Asia Stocks Drop With Evergrande, Omicron in Focus

10/12/2021 Asian stocks followed their U.S. peers lower as traders weighed the economic threat of virus restrictions against optimism about the efficacy of vaccines. Equity markets saw modest losses across the region. U.S. futures are flat after benchmarks ended a three-day rally amid losses in the consumer discretionary and real estate sectors. Treasuries were little changed, with a lackluster sale of 30-year bonds paring gains on Thursday. Oil was steady around $71 per barrel and Bitcoin edged higher. The dollar held overnight gains.

Ratings agency Fitch downgraded property developers China Evergrande Group and Kaisa Group to “restricted default” status, saying they had defaulted on offshore bonds, while a source said that Kaisa had started work on restructuring its $12 billion offshore debt.

Locally the JSE lost ground and the rand weakened as investors locally and abroad weighed up the effects of the latest Covid-19 variant on the global economy and set their sights on US inflation. While the symptoms of the strain appear to milder than its Delta predecessor, it’s 4.2 times more transmissible in its early stages, according to a study from Japan. The finding is likely to heighten fears about Omicron and could justify tighter restrictions being imposed globally after a spike in infections. The JSE Top 40 closed down 0.32 percent with NPH, EXX and SOL been the big losers. We in for a mixed to lower open as Asia trades lower, US Futures are flat and Tencent is down 0.59%.
South Africa recorded 22,391 new coronavirus cases on Thursday, rising from 19,842 the previous day, according to the National Institute For Communicable Diseases. Hospitalizations increased by 453 to 4,795.
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European stocks closed lower yesterday, as investors continued to monitor developments around the omicron Covid variant and look ahead to key U.S. economic data. The pan-European Stoxx 600 closed down by 0.1% provisionally, having started the day on a positive note. Oil and gas stocks fell 1.1% to lead the losses as most sectors and major bourses fell into the red.
Overnight in the US, The Dow, moved less than a point lower, finishing at the flatline. The S&P 500 fell 0.7% and the tech-heavy Nasdaq Composite lost 1.7%. Nevertheless, all are on track to finish the week higher. Jobless claims data released yesterday showed the labour market recovery remains strong. The Labour Department reported initial claims for unemployment insurance totaled 184,000, below the 211,000 estimated by economists surveyed by Dow Jones and the lowest reading since 1969. Attention has now turned to the key inflation data due later today. Economists surveyed by Dow Jones expect consumer prices in November to have grown 6.7% year-over-year. If that is the case, it would mark the biggest move since June 1982.
Asia-Pacific markets declined today as investors assess risks associated with the new omicron Covid variant and look ahead to key inflation data in the U.S. the Nikkei extended losses from the previous session and is down 0.48%, the ASX 200 is 0.38% lower with the Aussie Miners down 0.14%. Chinese markets are in focus after China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt. Evergrande shares fell about 2%. Kaisa’s shares, which are traded in Hong Kong, were suspended. China’s central bank took further steps to limit the yuan’s strength — setting the weakest reference rate relative to estimates compiled by Bloomberg since 2018 — a day after policy makers raised foreign currency reserve requirement ratio for banks a second time this year. The yuan shrugged the moves to advance.
Gold has firmed a tad this morning after losing ground yesterday on the Dollar strength, the market is looking ahead to today’s CPI number, a high inflation number should be good for the metal and could see it test $ 1800 again. Spot Gold + 0.13% $ 1777, Platinum + 0.67% $ 1816 and Palladium – 0.06% $ 1816.
Oil prices are a touch lower on fears about the economic outlook in the world’s biggest oil importer following ratings downgrades to two Chinese property developers, and after some governments took measures to fight the Omicron variant of the coronavirus. The Omicron outbreak sparked a 16% slump in Brent prices from Nov. 25 to Dec. 1. More than half of the drop has been recouped this week, but analysts say a further recovery could be limited until Omicron’s impact is clearer. Brent – 0.31% $ 74.18, WTI – 0.27 % $ 70.75