Asian markets weaken

16/07/2020

We are indicating a lower start with the FTSE JSE Top40 future down 590 points or 1.1% on the back of weaker Asian markets with U.S. and European equity futures also lower, as investors parsed a slew of economic data in China that showed the path of economic recovery from the pandemic remains bumpy. retail sales in June missed estimates.

In SA, Ministers of the Economic Cluster are scheduled to explain further government plans to curb the spread of the coronavirus. Briefing starts at 4 p.m.

* Eastern Cape Provincial Government briefs lawmakers on its Covid-19 response plan
* Opposition leader Julius Malema due in court on charges of illegally discharging a firearm in 2018

* 10am: (SA) SARB Quarterly Bulletin

*Richemont trading update, 1Q Sales At Constant Exchange Rates Miss Est.
*RICHEMONT 1Q SALES EU1.99B, EST. EU2.13B

*RICHEMONT 1Q SALES AT CONSTANT FX -47%, EST. -45.3%

ECONOMIC DATA:
* 11:30am: May PPI YoY, est. -0.1%, prior 1.2%
* 11:30am: May PPI MoM, est. -0.8%, prior -0.7%

MARKETS
Yesterday the FTSE/JSE Africa All-Share Index closed up 0.8% to 55,947.05, tracking better global markets on vaccine hopes. Bank, retail, industrial and resource sectors were all up across the board, with the Gold sector that ended the day in negative territory. The Rand was up 1.1% to 16.5744 per US$ yesterday, but is currently slipping, -0.61 to 16.68, with the Yield on 10 year govt rand bonds that fell 7.9 bps to 9.375%.


EU/UK

European stocks close higher on coronavirus vaccine hopes. The pan-European Stoxx 600 index gained 1.76%, with travel and leisure shares surging 5.9% to lead gains as all sectors and major bourses traded in positive territory. In London the FTSE 100 closed up 1.83%, the German Dax surged 1.84%, with the Paris CAC 40 gaining 2.03%. Earnings in Europe come from retailer Burberry. Its shares sank 5% after reporting a 45% drop in sales for its first quarter. Shares of Atlantia in Italy meanwhile soared nearly 26% amid a last-ditch effort by the firm’s motorway unit to keep its concession with the national government.

U.S.

Stocks rose last night on the back of positive coronavirus vaccine news and a blowout quarter from Goldman Sachs. The Dow closed 227 points higher, or 0.9%, at 26,870.10. It was the Dow’s fourth straight daily gain. The S&P 500 was up 0.9%, with the Nasdaq that gained 0.5%. The Russell 2000 — which is made up of small-cap stocks — rallied 3.5% for its biggest one-day gain since early June. Data published by the New England Journal of Medicine showed Moderna’s coronavirus vaccine produced a “robust” immune response, or neutralizing antibodies, in all 45 patients in its early stage human trial. The news sent Moderna shares up 6.9% Stocks directly tied to an economic reopening jumped following the vaccine news. American Airlines, United Airlines, and Royal Caribbean Cruise Lines all popped more than 14%. Gap jumped 12.7% and Kohl’s gained more than 9%. Earnings season continued and Goldman Sachs reported quarterly numbers that easily beat analyst expectations. The company’s results were driven by a 93% surge in trading revenue. Goldman shares gained 1.4%. Bank earnings had been mixed leading up to Wednesday. JPMorgan Chase reported on Tuesday better-than-expected quarterly results on the back of a massive surge in trading revenue. Meanwhile, Wells Fargo suffered a $2.4 billion loss and slashed its dividend to 10 cents per share.

ASIA
Asian stocks are lower this morning as investors parsed a slew of economic data in China that showed the path of economic recovery from the pandemic remains bumpy. While the Chinese economy returned to growth in the second quarter, retail sales in June missed estimates as they continued to contract, highlighting how confidence remains fragile. Equities in China were down about 2.5%, with shares also lower in Japan, South Korea, Hong Kong and Australia. The Nikkei is down 0.79%, the Hang Seng shedding 1.14% (Tencent -4.05%) and the Shanghai is 2.25% lower. In OZ the ASX 200 gave up 0.69%, with the metals & mining index down 0.78%

COMMODITIES
Oil edged lower after closing at a four-month high as the OPEC+ alliance confirmed it would start tapering output cuts from next month. Futures in New York dipped below $41 a barrel after jumping 2.3% on Wednesday. Saudi Arabia and Russia said the producer bloc would proceed with its plan to add more supply next month and were confident that it wouldn’t hurt oil’s rally

Spot gold is steady at $1,807.08/oz, with Platinum down 0.37% and Palladium slightly higher +0.05%. Iron futures fell for a second day as investors looked ahead to confirmation of increased output from Vale SA, while weighing data showing booming steel output in China, the world’s largest ore importer.

Have a good day