Stocks Aided by China Signals; Pound Dips on Virus / S&P 500 notches closing record / Inflation highest since 1982

13/12/2021 Asian stocks are higher along with U.S. and European equity futures this morning, aided by signs that China may take steps to support its economy. The pound fell on an omicron warning from U.K. Prime Minister Boris Johnson. MSCI Inc.’s Asia-Pacific gauge advanced for the fourth session in five, with stocks in China outperforming. China’s top decision makers last week signaled policies may become more pro- growth next year. Economists predict the nation will start adding fiscal stimulus in early 2022. S&P 500, Nasdaq 100 and European futures are all higher. U.S. shares closed at a record Friday after an inflation print that was high but in line with predictions.
Crude oil extended gains in the wake of its biggest weekly advance in more than three months, with gold extending Friday’s advance, adding 0.2% to $1,786.33 an ounce. Silver, platinum and palladium climbed, with copper adding 0.1%. Other base metals were mixed, with zinc down 0.9% and lead up 0.6%. Iron ore surged more than 6% in Singapore amid demand optimism on expectations that China will move to increase stimulus next year to bolster the economy
Tencent trades 2.2% higher in Hong Kong. The Rand remains weak at around the 16.00 level vs the USD, with the FTSE JSE Top 40 futures indicating a better start, up 332 points or 51%.
Here are some events to watch this week:

  • The U.S. Federal Open Market Committee starts its two-day policy meeting. Tuesday
  • China releases November industrial output, retail sales data. Wednesday
  • FOMC rate decision and Powell news conference. Wednesday
  • Rate decisions from Indonesia, Philippines, Mexico, Bank of England, European Central Bank (Christine Lagarde briefing), Norway, Switzerland, Taiwan, Turkey. Thursday
  • Markit manufacturing PMI: Eurozone, France, Germany, U.K., Australia. Thursday
  • Rate decisions from Colombia, Japan, Russia. Friday
    Locally the FTSE/JSE Africa All-Share Index closed down 0.7% to 71,686, with the retail and precious metals & mining sectors weighing the most, closing down 3.1% and 2.5% respectively. Banks were also on the backfoot shedding 1.5% at the end of the session as the rand remains weak. The Rand was down 0.2% to 15.97 per US$, with the Yield on 10-year govt rand bonds that rose 0.80 bps to 9.94%
  • UBS Is Said to Retreat From South African Investment Banking
  • Battle for South African Platinum Miner Comes to a Boil
  • AVI Says Talks With Mondelez International Have Been Terminated
  • Sibanye Says Workers at Gold Mines May Strike in New Year
  • Spar Is at ‘Attractive Entry Point,’ Upgraded to Buy by SBG
  • Amplats Lifts Refined Production Guidance for 2021, Lowers 2022
  • Anglo American Confirms Guidance; Upgrades Scope of Woodsmith
  • Kumba 2022, 2023 Production Guidance Lowered to 39-41Mt
    EU/UK
    European markets closed slightly lower on Friday as renewed concerns about the omicron Covid-19 variant continue to weigh, while investors reacted to key U.S. inflation data. The pan-European Stoxx 600 provisionally ended 0.3% lower, with most sectors and major bourses in negative territory. Retail stocks led the losses, falling 1.4%. On the data front, the U.K. economy grew just 0.1% month-on-month in October, shy of expectations in a Reuters poll for a 0.4% expansion. The reading has fueled doubts over whether the Bank of England will hike interest rates at its next meeting. British industrial output fell 0.6% in October from the previous month, again falling short of economist expectations for a 0.1% rise. “The weaker-than-expected October GDP number will give the Bank of England further cause for hesitation ahead of the interest rate-setting meeting next week. The discovery of the omicron variant, and the announcement of new Plan B restrictions, provide a further note of caution for policymakers,” said Dean Turner, economist at UBS Global Wealth Management. Final German consumer price index inflation was confirmed at -0.2% month-on-month in November for a 5.2% annual incline. In terms of individual share price movement, German automotive giant Daimler was up 2.8%, having plunged more than 16% in early trade following the spin-off of Daimler Truck, which began trading on the Frankfurt Stock Exchange on Friday. At the top of the Stoxx 600, tobacco company Swedish Match gained 7% after the U.S. Senate dropped plans to raise taxes on tobacco next-generation products (NGPs). Toward the bottom of the European blue chip index, Danish biotech firm Genmab fell 4.6%.

