Stocks, Futures Weather Focus on Risk of Fed Taper / Dow fell 160points, ends wild session way off lows

20/05/2021 Asian stocks are steady this morning and Treasury yields held an advance as traders weighed Federal Reserve minutes that flagged the possibility of a debate on scaling back asset purchases. Commodities remained under pressure. Equities edge up in Japan, posted losses in Hong Kong and China, and outperformed in Australia. U.S. futures are fluctuating after the S&P 500 pulled back for a third day. The Nasdaq 100 notched a small advance, boosted by late-day gains in tech stocks including Facebook Inc. European contracts are in the green. The minutes indicated some Fed officials may be open “at some point” to discussing adjustments to the pace of massive bond purchases if the U.S. economy keeps progressing rapidly. The benchmark 10-year Treasury yield was steady after climbing to 1.67%. Commodities have slid amid concern about inflation, potential curbs on monetary stimulus and China’s efforts to rein in raw material prices. Volatility swept over cryptocurrencies, with Bitcoin posting a same-day plunge and rally of about 30% Wednesday. The sector was more stable Thursday. Tencent is trading up 0.41% in HK and is set to post results after their close. The JSE Top 40 futures are indicating a positive start, up 500 points or 0.83%, with the Rand steady around the 14.07 level vs the USD.
Here are some key events this week:

  • IMF Managing Director Kristalina Georgieva and ECB President Christine Lagarde speak at the Vienna Economic Dialogue Thursday
  • Euro-area finance ministers and central bank chiefs hold an informal meeting. A larger group of EU finance ministers and central bank chiefs will meet May 22
    The FTSE/JSE Africa All-Share Index closed down 2.1% to 65,855, with the resource index weighing the most, down 4.4% on the back of lower commodity prices, with financials also down 0.6%. Gold counters closed in the green as the safe haven status benefitted from worries of higher inflation around the globe. Retailers and property counters were also positive with the sectors ending up the session 0.63% and 0.27% respectively. The Rand was down 0.2% to 14.03 per US$, with the Yield on 10-year govt rand bonds that rose 1.70 bps to 9.51%.
    The South African Reserve Bank announces its latest monetary policy stance around 3pm. All 19 economists in a Bloomberg survey expect the monetary policy committee will leave the benchmark rate unchanged at 3.5%.

NEWS:

  • Merkel Discusses Vaccine Production With South African President
  • Gold Climbs to Four-Month High as Markets Tumble, Yields Ease
  • South Africa Data Suggest Marginal First-Quarter GDP Growth
  • Ninety One Pledges to Cut Carbon Emissions Across Investments
  • South Africa Rate Bets Rise as Inflation Jumps to 14-Month High
    EQUITY PREVIEW:
  • Vodacom Rises Most Since March as Barclays Sees Upside Potential
  • UBS Initiates Coverage of S. Africa PGM Miners, Prefers Northam
  • Northam Platinum Rated New Buy at UBS
  • Impala Rated New Neutral at UBS
  • Amplats Rated New Sell at UBS
    MEDIA SUMMARIES:
  • Fin24: IEC could consult public about postponing October’s elections
  • ENCA: Gauteng Health MEC tests positive for COVID-19
  • Cyril Ramaphosa 🇿🇦 #StaySafe: We have been seeing emergence of what we think could be a third wave and we are monitoring

EARNINGS:

  • DataTec Ltd. (DTC SJ)
  • Tiger Brands Ltd. (TBS SJ)

ECONOMIC DATA:

  • SARB announces interest rate; est. 3.50%, prior 3.50%

GOVERNMENT:

  • Finance Minister Tito Mboweni and Deputy Finance Minister David Masondo will table the Treasury’s budget vote at 4:15pm
  • South Africa’s electoral commission will hold a media briefing about a process to review whether conditions are conducive for free and fair municipal elections later this year
  • South Africa’s biggest labor-union federation holds a media briefing after a three-day executive committee meeting

CORPORATE EVENTS:

  • Sales Results: NRP SJ

EU/UK
European stocks closed lower on Wednesday, following a global dip in markets as fears about rising inflation continue to weigh on sentiment. The pan-European Stoxx 600 ended the session down by 1.5%, with basic resources dropping 4.1% to lead losses as all sectors and major bourses traded firmly in negative territory. U.K. inflation more than doubled in April, the Office for National Statistics said Wednesday. Consumer prices rose by 1.5% after a 0.7% climb in March. European earnings came from E.On, which also holds an annual general meeting. Deutsche Boerse, Uniper, Experian and Premier Foods will also publish their latest results. Shares of British infrastructure investment group John Laing jumped more than 11% to a 52-week high after private equity firm KKR announced that it had agreed to buy the company for £2 billion ($2.84 billion). On the Stoxx 600, Swedish engineering company Sandvik fell 5.9%, while Swiss hearing aid manufacturer Sonova gained 1.8% after JPMorgan and Goldman Sachs upgraded the stock.
US
U.S. stocks cut sharp losses and ended the wild session far off their lows on Wednesday as cryptocurrency prices largely recovered, but the weakness in speculative pockets of the market still weighed on sentiment. The Dow Jones Industrial Average closed 164.62 points lower, or 0.5% to 33,896.04 after dropping 586 points at its low of the day. The S&P 500 fell 0.3% to 4,115.68 as nine out of 11 sectors registered losses. The tech-heavy Nasdaq Composite rebounded from a 1.7% loss earlier and closed flat at 13,299.74 as some of the major tech stocks reversed higher including Facebook, Netflix, Microsoft and Alphabet. The major averages briefly added to their losses in afternoon trading after the Federal Reserve’s minutes from its April meeting hinted at reconsidering its asset purchase programs in upcoming meetings.
COMMODITIES
Gold steadied near the highest level in more than four months as investors assessed the minutes from the Federal Reserve’s meeting in April that flagged the possibility of a debate on scaling back asset purchases. Spot gold rose 0.3% to $1,875.77 an ounce by 12:26 p.m. in Singapore. Prices climbed to $1,890.13 on Wednesday, the highest since Jan. 8, but erased gains after the release of the Fed minutes. Silver was little changed, while palladium and platinum advanced.
Brent oil was steady near a three-week low after a broader market slump as investors weighed the prospect of a boost in Iranian supply just as OPEC+ returns more barrels to the market. Futures in London — which briefly rose above $70 a barrel earlier this week — were little changed after sliding 3% on Wednesday.
Copper rebounded from Wednesday’s slump, pulled up by expectations that demand would remain resilient in the face of possible tapering by the U.S. Federal Reserve and China’s stepped-up efforts to jawbone prices lower. Copper was 0.8% higher at $10,076.50 a ton on the London Metal Exchange as of 11:28 a.m. in Shanghai, following Wednesday’s 3.9% slump, the most since October. Most other metals were higher, with aluminum 0.5% higher, and zinc rising 0.4% to $2,951.