ZAR Broke Below The R14/$ Mark For First Time In 16 Months; Inflation Fears Hurts Techs

11/05/2021 Asian stock markets and U.S. futures took a dive on Tuesday after a Wall Street tumble as surging commodity prices stoked concerns about inflation. Nasdaq futures retreated about 1% after the index tumbled on concern that higher inflation could push up interest rates, weighing on equity valuations. S&P 500 futures dropped after the gauge fell from an all-time high. Oil fell as traders monitored the worsening fallout from the closure of the largest U.S. oil-products pipeline – following cyberattacks, and looked ahead to OPEC’s latest analysis of global supply and demand. Brent currently down 0.70% at $67.84, while U.S WTI is on the back foot 0.68% at $64.47. Gold keeping its head high, near the highest level in three months, as investors weighed growing inflation risks. The yellow metal currently hovering around $1836.03.

The rand moved swiftly against the US dollar on Friday after the closely watched US nonfarm payrolls report missed estimates. On Monday morning the local currency bridged the R14/$ mark to touch, and test, the R13
9600/$ level. SA offers relatively higher rates compared with most developed markets, which is attracting foreign capital via bond inflows. The yield on the benchmark R2030 SA bond at 8.98% compares favourably with equivalent US treasury yields, which stand at 1.58%. Commodities prices are also benefitting the local currency.

The JSE reached a record high at 69,039.55 (momentarily) in the late afternoon trade before pulling back, to close down 0.21% at 68,377.23. Miners led the gains, while technology stocks pulled the index lower tracking a weaker close in tech-heavy Nasdaq. Kumba Iron Ore led the gains in the industrial miners’ sector, rising 2.96% to R710.76. Glencore added 2.91% to R65.43, BHP 1.82% to R469.10. Naspers fell the most in four weeks, down 1.13% to R3,300, while Prosus lost the most in almost a week, falling 3.69% to R1,481.21. Banks gained 0.52%, alongside financials firming 0.13% at the close.

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• Textainer Group Holdings Ltd. (TGH US)
• 1pm: March Manufacturing Prod SA MoM, est. 0.8%, prior -1.2%
• 1pm: March Manufacturing Prod NSA YoY, est. 1.0%, prior -2.1%
• Sibyane Stillwater CEO Neal Froneman addresses webinar on commodities rally
• Annual General Earnings Calls: TGH US
• Meetings: CAPC LN, SUI SJ

European stocks extended a rally on Monday as optimism about the reopening of economies and easy monetary policy lifted mining and financial sectors. The pan-European STOXX 600 index rose 0.1% to hit a fresh all-time high in early trading, with miners rallying 2.2% on the back of strong metal prices. The FTSE 100 ended the session down 0.09% as a stronger pound offset the positive sentiment around the lifting of Covid-19 restrictions. London-listed miners, such as Rio Tinto, BHP Group and Glencore rose between 1.7% and 2.6%. German biotech company BioNTech jumped 8.8% after revealing plans to build a manufacturing site for its vaccines based on messenger RNA technology (mRNA) in Singapore. The Dax closed flat on the day.

A selloff in in technology shares drove S&P 500 to retreat from a record high as inflation concerns grip the market and investors rotate from growth to value stocks. The Dow gave up 35points, 0.10%, at the close; the S&P500 slipped 1.04%, alongside the Nasdaq dropping 2.55% for the day. Alphabet and Facebook declined more than 2% after Citigroup warned about the outlook for digital advertising. The selloff quickly cascaded into a rout in technology shares. Blue-chip stocks outperformed as the Dow Jones Industrial Average rallied to a fresh record before sliding into the red in afternoon trading.

Here are some key events to watch this week:
• OPEC monthly Oil Market Report is published with global demand forecasts and production estimates Tuesday
• U.S. CPI report Wednesday is forecast to show prices continued to increase in April
• Bank of England Governor Andrew Bailey speaks Wednesday

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.7%. Markets are watching for U.S. and Chinese consumer and producer prices due out this week. Asian countries are seeing rising coronavirus infections and deaths that are straining health systems and setting back progress toward vanquishing the pandemic. Tokyo’s Nikkei 225 slipped 2.97% while the Hang Seng in Hong Kong lost 2.15%. The Shanghai Composite index shed 0.30%. Australia’s S&P/ASX 200 lost 0.96%, the government is due Tuesday to release a big-spending economic plan for the next fiscal year designed to create jobs and repair pandemic damage and with an eye toward winning votes at looming general elections.