Dollar Rises as U.S.-China Tensions Resurfaces, Asian Stocks Gain

08/09/2020

On Tuesday Asian markets followed their European counterparts higher, shaking off fresh Sino-American tensions. The pound underperformed against all major currencies on heightened risk of no new trade deal between the EU and U.K. come October the 15th – deadline for an accord to be struck. Locally, on Monday, the JSE tracked EU markets as investors await the ECB policy meeting scheduled on Thursday.  The local bourse closed 1.1% firmer to 54,473.45 points and the blue-chip Top 40 gained 1.11% at the close of trading. Platinum miners rose 3.85% and the gold mining index 2.94%. The Rand flat to the dollar at 16.7430, or 0.06%, while the Yield on 10 year govt rand bonds fell 1.8 bps to 9.196%

  • South Africa’s Not-Quite-QE Ends, Raising New Risk for Yields
  • SARB: South Africa Needs Fiscal Adjustment Reforms
  • Boris Johnson escalates threats to leave EU without trade deal
  • Trump vows to sharply scale back economic ties with China
  • Finance Minister Tito Mboweni and other ministers brief the National Council of Provinces on the financial state of municipalities
  • Ace Magashule, the secretary-general of South Africa’s ruling African National Congress, leads a delegation to Zimbabwe to try and resolve that nation’s political crisis
  • (CLS SJ): Racist Advert Row Hits South Africa’s Biggest Pharmacy Chain
  • EARNINGS: Shoprite (SHP SJ)
  • ECONOMIC DATA: 11:30am: (SA) 2Q GDP Annualized QoQ, est. -47.2%, prior -2.0% ; 11:30am: (SA) 2Q GDP YoY, est. -16.0%, prior -0.1%

EU/UK

European stock markets closed into positive territory on Monday as sterling slumped amid fears of a no-deal Brexit. The pound fell after reports the UK was working on legislation to override parts of the Brexit withdrawal agreement. The latest survey from Halifax, mortgage lender, showed that annual house price growth hit a new high in August, in part to pent-up demand following the Covid-19 lockdown. House prices rose 5.2% on the year, up from 3.8% growth in July and marking the strongest level of growth since late 2016. On the month, prices were up 1.6% following a 1.7% increase in July. London’s FTSE100 ended the session up 2.39%, with Paris’ CAC-40 bagging 1.79% at the close, while the German DAX saw the session out 2.01% firmer. The ECB will probably hold rates on Thursday but indicate that downside risks have intensified, suggesting further easing is possible before year-end.

US

Stock markets in the US remained closed for the Labour Day holiday on Monday, although index futures were trading. Nasdaq futures resume declines for the tech-heavy index, down 45 points/0.40%, as clouds gathered around a five-month rally that has bloated tech valuations.  Dow futures steady 204 points, while the S&P500 futures are marginally up 15 points. U.S. CPI data is due Friday, with consumer prices expected to rise in August for a third straight month. The Trump administration is considering a ban on importing products containing cotton from the Xinjiang region of China in response to Beijing’s alleged repression of the Uighur Muslim minority group.

ASIA

Japan’s economy contracted slightly more than initially estimated in the 2Q2020, April-June quarter. The economy shrank 7.9%, compared with the 7.8% contraction in a preliminary estimate. Companies were more cautious about their spending amid high uncertainty caused by the coronavirus pandemic. Japan’s Nikkei advanced 0.55%, China’s blue-chip index Shanghai Composite marginally gained 0.10% while Hong Kong’s Hang Seng gained 0.12%, even as President Donald Trump on Monday ramped up his anti-Chinese rhetoric by again raising the idea of de-coupling the U.S. and Chinese economies.

Australian shares rose for a second straight session, up 0.63%.

COMMODITIES Brent crude oil extended declines on Monday after Saudi Arabia’s Aramco cut the October official selling prices for its Arab light crude, indicating fuel consumption is wavering in key markets. Gold was down on Tuesday morning as the U.S. dollar rose. Gold futures edged down 0.28% to $1,928.45 after a peak of $1,945.90 the previous day and looked likely to continue falling.