Asian Stocks Drop, Treasuries Steady Post-Powell, Powell not worried about inflation

24/02/2021 Asian stocks all lower this morning as investors balanced the risk of stronger growth and inflation driving global rates higher against the Federal Reserve’s pledge of continued policy support. Treasuries were steady. A gauge of Asian shares declined to the lowest in more than two weeks. Hong Kong equities tumbled on the city’s plan to raise stamp duty on stock trading. U.S. equity futures and European contracts are lower. Earlier, the S&P 500 Index reversed losses to close in the green following Fed Chair Jerome Powell’s message Tuesday that the central bank was nowhere close to unwinding its easy policy. Cyclicals outperformed, while the tech heavy Nasdaq 100 closed lower despite a late rally. Commodities stabilized after their recent run-up, with the Bloomberg Commodity Spot Index just shy of its highest level since 2013. Tencent trades 2.3% lower in HK, with the JSE Top 40 futures indicating a slightly better start, up 215 points or 0.36%. The Rand is stronger at 14.54 vs the USD.

Locally the FTSE/JSE Africa All-Share Index closed down 2.1% to 65,921, with all sectors closing in the red. The platinum sector lost the most, closing down over 3%, followed by golds that gave up 2.4%. Banks and retailers lost 1.4% and 1.5% respectively. The Rand was up 0.8% to 14.57 per US$, with the Yield on 10-year govt rand bonds that fell to 8.84 bps.
Finance Minister Tito Mboweni will present South Africa’s annual budget statement at 2pm in Cape Town.

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European stocks closed lower on Tuesday after a choppy day’s trade, with tech stocks following their global counterparts lower on fears over rising bond yields. The pan European Stoxx 600 ended the session down by 0.4%, recovering some of its earlier losses. The tech sector shed 1.8% to lead losses while retailers edged about 0.9% higher. The drop in tech shares comes amid jitters over higher interest rates and a rotation into stocks more linked to the economic recovery. On the data front, euro zone inflation rose 0.2% month-on-month in January, Eurostat confirmed on Tuesday, breaking from a months-long trend of falling prices. Travel and tourism IT company Amadeus and student housing company Unite Group were among the top gainers in Europe, climbing 5.9% and 5.8% respectively. The British government set out proposals on Monday on how and when it plans to start lifting coronavirus restrictions. The easing will be gradual, but the government plans to have all restrictions lifted by June 21. Toward the bottom of the European blue chip index, German cooking appliance manufacturer Rational fell 9.6% after issuing a weaker-than-expected forecast.
The Dow Jones Industrial Average bounced back from steep losses and closed the session in the green on Tuesday after Federal Reserve Chair Jerome Powell relieved some of the concerns about higher interest rates and inflation. The blue-chip Dow wiped out a 360-point loss and closed 15.66 points higher, or 0.1%, at 31,537. The S&P 500 also reversed a 1.8% loss and ended the day 0.1% higher at 3,881.The Nasdaq Composite slipped 0.5% to 13,465, after dropping as much as 3.9% earlier. At its session low, the tech-heavy benchmark fell below its 50-day moving average, a key technical indicator, for the first time since Nov. 3 on an intraday basis. The intraday turnaround came after Powell said in his testimony to Congress that inflation is still “soft” and the economic outlook is still “highly uncertain,” easing fears of a policy change by the central bank. High-flying tech stocks, which came under pressure amid higher interest rates, pared losses after Powell’s remarks. Tesla closed 2.2% lower after sliding as much as 13% earlier. The electric car maker suffered a 9% decline in the previous session. Apple’s stock dipped just 0.1% after falling 6% earlier. Energy and financials — two of the best-performing sectors this year — once again supported the market as investors snap up names they think will benefit from an economic recovery. The energy sector gained 1.6%, bringing its 2021 rally to nearly 27%.
Shares are trading mostly lower across Asia-Pacific markets this morning as investors turned cautious, despite remarks overnight from Federal Reserve Chair Jerome Powell that attempted to ease some worries around higher interest rates and inflation. In Australia, the benchmark ASX 200 fell 0.78%, led by losses in most sectors, including a 0.4% drop in the heavily weighted financials subindex. Among the so-called Big Four banks in the country, ANZ shares were down 0.86%, Commonwealth Bank shares were down 0.71%, and Westpac fell 0.58%. National Australia Bank shares reversed losses to trade up 0.68%. Japanese markets returned to trade after being shut on Tuesday for a public holiday. The Nikkei 225 fell 1.6% while the Topix index was down 1.2%. South Korean shares wavered as the Kospi index slipped back into negative territory, down 0.64%. The Kosdaq index erased gains to trade down 0.74%. Chinese mainland shares also traded lower: The Shanghai composite dropped 2.3% while the Shenzhen component index fell 1.8%. Hong Kong’s Hang Seng Index tumbled 3%, while in Singapore, the Straits Times Index bucked the general downward trend to advance 1.3%. The session in Asia followed a mixed finish on Wall Street, where the Dow Jones Industrial Average reversed steep losses following Powell’s remarks.
Gold rose as investors weighed comments from Jerome Powell on policy and growth, with the Federal Reserve chair signaling the central bank was not close to curbing support for the pandemic-hit economy. Spot gold advanced 0.3% to $1,811 an ounce by 10:43 a.m. in Singapore, after easing 0.2% on Tuesday. Silver, platinum and palladium all rose.
Oil declined in Asian trading after an industry report pointed to the first gain in U.S. crude stockpiles in five weeks following a recent cold blast that led to a spate of refinery outages. Futures in New York dropped 0.9% to trade near $61 a barrel after ending Tuesday’s session little changed.
Copper held near the highest since 2011 as expectations of a global economic rebound, driven by investment in electric-vehicle infrastructure and renewables, fuel bets that the metal’s surge has more room to run. Copper rose as much as 1.5% to $9,342 a ton on the London Metal Exchange, the highest since 2011, and was at $9,235 by 11:27 a.m. in Hong Kong.
Iron ore futures are lower in Singapore, dropping 0.6% to $168 a ton.
Some key events to watch this week:

  • EIA crude oil inventory report is out Wednesday.
  • Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.