24/11/2021 Most Asian stocks fell Wednesday and Treasury yields declined as traders weighed economic risks from tighter monetary policy while awaiting key U.S. data as well as the latest Federal Reserve minutes. MSCI Inc.’s Asia-Pacific share gauge retreated for a third day. U.S. futures slipped after energy and financials helped the S&P 500 eke out a gain, while the Nasdaq 100 extended a drop. A slew of reports are due later in the day on U.S. economic activity and the cost of living. A climb in Treasuries unwound much of their overnight slide. The prospect of the Fed reducing stimulus more quickly to fight price pressures has tempered bond market inflation expectations, though they remain historically elevated. New Zealand’s currency weakened after the nation raised interest rates to 0.75% to curb price pressures, a smaller move than some had expected. The U.S. data and the Fed minutes will give investors a read on price pressures and the economic recovery, potentially buffeting markets.
Oil trades higher as a planned coordinated release of strategic reserves by the U.S. and other nations fell short of expectations. Gold pared a drop but remains under pressure from higher yields. Platinum and palladium also gained, while silver dropped. Base metals are broadly higher, tracking rises in energy-commodity prices. The three-month LME aluminum contract rose 0.4% a ton, while the respective copper contract is 0.1% higher. Iron ore has climbed back to roughly $100 a ton after China signaled an easing bias. Tencent trades 0.91% lower in Hong Kong. The Rand is slightly stronger at around the 15.85 level vs the USD, with the FTSE JSE Top 40 futures indicating a flat start.
Here are some events to watch this week:
- U.S. FOMC minutes, consumer income, wholesale inventories, new home sales, GDP, initial jobless claims, U.S. durable goods, University of Michigan consumer sentiment. All Wednesday
- Bank of Korea policy decision Thursday
- U.S. Thanksgiving Day: U.S. equity, bond markets closed Thursday
- Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday
Locally the All-Share Index closed up 0.2% to 71,015.38, mostly supported by resources with the index closing up 1.64%. Sasol contributed the most surging 6.9% as oil prices recovered slightly, with BHP also gaining 3.4% on higher commodity prices. Naspers weighed on the market, erasing 3.2%, with Prosus also giving up 1.2% at the end of the session following a fall in tech stocks globally. The Rand strengthened 0.2% to 15.82 per US$, with the Yield on 10-year govt rand bonds that rose 7.90 bps to 10.17 %.
The African National Congress lost control of most of the country’s main urban centers after its worst electoral showing, raising the threat of the party losing its national majority in a 2024 vote.
- Prosus Turns Spending Focus on Fast-Growing Online Car Dealers
- Pepkor Said to Make Offer for South African Furniture Owner
- South Africa Insurers Count Excess Death Costs As New Wave Seen
- Biggest Eskom Creditor Sees Barriers to Debt-for-Equity Swap
- Naspers Drops for a Fifth Day as It Underperfoms Prosus & Tencent
- 12pm: 4Q BER Business Confidence, prior 43
- Kenyan president on state visit to South Africa
- Reserve Bank to publish bi-annual Financial Stability Review
- Annual General Meetings: Woolworths (WHL SJ)
European stocks pulled back on Tuesday as market players monitored a Covid-19 surge, the prospect of U.S. rate hikes and the latest purchasing manager’s index (PMI) data for the euro zone. The pan European Stoxx 600 provisionally closed down by 1.1%, with tech stocks falling 3.1% to lead the losses as most sectors and major bourses dipped into negative territory. Euro zone business activity growth jumped unexpectedly in November, but a fresh wave of Covid-19 infections across the bloc and surging prices soured the outlook for December. IHS Markit’s flash composite PMI, a useful gauge of economic health, climbed to 55.8 in November from 54.2 in October, greatly outstripping expectations in a Reuters poll of economists for a fall to 53.2. However, optimism about the immediate future for economic activity ebbed, with the business expectations index falling to 66.6, its lowest reading since February, from 69.0 last month. French and German PMIs both came in stronger than expected in November, while manufacturing supply bottlenecks continued to drag on factory production and drive up inflationary pressures. In terms of individual share price movement in Europe, British technical products company Diploma tumbled 8% as the market reacted with uncertainty to its earnings report on Monday. German conglomerate Thyssenkrupp fell almost 6% after a report that Swedish activist fund Cevian will take a 6.9% stake in the company. At the top of the European blue chip index, U.K. foodservice firm Compass Group rose nearly 6% after reporting a rise in profits.
