitcoin slipped below $60,000.

Here are some events to watch this week:
• ECB rates decision, President Christine Lagarde briefing, Thursday
• U.S. GDP, initial jobless claims, Thursday
• G-20 joint finance and health ministers meeting ahead of the weekend leaders’ summit, Friday

LOCAL
The JSE lost 0.21% to 67,475 points while the Top-40 eased 0.25% on Wednesday. Sino-US tensions reared its ugly head to geopolitical tensions, with markets remaining under pressure despite strong earnings coming from US tech companies. Industrial metals fell 1.01%, resources 0.85% and retailers 0.7%. Banks rose 0.24% and financials 0.1%. PGM Royal Bafokeng Platinum rose the most since January 2019, skyrocketing almost 24% in a day to close at R114.30, after Impala Platinum said it was in talks about a potential buyout and delisting of the community-owned miner. Implats did not provide any details of the pricing of the proposed deal in a cautionary announcement and said the talks do not represent an offer or a firm intention to make an offer. The rand weakened to a two-week low of R15.0810, with weaker commodity prices putting pressure on emerging market currencies.

South African Public Enterprises Minister Pravin Gordhan said severe blackouts imposed by state utility Eskom due to a shortage of generation capacity would be eased starting Thursday.
Power cuts unlikely for local elections on Nov. 1

NEWS:
• Heineken Takeover Talks With Distell Prolonged by Shareholders
• South African Authorities Clear Blockades by Protesting Truckers
• Billionaire-Backed ARM in Advanced Talks to Buy Amplats Mine
• Implats in Talks to Buy Royal Bafokeng to Create PGM Giant
EARNINGS:
• 7am, Anheuser-Busch InBev, 3Q (ABI BB)
ECONOMIC DATA:
• 10:30am: Sept. PPI YoY, est. 7.3%, prior 7.2%
• 10:30am: Sept. PPI MoM, est. 0.4%, prior 0.8%
GOVERNMENT:
• 4:30pm: PIC, Africa’s largest fund manager, gives progress report

EU/UK/US
European markets closed lower as investors mulled the implications of the latest UK Budget and mixed earnings reports. Miners lead the declines after concerns about Chinese intervention hit metal prices. The pan-European Stoxx 600 index was down 0.36%, with all of the main regional bourses lower. Both the FTSE100 and Germany’s Dax gave back 0.33%, while the Cac-40 saw the session out 0.20% lower. European miners fell the most with a 1.4% drop, as Chinese steel futures declined with raw material prices plunging amid government intervention to cool commodity prices. Deutsche Bank shares fell 7% after reporting a fall in revenues at its investment banking unit but still beating expectations to post its fifth consecutive quarter of profit.

Wall Street: Wednesday’s focus was corporate earnings, with a number of big-firms reporting throughout the course of the day. General Motors beat Wall Street estimates with its third-quarter earnings and revenues on Wednesday and said its full-year results were now on track to be at the “high end”. Harley-Davidson shares jumped after blowing past earnings estimates. The S&P 500 fell back from the record closing high it touched on Tuesday as the earnings torrent continued to swamp markets. By the end of the day, the Dow gave up 0.74%, the S&P500 retreated 0.51%, the tech-heavy Nasdaq closed flat. Microsoft Corp. and Alphabet Inc. both rose after results that topped expectations. Cryptocurrency-exposed stocks fell after Robinhood delivered results that missed expectations and Bitcoin slid below $60,000 as traders liquidated the most positions in a month. Dow futures currently +0.13% firm, the S%P500 futures holding up +0.15%, while the Nasdaq are +0.19% in the greener pastures.

ASIA
China stocks fell, led by coal miners as Beijing stepped up efforts to tame coal prices, while financial and healthcare shares weighed on Hong Kong’s benchmark index. The CSI300 index fell 0.3%, the Shanghai Composite drifting lower almost 1.0%.
Japan’s Nikkei share average was down 0.9% as disappointing outlook by technology blue-chip companies prompted a broader sell-off, though gains in heavyweight chip-related shares limited losses. Robot maker Fanuc tumbled 8.54% as it cut outlook for this year, citing shortages of chips and other parts. Hitachi lost 1.39% production cut of automakers due to lack of chips had affected the technology conglomerate. Computer maker Fujitsu also fell 8% after its outlook missed expectations. Australia’s S&P/ASX200 retreated 0.30% as gains in financials and healthcare sectors were outweighed by losses in materials and miners.