US
The S&P 500 closed at a record on Friday, capping off Wall Street’s strong rally this week, despite inflation hitting a 39-year high. The S&P 500 rose 0.95% to 4,712 to close at a record. The 500-stock average sits 0.7% from its all-time high. The Dow Jones Industrial Average gained 216 points, or 0.6%, to 35,970. The technology-focused Nasdaq Composite climbed 0.7% to 15,630. The Dow Jones Industrial Average rose 4% since Monday, snapping a 4-week losing streak. The 30-stock index had its best weekly performance since March. The S&P 500 and Nasdaq Composite added 3.8% and 3.6%, respectively, this week — the best since February for both indexes. Inflation soared 6.8% year-over-year in November to highest rate since 1982, the Labor Department said Friday. The print came in slightly higher than the 6.7% Dow Jones estimate. The consumer price index, which measures the cost of a wide-ranging basket of goods, rose 0.8% for the month. Core CPI, which excludes food and energy prices, rose 0.5% for the month and 4.9% from a year ago, in line with estimates. A bright spot of the CPI report was that increases in used cars, lodging, and airfares were all lower than expected. These areas have been stubbornly high and this could be one of the first signs that inflation could be nearing a peak. Oracle shares soared 15.6% on Friday, a day after the company posted better-than-expected quarterly results. Airlines ticked lower. Southwest Airlines dropped nearly 3.8% following another downgrade on Wall Street, this time from Goldman Sachs. Interactive fitness company Peloton added to its woes, slipping about 5.4% after tumbling 11.3% on Thursday. Credit Suisse cut its view on the company, saying a return to gyms and shifts in consumer spending will weigh on profitability.

ASIA
Asia-Pacific markets jumped on Monday as investors turn their focus to a number of monetary policy meetings happening this week. In Japan, the Nikkei 225 rose 0.91% while the Topix index added 0.37%. South Korea’s Kospi added 0.55% and Australia’s benchmark ASX 200 rose 0.57%. Hong Kong’s Hang Seng index rose 1.1%. Reuters reported that Chinese artificial intelligence start-up SenseTime Group will withdraw its $767 million Hong Kong initial public offering after it was placed on a U.S. investment blacklist. Chinese mainland shares also advanced: The Shanghai composite was up 0.68% and the Shenzhen component added 0.6%. A number of high profile central banks are due to hold their monetary policy meetings this week, including the U.S. Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank. Elsewhere, Israeli researchers said that they found a three-shot course of the Pfizer-BioNTech Covid-19 vaccine provided significant protection against the omicron variant. The Japanese yen changed hands at 113.51 per dollar, weakening from an earlier level around 113.25, while the Australian dollar fell 0.07% to $0.7166.

COMMODITIES
Gold extended Friday’s advance as investors weighed concerns over elevated inflation and the omicron variant ahead of a meeting of the Federal Reserve this week. Spot gold added 0.2% to $1,786.33 an ounce by 12:35 p.m. in Singapore after rising 0.4% Friday. The Bloomberg Dollar Spot\ Index was up 0.1% after dropping 0.2% in the previous session. Silver, platinum and palladium climbed.
Oil extended gains — after its biggest weekly advance in more than three months — on more signs that omicron won’t be as bad as initially feared and predictions that China will start adding fiscal stimulus early next year. West Texas Intermediate futures climbed as much as 1.6% after gaining 8.2% in the first weekly increase since late October to recoup more than half of an omicron-driven plunge. Oil has staged a remarkable turnaround after tumbling into a bear market following a multi-week plunge. While Asian oil consumers are yet to follow through on their strategic oil releases, the market is weighing the potential impact of such a move or omicron-related travel restrictions on supply and demand. Citigroup Inc. last week lowered its Brent price forecast by $2 a barrel for next year on omicron fear.
Copper edged up in London as investors assessed potential fiscal stimulus from China and winter demand weakness in the top metals-consuming country. Economists predict China will start adding fiscal stimulus in early 2022 after the country’s top officials said their goals for the coming year include counteracting growth pressures and stabilizing the economy. Copper added 0.1% to $9,518 a metric ton on the London Metal Exchange as of 10:15 a.m. in Shanghai. The metal has been trading in a narrow range for nearly two months after prices retreated from a peak in October amid mounting concerns over a slowing Chinese economy, new coronavirus variants, and U.S. Federal Reserve tapering. Other base metals were mixed, with zinc down 0.9% and lead up 0.6%.
Iron ore surged more than 6% in Singapore amid demand optimism on expectations that China will move to increase stimulus next year to bolster the economy. Prices also jumped in Dalian. Futures on the SGX extended a stretch of four weekly gains, the longest winning run since May, and headed for the highest close since late October. Iron ore has been on a tumultuous ride this year as a slew of output and pollution curbs hit consumption and turmoil in the property industry damped construction activity. The steel-making ingredient has roughly halved from its peak in May, though it has been supported recently by improved demand. Iron ore futures in Singapore soared 6.8% to $115.75 a ton by 11:33 a.m. Dalian prices surged 5.2%. Steel rebar and hot- rolled coil climbed in Shanghai.