Dow jumps to another record on Friday; Asia Stocks Erase Gains this morning; Yields, Dollar Tick Up

15/03/2021 Asian stocks and U.S. equity futures are mixed this morning as benchmark Treasury yields traded around a one- year high and China data painted a patchy economic picture. Ten-year Treasury yields stayed above 1.6% as vaccinations and the $1.9 trillion U.S. stimulus keep the spotlight on inflation risk amid an economic recovery. Australian and New Zealand 10-year rates rose. The dollar edged up versus major peers. China’s stocks extended declines, as persistent liquidity concerns overshadowed data showing the strength of the nation’s economic recovery. S&P 500 and Nasdaq 100 futures pared gains.. Tencent trades 3.2% lower in HK. We in for a lower start, with the JSE Top 40 futures down 230 points or 0.38%. The Rand is weaker at 15.01 vs the USD.

Locally the FTSE/JSE Africa All-Share Index closed down 0.8% to 68,209. The Rand was down 0.8% to 14.95 per $ on Friday, with the Yield on 10-year govt rand bonds that rose 5.9 bps to 9.35%.
Absa Group Ltd. is due to report full-year earnings for the period through Dec. 31. The Johannesburg-based lender said last month it expects headline earnings to decrease by 55% to 60%.

  • Eskom Says Stage 2 Load shedding Extended to 5:00 on Wednesday
  • Aspen Pharmacare to Deliver J&J Vaccines in Next Three Months
  • Naspers, Prosus Slide as Tencent Is Said to Face Clampdown
  • Diamond Mining Market in Better Health, Upgrade Petra: Berenberg
  • Massmart Raised to Neutral at JPMorgan; PT 61 rand

EARNINGS:

  • Absa Group Ltd. (ABG SJ)

GOVERNMENT:

  • 1pm: Eskom Holdings SOC Ltd. to hold state-of-the-system briefing
  • The Commission of Inquiry into Allegations of State Corruption, headed by Judge Raymond Zondo, continues its hearings in Johannesburg

EU/UK
European markets retreated Friday as a rise in Treasury yields resurfaced some investor caution, but stocks in the region still logged their best week since November. The pan-European Stoxx 600 fell 0.3%, with tech stocks shedding 2% to lead losses while banks added 1.2%. The benchmark saw gains of 3.5% for the whole week. The European Central Bank on Thursday vowed to ramp up its bond buying efforts “significantly” in the second quarter after borrowing costs rose across the continent, with European bond yields following U.S. Treasury yields higher over the past month. Investors were worried that rising bond yields could derail Europe’s economic recovery, by increasing the borrowing costs for countries that are already struggling with the coronavirus crisis. On the data front, the U.K. economy shrank by 2.9% in January from the previous month, a less severe contraction than expected as the country reentered nationwide lockdown. British luxury fashion brand Burberry saw its shares climb more than 6.8% to the top of the Stoxx 600, after upgrading its guidance on the back of a strong rebound in sales. At the bottom of the index, Dutch tech investment firm Prosus fell 6.7% after China’s market regulator fined Tencent, in which the company has a stake. British property developer Berkeley Group fell 5.8% after projecting flatlining profits in 2021. Credit Suisse dropped 2.5% as it faces questions from regulators over supply chain finance funds linked to the collapsed Greenhill Capital, according to Reuters.
US
The Dow Jones Industrial Average jumped to another record high on Friday as rising reopening optimism continued to encourage the rotation into cyclical stocks. Meanwhile, surging bond yields rekindled valuation fears and took the comeback momentum out of tech names. The 30-stock benchmark climbed 293 points, or 0.9%, to close at a record at 32,778. Bank stocks gained amid rising rates, while industrials continued their strength on the back of new stimulus. Goldman Sachs shares jumped 2%, and JPMorgan climbed 1.2%. Boeing and Caterpillar popped 6.8% and 4.2%, respectively. The S&P 500 erased earlier losses and inched up 0.1%, eking out a record close of 3,943. Tech and communication services were the only two sectors registering losses. The Nasdaq Composite shed 0.6% as rates surged. Alphabet and Facebook dropped 2% each, while Apple, Amazon and Microsoft all closed in the red.
ASIA
Asia-Pacific markets are trading mixed this morning ahead of this week’s Federal Reserve meeting stateside. Australian shares reversed earlier losses as the benchmark ASX 200 climbed 0.31%. The energy sector gained 1.1% while the materials sector erased some of its losses but still traded down 0.36%. The heavily-weighted financials subindex rose 0.68%. Japanese markets rose, where the Nikkei 225 notched up a 0.36% gain while the Topix index added 0.69%. Tech giant Rakuten jumped 18% after the company said Friday that it will issue new shares to raise $2.2 billion in capital to compete with its U.S. rivals. Japan Post is expected to take a 8.3% stake in Rakuten, while China’s Tencent will take 3.6% and U.S. retail giant Walmart takes a 0.9% stake. In South Korea, the Kospi wavered between gains and losses — the benchmark index inched up 0.09%. Elsewhere, Hong Kong’s Hang Seng index rose 0.94%. Chinese mainland shares struggled for gains: The Shanghai composite fell 0.21% while the Shenzhen component declined 1.51%.
COMMODITIES
Gold held an advance as investors weighed concerns over inflation while awaiting the Federal Reserve’s meeting this week for guidance on policy responses. Spot gold was little changed at $1,726 an ounce by 11:40 a.m. in Singapore, after rising 0.3% on Friday to post a weekly gain. Silver and platinum climbed, while palladium fell.
Oil opened the week in robust form after a raft of economic data from China added to signs of recovery from the coronavirus pandemic just as the OPEC+ alliance presses on with output curbs to drain global inventories. West Texas Intermediate in New York gained 0.9%, while Brent also climbed.
Copper rose for a fourth session as most metals gained after better-than-expected economic activity in China in the first two months of the year added to demand optimism. Copper rose as much as 1.3% to $9,199 a ton on the London Metal Exchange before trading at $9,148 as of 11:10 a.m. in Shanghai. Aluminum added 0.8% to $2,188 and zinc rose 0.9% to $2,829. Nickel dropped 0.5% to $15,935, heading for the lowest close since Nov. 23.
Iron ore futures extended their slump as China’s top steel-making city expanded its inspections of mills in a push to crack down on violations of pollution curbs, hurting the outlook for demand. The most-active contract in Singapore fell as much as 4.6% to $152 a ton before trading at $154 by 11:17 a.m. local time. Prices dropped 4.6% last week, the most since late January.
Some key events to watch this week:

  • Fed Chair Jerome Powell will likely reaffirm his no-tightening policy stance at the Fed policy meeting Wednesday.
  • Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.
  • Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.