Stocks Mixed, Futures Edge Up; Yields Hold Decline

11/06/2021 Asian stocks were mixed Friday after a rally in U.S. shares and Treasuries on bets that a jump in inflation is likely to be transitory, leaving scope for ongoing central- bank support. Equities edged up in Hong Kong and dipped in Japan and China. U.S. contracts crept higher following a climb in the S&P 500 to a record overnight and a technology rally that boosted the Nasdaq 100. Meme-stocks favored by day traders, such as GameStop Corp., plunged. The 10-year U.S. Treasury yield held a drop to 1.43%, its lowest point since March. The yield had briefly jumped in U.S. hours on above-forecast gains in consumer prices. The dollar retreated. The U.S. CPI increase in May was driven largely by categories associated with a broader reopening of the economy, as vaccinations bring the pandemic under control. Despite some signs of wider price pressures, concerns about a spike in longer term borrowing costs that could destabilize global markets have eased. Crude oil pared a rally while staying around $70 a barrel. A decision by international banking regulators to classify Bitcoin as the riskiest of assets buffeted the virtual currency, but it remains steady for the week at about $36,700. Tencent trades 0.25% lower in HK. The JSE Top 40 futures are indicating a better start up 240 points or 0.39%, with the Rand steady at 13.56 vs the USD.
Here are key events
Later Today, investors will be keeping an eye on the opening of the Group of Seven leaders’ summit in the U.K.
The FTSE/JSE Africa All-Share Index closed down 0.2% to 67,542, weighed down mostly by the banking sector that shed 0.79%. Platinum counters were also lower with heavyweights Naspers and Prosus also closing in the red. MTN & Vodacom both had good gains closing up 2.3% and 1.1% respectively, with the retail sector closing 1.3% in the green. The Rand was up 1% to 13.60 per US$, with the Yield on 10-year govt rand bonds that fell 2.00 bps to 9.00 %
Minister of Public Enterprises, Pravin Gordhan will brief reporters on matters related to South African Airways. South Africa’s government is set to announce that it has found a strategic equity partner for state-owned carrier, reported on Thursday.

NEWS

  • Gold Erases Losses After U.S. Inflation Data, ECB Decision
  • TFG Expands Jet Stores in South African Discount Clothing Drive
  • Ramaphosa Cuts Red Tape to Ease Blackouts Hobbling South Africa
  • Anglo Platinum Gets Approaches From Northam, Arm for Mine
  • Sky-High Coal Prices Won’t Spur New Mines in a Greener World
  • South Africa’s Virus Cases Surge the Most Since January
  • S. Africa Current-Account Surplus Beats Estimate on Exports Jump
  • Stor-Age Property Extends Rally to 3-Week High After FY Results
  • TFG Raised to Buy at Investec; PT 200 rand
  • MultiChoice Group FY Net Income 2.16b Rand Vs. 507m Rand y/y
  • TFG FY Gross Margin 45.5% Vs. 52.7% Y/y

EARNINGS:

  • Stenprop Ltd. (STP SJ)

GOVERNMENT:

  • 7am: Justice and Correctional Services Minister Ronald Lamola briefs reporters on the ratification of an extradition treaty with the UAE
  • 9:15am: Minister of Public Enterprises Pravin Gordhan will brief media on matters related to South African Airways

BOND SALES/PURCHASES:

  • 9am: South Africa to Sell 2.7 Billion Rand of 181-day Bills
  • 9am: South Africa to Sell 1 Billion Rand of 90-day Bills
  • 9am: South Africa to Sell 4.2 Billion Rand of 363-day Bills
  • 11am: South Africa to Sell 2.5% 2046 Linkers
  • 11am: South Africa to Sell 1.875% 2029 Linkers
  • 11am: South Africa to Sell 1.875% 2033 Linkers
  • 11am: South Africa to Sell 3.8 Billion Rand of 272-day Bills

CORPORATE EVENTS:

