Improved FTSE on the back of stronger Asian Markets

15/07/2020

We are indicating a better start with the FTSE JSE Top40 future up 590 points or 1.1% on the back of stronger Asian markets with U.S. and European equity futures also higher, amid optimism that progress is being made in developing a defense against the coronavirus. Moderna Inc.’s Covid-19 vaccine produced antibodies in all patients tested in an initial safety trial.

South Africa’s inflation rate is expected to have dropped below the central bank’s target range for the first time in almost 15 years in May due to lower fuel prices and ongoing restrictions to curb the spread of the coronavirus pandemic. Consumer prices are seen rising 2.2% from a year earlier compared with 3% in April, according to the median estimate of 15 economists surveyed by Bloomberg. Data due at 10am.

* South African Township Taverns Face Ruin From Second Booze Ban
* South African Airways Creditors Approve $1.6 Billion Rescue

* National Treasury faces deadline to provide written commitment to South African Airways to provide bailout funding
* 11am: Bank of America Securities hosts media roundtable on latest fund manager survey, South African economy and investment climate

ECONOMIC DATA
* 10am: May CPI YoY, est. 2.2%, prior 3.0%
* 10am: May CPI MoM, est. -0.5%, prior -0.5%
* 10am: May CPI Core YoY, est. 3.2%, prior 3.2%
* 10am: May CPI Core MoM, est. 0.0%, prior -0.2%

MARKETS
Yesterday the FTSE/JSE Africa All-Share Index closed down 1.2% to 55,531, weighed down mostly by Naspers Prosus and the banking sector, with the gold and platinum sectors ending in the green on a risk-off day as virus cases surged in a number of countries around the globe.  The Rand strengthened 0.6% to 16.75 per US$ and is currently continuing the trend, up another 0.5%, last at 16.67, with the Yield on 10 year govt rand bonds unchanged at 9.454%.

EU/UK

The pan-European Stoxx 600 closed down by 0.84%, with tech stocks shedding almost 2.8% to lead losses as most sectors and major bourses slipped into negative territory as virus cases have spiked in a number of countries around the world. In London the FTSE 100 managed to close slightly higher up 0.06%, the German Dax lost 0.80%, with the Paris CAC 40 shedding 0.96%. Official figures revealed that UK GDP expanded by 1.8% in May following April’s historic 20.4% contraction. Economists polled by Reuters had expected a monthly rebound of 5.5%. British homebuilder Meggitt and German software company Nemetschek both fell by more than 6%. BT stock meanwhile was one of the top performers, climbing 4% after the U.K. announced plans to strip out Huawei from its 5G networks.

U.S.

Stocks rose last night as investors added exposure to some of the more cyclical names in the market while Big Tech underperformed. The Dow closed 556 points higher, or 2.1%, at 26,642. The S&P 500 climbed 1.3% to 3,197, while the Nasdaq was up nearly 1% at 10,488. Caterpillar was the best-performing Dow stock, rising more than 4%. Exxon Mobil and Chevron were up more than 3% each as well. Boeing closed 2.5% higher. At the S&P 500 sector level, energy jumped 3.6% while materials and industrials each gained more than 2%. Sentiment also got a boost after Florida reported a daily coronavirus case increase that was below a seven-day average. California’s daily Covid case rate decreased slightly from Monday’s as well. Big Tech — which has been a stalwart on Wall Street all year as investors bet these stocks will stay resilient during the coronavirus pandemic — lagged. Amazon and Netflix were down 0.6% and 0.1%, respectively. Alphabet rose 0.6% after being down for most of the day. 

ASIA
Asian markets are mixed to mostly higher amid optimism that progress is being made in developing a defense against the coronavirus. Shares in Japan, India, South Korea and Australia rose as Moderna Inc.’s Covid-19 vaccine produced antibodies in all patients tested in an initial safety trial. Shares in Hong Kong underperformed, while those in Shanghai fell amid signs policy makers are uneasy over the pace of recent gains. The Nikkei is up 1.5%, the Hang Seng slightly positive up 0.06% (Tencent +2.8%) and the Shanghai is 0.12% lower. In OZ the ASX 200 gained 1.8%, with the metals & mining index up 2.7%

COMMODITIES
Oil edged higher after a report pointed to a drop in U.S. crude stockpiles and on signs that additional supply from OPEC+ next month won’t be as much as previously anticipated. Futures in New York traded near $40.50 a barrel after closing up 0.5% yesterday. The American Petroleum Institute reported that U.S. inventories fell by 8.32 million barrels last week, according to people familiar with the data. That would be the largest drawdown since December if confirmed by official figures due today, suggesting a supply glut is easing.

Gold held a two-day advance above $1,800 an ounce as investors tracked tensions between the U.S. and China, progress in developing a coronavirus vaccine, and the mixed outlook for the global economy. Spot gold is steady at $1,808.08/oz after a two-day advance, with Platinum little changed and Palladium +0.3%.

Have a good day