Asia-pacific Markets Dip After Hawkish U.S. Federal Reserve Minutes

06/01/2022 Asian shares took their cue from overnight losses on Wall Street, extending a global slump after Federal Reserve meeting minutes pointed to a faster-than-expected rise in U.S. interest rates due to concerns about persistent inflation. The Nasdaq plunged more than 3% on Wednesday in its biggest one-day percentage drop since February and the S&P500 fell the most since Nov. A selloff in Chinese tech companies continued on concerns firms will trim holdings amid Beijing’s regulatory crackdown on the sector. The Hang Seng Tech Index fell for a fourth day. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.25%, Australia and Japan were the worst performers in the region. U.S. and European futures extended a global selloff Thursday as the rout in technology shares accelerated.

Oil prices lost ground on Thursday, falling more than $1 a barrel after U.S. fuel stockpiles surged amid declining demand. Brent crude futures fell $1.02, or 1.15%, to $79.65 a barrel at the writing. U.S. WTI crude futures lost 1.2%, to $76.81 a barrel.

Gold was down as the minutes released from the U.S. Federal Reserve meeting signalled a hawkish stance amid persistent inflationary pressures. Gold spot was down 0.34% to $1,803.05. In other precious metals, platinum edged down 0.99% to $976.66 and Palladium slipped 0.68% to $1,856.69.

Bitcoin tumbled to around $43,000, the lowest since its early-December weekend flash crash. Other cryptocurrencies also declined.

What to watch this week:
• Fed’s Bullard discusses the U.S. economy and monetary policy in an event on Thursday
• Fed’s Daly discusses monetary policy on a panel Friday
• U.S Non-farm payrolls, due on Friday.

Locally, the JSE closed flat 0.01%. Top-40 slipped 0.05% with gains in financials offset by Naspers and Prosus, both having to dip 3.46% and 3.21% respectively at the close of market. The rand bounced back from Tuesday’s losses just a day after President Cyril Ramaphosa received the first of three parts of the state capture report from acting chief justice Raymond Zondo. Rand slipped 0.35% to R15.95/$ this morning. Yield on 10-year govt rand bonds fell 5.30 bps to 9.83%. Top-40 futures in the doldrums, down -757 points.
NEWS:
• South Africa Judicial Probe Puts Zuma at Center of State Plunder
• South Africa Reports 11,106 Covid-19 Cases; Positivity 22.2%
EQUITY PREVIEW:
• Pepco Group Drops as Discount Retailer’s CEO Bond Steps Down
MEDIA SUMMARIES:
• Business Day.za: Probe Nedbank’s role in Acsa funding deal, says state capture report
• News24: Ramaphosa gets first endorsement for second term as ANC president

EU/UK/US
The pan-regional Stoxx 600 index was up 0.07% as investors eyed higher US Treasury yields and a much stronger-than-expected reading on consultancy ADP’s US private sector payrolls report for December. European automobile stocks rose more than 2% to a record high on Wednesday as investors turned increasingly bullish on the sector on growing expectations for stronger car sales in 2022. FTSE100 notched up 0.16%, CAC-40 0.81% and the DAX gained 0.74% at the close. Minutes from the Fed’s December meeting showed that officials had discussed shrinking the U.S. central bank’s overall asset holdings as well as raising interest rates sooner than expected to fight inflation. Stocks extended declines after the release of the minutes on Wednesday, led by a selloff in technology and growth shares. European futures doen across the board, with FTSE100 skidding -111 points and the DAX shedding almost -300 points.

U.S. stock futures open below the watermark after Fed minutes prompt sell-off:- Dow futures down -109 points, or 0.33%, S&P 500 futures drifting lower -0.46%, alongside Nasdaq futures plummeting -0.76%. U.S. technology companies extended losses on Wednesday as rising Treasury yields prompted investors to rotate out of high-flying growth stocks that are rate sensitive.
The yield on the U.S. 10-year rose to 1.7% after the release of the Fed’s minutes and a private jobs report that signalled more Americans are returning to the labour force, increasing the conviction among investors that the central bank will raise rates at least three times this year.

ASIA
Australian shares posted their biggest drop since September 2020 on Thursday, after the minutes of a U.S. Federal Reserve policy meeting signalled an earlier-than-anticipated rate hike, sharply hitting technology sector stocks. The S&P/ASX 200 index closed 2.74% down. Japan’s benchmark 10-year government bond yields hit a nine-month high on Thursday, tracking elevated U.S. yields. The Nikke225 closed down 2.88%. Chinese data released earlier in the day showed that the Caixin services purchasing managers index (PMI) was 53.1 in December, versus consensus of 51.7. Hang Seng down 0.47% and China’s blue-chip CSI300 down 0.98%.