  • Earnings Calls: MCG SJ, STP SJ
    EU/UK
    European stocks closed mixed Thursday as traders digested new U.S. inflation data and monetary policy decision from the European Central Bank. The pan-European Stoxx 600 closed marginally higher, with the major bourses struggling for direction. In terms of sectors, telecoms stocks rose 1.2% while travel shares slipped 1.2%. Global markets were predominantly focused on the U.S. inflation data on Thursday, with May’s consumer price index coming in 5% higher year-over-year, vs expectations of a 4.7% increase. The European Central Bank opted to keep interest rates and asset purchases unchanged on Thursday, despite the recent overshoot of its inflation target. U.K. Prime Minister Boris Johnson met with U.S. counterpart Joe Biden on Thursday ahead of the start of the Group of Seven summit in Cornwall that begins on Friday. In terms of individual share price movement, BT rose to the top of the Stoxx 600, climbing 6.6% after French telco Altice said it was taking a 12% stake in the company. British car trading service Auto Trader, meanwhile, climbed 6.5% after a strong earnings report.
    US
    The S&P 500 rose to an all-time high on Thursday as investors shrugged off a key inflation report that showed a bigger-than-expected increase in price pressures. The broad equity benchmark climbed nearly 0.5% to a record closing high of 4,239. The S&P 500 also hit an intraday record of 4,249, overtaking its May 7 high after the market traded sideways for a month. The Dow Jones Industrial Average advanced 19 points, or less than 0.1%, to 34,466, while the Nasdaq Composite gained about 0.8% to 14,020. Consumer prices for May accelerated at their fastest pace since the summer of 2008 amid the economic recovery from the pandemic-triggered recession, the Labor Department reported Thursday. The consumer price index, which represents a basket including food, energy, groceries and prices across a spectrum of goods, rose 5% from a year ago. Economists surveyed by Dow Jones had been expecting a gain of 4.7%. A separate report released Thursday showed that jobless claims for the week ended June 5 came in at 376,000, versus a Dow Jones estimate of 370,000. The total still marked the lowest of the pandemic era. UPS shares rose about 1% after an upgrade from JPMorgan. Shares of Boeing were higher, but Delta Air Lines slipped. Video-game retailer and meme stock GameStop fell 27% even after the company tapped former Amazon executive Matt Furlong to be its next CEO and said that sales rose 25% last quarter. The company also said it may sell up to 5 million additional shares.
    ASIA
    Shares in Asia-Pacific were mixed in Friday afternoon trade, following gains overnight on Wall Street that saw the S&P 500 sailing to a record closing high. Stocks in Japan were little changed as the Nikkei 225 hovered above the flatline while the Topix sat about 0.1% lower. Over in South Korea, the Kospi edged 0.6% higher. Mainland Chinese stocks declined as the Shanghai composite fell 0.25% while the Shenzhen component slipped 0.51%. Hong Kong’s Hang Seng index advanced 0.39%. Shares in Australia were higher as the S&P/ASX 200 climbed 0.31%. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.35%.
    COMMODITIES
    Gold held an advance as some investors deemed that the slightly faster-than-expected rise in U.S. inflation is likely to be transitory, keeping ongoing central- bank support intact. Spot gold was little changed at $1,898.70 an ounce at 12:00 p.m. in Singapore, after climbing 0.5% on Thursday, and is heading for a small weekly gain. Prices advanced to $1,916.64 last week, the highest intraday level since Jan. 8. Silver rose, while platinum steadied and palladium dropped.
    Oil dipped despite bullish signs on the demand outlook, with prices struggling to maintain upward momentum above $70 a barrel. Futures in New York have bounced around that mark since topping the level for the first time since October 2018 earlier this week. While prices fell 0.4% on Friday, the demand picture remains positive. Road traffic in the U.S. and most of Europe is pretty much back to pre-virus levels, and OPEC is predicting that the global recovery will gather strength in the second half of the year.
    Copper prices fell on Friday and were on track for a weekly decline as investors worried about possible measures by Chinese authorities to curb a rally in commodity prices. Three-month copper on the London Metal Exchange fell 0.2% to $9,871 a ton. The contract was down 0.8% on a weekly basis. LME aluminum rose 0.4% to $2,486.50 a ton and lead advanced 0.6% to $2,188 a ton.
    Iron ore climbed into a bull market – just two weeks after tumbling into a bear market — on expectations for robust Chinese steel output and as a warning about a Vale SA dam put the spotlight back on supply. Spot iron ore rose for a third day to $215.05 a ton on Thursday, rebounding more than 20% from last month’s low. Prices reached a record $233.70 a ton on May 12. Futures in Singapore traded 1.6% higher at $208, and were also on track for a bull market. Investors are also focused on ongoing supply issues in Brazil, with inspectors warning a Vale tailings dam near the site of a deadly disaster in 2015 runs the imminent risk of rupture. Authorities had restricted trains on a rail spur at the company’s Mariana Complex last Friday. Vale said there’s no imminent risk of a tailings dam rupture and is maintaining dialog with officials to resume activities. It had halted rail transportation to a nearby plant, affecting about 33,000 tons of daily output. Some points of access to the nearby Alegria mine were also closed, compromising 7,500 tons of daily output.