The Nasdaq Composite fell for the second consecutive day as higher interest rates appeared to put pressure on high-flying tech stocks, but shares of banks and industrial names moved higher in a split market on Tuesday. The tech-heavy index fell 0.50% to 15,775, while the S&P 500 ticked up 0.17% to close at 4,690. The Dow Jones Industrial Average rose 194 points to 35,813 on the strength of bank and energy stocks. The decline in tech and other growth stocks comes as Treasury yields have jumped following President Joe Biden’s decision to select Fed Chair Jerome Powell for a second term on Monday. Higher rates are often seen as a negative for high-growth companies because their future earnings look less attractive as short-term yields rise. Social media giant Meta, the parent company of Facebook, fell 1.1%, while Roku and biotech stock Moderna dropped more than 2%. Shares of Zoom Video Communications tumbled 14.7% a day after it beat earnings estimates but warned of a slowdown ahead as the Covid pandemic winds down and the demand for remote contact decreases On the other hand, bank stocks rose along with rates, with shares of JPMorgan adding nearly 2.4%. Energy stocks climbed even after President Joe Biden announced on Tuesday that he would tap the strategic petroleum reserve in an attempt to lower gas prices at a time when inflation is running at its highest level in three decades. The price of oil had declined in recent days amid rumors that Biden would take this step but reversed higher on Tuesday. In other earnings news, shares of Best Buy fell 12.3% after the company said comparable sales and gross profit margin might decline in the fourth quarter compared to the year ago period. On the positive side, chipmaker Western Digital was one of the best performers on Tuesday, rising 6.3% following an upgrade from Mizuho.
Shares in Asia-Pacific were mixed in Wednesday trade, with Japanese stocks leading losses regionally. The Nikkei 225 in Japan fell 1.79% while the Topix index declined 1.32%. Markets in Japan were closed on Tuesday for a holiday. South Korea’s Kospi dipped 0.44%. Hong Kong’s Hang Seng index sat fractionally lower while mainland Chinese stocks dipped, with the Shanghai composite down about 0.1% and the Shenzhen component declining fractionally. Elsewhere in Asia, the Straits Times index in Singapore gained 0.14%. Singapore’s economy grew 7.1% in the third quarter as compared with a year ago, according to the Ministry of Trade and Industry. It was higher than an earlier official advance estimate for 6.5% year-on-year growth. Australia’s S&P/ASX 200 stood little changed. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.25%. In other central bank developments, the Reserve Bank of New Zealand on Wednesday announced its decision to raise the official cash rate to 0.75%, in line with expectations. Following the RBNZ’s announcement, the New Zealand dollar tumbled nearly 0.7% to $0.6901, against levels around $0.7 seen earlier in the week.
Gold gained from a more than two-week low ahead of important data releases from the U.S. and the Federal Reserve minutes, which are set to throw further light on the state of the economic recovery and monetary policy outlook. Prices dropped on Tuesday to a fresh two-week low, adding to Monday’s 2.2% slide after the White House announcement about the reappointment of Fed Chair Jerome Powell, who is considered slightly more hawkish than the other prospective candidate. Spot gold rose 0.2% to $1,792.89 an ounce in Singapore. The precious metal shed 3.1% in the prior two sessions. Platinum and palladium also gained, while silver dropped.
Oil was steady after the biggest gain in two weeks following an announcement by the U.S. of a coordinated release of strategic reserves with other countries that fell short of expectations Futures in New York traded above $78 a barrel after climbing 2.3% on Tuesday. The U.S. will release 50 million barrels, in concert with China, Japan, India, South Korea and the U.K. in an effort to tame prices. Much of the oil will need to be returned to the stockpile by those who buy it, however, and contributions from international partners were smaller than many had anticipated. Focus now turns to OPEC+ and how the group will respond to the move by some of its biggest customers. The alliance said prior to the announcement that a release is unjustified by current market conditions and that they may have to reconsider plans to add more supply at a monthly meeting next week.
Base metals are broadly higher, tracking rises in energy-commodity prices, ANZ says. Energy prices jumped as several countries announced plans to release fewer oil reserves than the market had been expecting. Energy intensive aluminum is among the top gainers, with copper also trading higher. The metal is getting support from a tightening Chinese market amid signs that some buyers are paying premiums over international benchmark prices, the bank says. The three-month LME aluminum contract rises 0.4% to $2,678.5 a ton, while the respective copper contract is 0.1% higher at $9,717.5 a ton.
Iron ore has climbed back to roughly $100 a ton after China signaled an easing bias Spot iron ore was last at $99.45 a ton, up $4.75.