Stock Rally Pauses Amid Tame CPI, Weak Volumes

11/02/2021 A rally in equities has taken a slight pause and stock futures in the U.S. and Europe are steady as investors assessed the implications of weaker than expected American inflation data for the so-called reflation trade that bets on a recovery from the pandemic. S&P 500 contracts fluctuated after the index ended virtually flat near a record high. The 10-year Treasury yield fell back to 1.12% Wednesday after U.S. core consumer prices signaled scant inflation. Cash Treasuries are closed until the London open due to a holiday in Japan. U.S. bond futures edged higher. Asian stocks were little changed amid low volumes, with China and South Korea markets closed. Hong Kong equities shrugged off a report that Chinese authorities had detained a Tencent Holdings Ltd. executive. Tencent is marginally lower, down 0.53%.

Locally, the Platinum miners led gains on the JSE as the price of the metal rose to its highest in six years on global economic recovery hopes. The rally in the metal price came on expected improvements in industrial production with data showing China’s producer price index (PPI) rose 0.3% from a year earlier, showing steady economic growth momentum for the world’s second-largest economy. SSW, NHM and IMP led led the gains, up 6.38, 5.61 and 5.37 percent respectively. We should see a softer open this morning with Asia been mixed, Tencent down 0.53%.
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The pan-European Stoxx 600 finished the session down 0.23%, with most sectors and major bourses in negative territory. stocks followed a cautious trend seen elsewhere overnight. U.S. stocks wiped out earlier gains and traded in the red on Wednesday as investors rotated out of major technology stocks. German Chancellor Angela Merkel is set to announce that Germany will extend its lockdown until March 14 amid concerns over new strains of the coronavirus. DAX – 0.56%, CAC – 0.36% and FTSE -0.11%.
Overnight the Dow closed up 61 points to close at a record high. In a volatile session that saw the 30-stock average swing between gains and losses, the Dow also hit its ninth intraday record of the year. The S&P 500 and Nasdaq Composite also hit record highs during Wednesday’s session, but the indexes couldn’t ultimately hold onto those gains. The S&P wound up closing 0.03% lower, while the Nasdaq slid 0.25%. In Washington stimulus talks are ongoing, with investors anticipating that any additional relief measures would support equities further. Of the S&P 500 components that have reported earnings thus far, more than 80% have topped Wall Street’s expectations, according to a CNBC analysis.
A busy week of earnings will continue today, PepsiCo, Kraft Heinz and Kellogg are among the names set to report before the market opens. Disney and Expedia will give their quarterly reports after the close.
Markets in Asia are mixed in slow trade with China, Japan, South Korea and Taiwan closed for holidays. The Hang Seng index rose 0.45% on the day to 30,173.57 while the Straits Times index in Singapore closed little changed at 2,925.48. Markets in Hong Kong and Singapore ended their trading day earlier than usual on the eve of the Lunar New Year. In Australia, the S&P/ASX 200 was fractionally lower. MSCI’s broadest index of Asia-Pacific rose 0.15%.
Oil edged lower after capping the longest run of gains in two years, with one technical indicator signaling the rally may be overdone. Futures in New York have surged more than 12% over the past eight sessions as oil stages a robust recovery from the depths of the Covid-19 pandemic amid a tightening market. The rapid gain has driven prices to the highest level in a year, but also pushed crude’s 14-day Relative Strength Index firmly into overbought territory, signaling a correction is due. Despite the rally pausing, the outlook remains positive. U.S. crude stockpiles declined more than forecast last week, while Citigroup Inc. predicted the global benchmark Brent will reach $70 a barrel by the end of the year. Brent $ 61.15 -0.52% , WTI $ 58.36 – 0.55%.
Precious Metals are a tad softer after yesterday’s rally, Gold is trading a $ 1836 down 0.33%. Platinum fell 0.11% to $1,242.08 an ounce, having hit its highest since February 2015 above $1,250 on Wednesday as hopes firmed that an economic recovery would boost auto sales.Spot silver shed 0.4% to $26.89 and palladium eased 0.2% to $2,351.24.