Asia-Pacific Shares Up As Focus Shifts On Sino-US Talks, Treasury Yields Retain Gains

16/11/2021 MSCI’s broadest index of Asia-Pacific shares ex. Japan rose 0.28% to a 2-1/2 week high, as investors kept a close eye on a key meeting between U.S. President Joe Biden and Chinese leader Xi Jinping. Kaisa Prosperity, a property arm of embattled developer Kaisa Group, tumbled 14% as trading resumed a day after the company said its parent’s liquidity issues would not impact operations. Shares in Japan edged up, advanced in China, while Hong Kong outperformed regional peers. Tencent advancing 1.67%. Benchmark U.S. Treasury yields rose nearly five basis points to a three-week high on Monday as companies rushed to sell debt before liquidity thins during holiday trade and ahead of a U.S. government sale of new 20-year bonds on Wednesday. Both U.S. and European contracts edged higher after the S&P 500 and Nasdaq 100 ended flat. This week’s focus will be on the consumer strength, with Tuesday’s U.S. retail sales data poised to show an acceleration and industry giants such as Walmart Inc. and Home Depot Inc. announcing their quarterly results.

ECB President Christine Lagarde pushed back tighter monetary policy speculations saying doing so now to rein in inflation could choke off the euro zone’s recovery. This sent the euro lower to near a 16-month low at $1.354. The pound was $1.3359 near a year low. The UK will publish its September labour market report later on Tuesday, which analysts believe could make or break the case for a rate hike this year.

Oil rose as investors wait to see if the Biden administration will tap crude reserves. Gold pushed higher, currently $1,867, while Bitcoin slipped to trade below $61,000.
Miners were dragged lower on weaker iron ore and metal prices with BHP, Glencore, Rio Tinto and Anglo American all down as a result.

What to watch this week:
• Fed Presidents Thomas Barkin, Esther George, Raphael Bostic, Patrick Harker speak at various events. Tuesday
• Reserve Bank of Australia Governor Philip Lowe delivers a speech. Tuesday
• U.S. retail sales are poised to show an acceleration in October as consumer demand remains resilient. Tuesday
• Euro region CPI. Wednesday
• U.S. housing starts. Wednesday
• Conference Board U.S. leading index, initial jobless claims. Thursday
• Fed’s Richard Clarida and Mary Daly speak at Asia Economic Policy Conference. Friday

Local Market:
The All-share gained 0.24% to 70,090 points and the Top-40 0.34%. The local bourse closed above the 70,000 mark supported by corporate earnings, M&A activity and generally positive sentiment. On Monday, Heineken, European brewer, said it will buy SA’s largest alcohol producer Distell for R180 a share in a deal that values the Stellenbosch-based company at R40.1bn. Shoprite advanced 7.0% to R197.80 at the close. This is after the food retailer reported quarterly sales figures to have risen by 9.3%, while its core supermarkets SA segment continued to report marker share gains. Industrials added 1.07% and banks 1.02%. Industrial metals fell 2.26% and resources 1.19%. The rand steady at R15.20/$ this morning, while the Top-40 futures are +299 points firm.

NEWS:
• Inflation Is Killing the Dollar Carry Trade in Emerging Markets
• Eskom Debt Conundrum Compounds South African Energy Crisis
• South African Stock Index Rises Above 70,000 for First Time
• South African Rate-Hike Bets Are Setting the Rand Up for a Fall
• Ninety One Names Nazmeera Moola as Chief Sustainability Officer
EQUITY PREVIEW:
• Vodacom Considers South Africa Financial Services Unit IPO
• Heineken to Buy Distell for $2.5 Billion in Africa Expansion
• Shoprite’s Former Chairman Wiese Meets Opposition for Board Seat
• South Africa Union On Strike at Tiger Brands Snacks Unit
• Vodacom Intends to Start Work on Network in Ethiopia Next Year
• Absa Group Raised to Overweight at Morgan Stanley; PT 163 rand
MEDIA SUMMARIES:
• Business Day.za: Enoch Godongwana to step down as ANC economy guru
• ENCA: Rand Water’s three-day ‘shutdown’ begins
• Moneyweb: Transnet incurs R14.5bn irregular expenditure for 2021
• Moneyweb: Telkom burning through cash as warning signs pile up
EARNINGS:
• Stor-Age Property REIT Ltd. (SSS SJ)
• Transaction Capital Ltd. (TCP SJ)
GOVERNMENT:
• South Africa’s second largest political party, the Democratic Alliance holds briefing on coalition strategies after the Nov. 1 municipal elections resulted in dozens of hung councils

EU/UK/US
European stock markets closed at record highs on Monday, despite the prospect of new lockdown fears across the Continent. ECB President Christine Lagarde said the current inflation spike will be longer than once anticipated but would fade next year, so policy action now would hit the economy just as price growth starts to moderate on its own. The pan-European Stoxx 600 index finished 0.35% higher to hit a new record of 483.43 points. Germany’s DAX gained 0.34% to hit record highs, while France’s CAC 40 outperformed the broader market and powered beyond the 7,100 mark by advancing 0.52%. FTSE closed flat 0.05%. Royal Dutch Shell added 2.1% after saying it would simplify its business and move its head office to Britain from the Netherlands.

The Austrian government on Sunday became the first European country to reinstate a fresh lockdown, placing millions of unvaccinated people under restrictions amid record-level infection rates.

Monday was an uneventful day on Wall Street, with investors holding out for retail sales data on Tuesday and new construction starts and building permits reports on Wednesday. The Dow was closed flat 0.04% , alongside the S&P 500 flat at 4,682.80 and the Nasdaq Composite saw out the session 0.04% softer. U.S. coal prices surged to the highest in more than 12 years as a global power crisis drives up demand for the dirtiest fossil fuel.

ASIA
Japanese shares rose on Tuesday, as investors scooped up companies with upbeat outlook, although gains were capped by caution ahead of the outcome of the U.S – China summit meeting. The Nikkei share average gained 0.2%. Australia’s
S&P/ASX200 was down 0.39%, pulled down by mining and banking sectors, as investors maintained a cautious stance ahead of the U.S. retail sales data that is expected to reveal signs of any impact inflation has had on consumer spending.
Shanghai Composite firm 0.30% and Hang Seng jumping 1.05% as the 21st Century Business Herald reports that China may restart online game approvals soon. Chinese authorities have told Evergrande chairman Hui Ka Yan to use some of his personal wealth to help pay bondholders.