Asia Stocks Sapped by China; OPEC+ Spat Boosts Oil

02/07/2021 A slide in Chinese equities and the regional spread of the delta Covid-19 variant weighed on Asia’s stock market Friday, restraining sentiment despite positive vaccine developments and a record U.S. close. Oil climbed. China’s CSI 300 index tumbled following Thursday’s centennial celebrations for the Communist Party. Some investors viewed the event’s conclusion as increasing market risks. Shares rose in Japan and Australia. S&P 500 contracts were stable after the U.S. index posted its longest winning streak since February, helped by cyclical sectors like energy. Nasdaq 100 futures retreated. Crude traded above $75 a barrel, around the highest since 2018, after the OPEC+ alliance descended into infighting, casting doubt on an agreement that could ease a surge in prices. The dollar held a climb and Treasuries were little changed ahead of Friday’s monthly payrolls report, which will help guide views on when the Federal Reserve may start pulling back on stimulus.. Hong Kong reopened after a holiday yesterday, with Tencent trading 1.7% lower. The JSE Top 40 futures opened lower, down 390 points or 0.0.65%, with the Rand weaker, last at 14.48 vs the USD.
Here are key events today

  • ECB President Christine Lagarde speaks
  • The U.S. jobs report is due later today
    The FTSE/JSE Africa All-Share Index closed up 0.5% to 66,555, mainly supported by miners with the Resource index gaining 1.8% on the day. Platinum counters Northam, Impala and Sibanye gained 4%, 3.7% and 2.8% respectively. Sasol also added 3% to its share price on the back of higher oil prices. Naspers and Prosus weighed, closing down, 1.2% and 0.54% respectively, with banks and retailers that were negative and the property sector flat. The Rand was down 1.1% to 14.44 per US$, with the Yield on 10-year govt rand bonds that rose 6.10 bps to 9.32 %.
    Acting Minister of Health Mmamoloko Kubayi and a panel of experts will brief reporters on government efforts to contain Covid-19, including an update on the national vaccination program. The briefing is scheduled for 7:30am.
  • Gold Gains After Monthly Drop With Traders Eyeing U.S. Jobs Data
  • Eskom’s Debt Drops Below $28 Billion Amid Funding Talks
  • JPMorgan Sees South African Stocks Extending EM Outperformance
  • South Africa’s Top Court Clears Ramaphosa on Campaign Funding
  • S. African Zuma’s Foundation Denounces Court Sending Him to Jail
  • South Africa’s Rand Water Sells 1.7 Billion Rand of Bonds
  • Mozambique Suspends All Standard Bank Unit’s Forex Trading
  • BofA Remains Bullish on EEMEA Stocks, Favors Russia, S. Africa
  • Steinhoff Investment Says Dutch Court Rejects Hamilton’s Appeal
  • Richemont’s Delvaux Deal May Raise ‘Legitimate’ Questions: Citi
  • Sasol CFO Victor Steps Down; Royal Bafokeng’s Rossouw Appointed

GOVERNMENT:

  • 9am: Social Development Minister Lindiwe Zulu briefs journalists on the department’s response to Covid-19 and on level 4 restrictions
  • 10am: Judicial inquiry into state corruption resumes in Johannesburg

BOND SALES/PURCHASES:

  • 11am: South Africa to Sell 1.875% 2033 Linkers
  • 11am: South Africa to Sell 2.25% 2038 Linkers
  • 11am: South Africa to Sell 2.5% 2050 Linkers
  • 12pm: South Africa to Sell 4.2 Billion Rand of 364-day Bills
  • 12pm: South Africa to Sell 3.8 Billion Rand of 273-day Bills
  • 12pm: South Africa to Sell 1 Billion Rand of 91-day Bills
    EU/UK
    European stock markets climbed on Thursday, beginning the second half of 2021 on a positive note as investors anticipated the continent’s economic recovery. The pan-European Stoxx 600 ended the session up by 0.6%, with oil and gas shares adding 2.1% while travel and leisure stocks rose 1.9% to lead the gains. Most major bourses finished in positive territory. Euro zone manufacturing activity grew at its fastest pace on record in June, according to IHS Markit’s final manufacturing PMI (purchasing managers’ index) on Thursday. The reading of 63.4 was up from an initial 63.1 “flash” estimate, and the sharpest incline since the survey began in 1997. U.K. factories also rode the recovery, though the PMI reading dipped to 63.9 from a record high 65.6 in May. Inflation pressures were also palpable as supply chain challenges cause by the pandemic sent input costs soaring. In corporate news, Reuters reported, citing three sources, that Credit Suisse is considering a reversal of the regional distribution of its private banking division, in favor of a centralized management structure that will enable the scandal-ridden lender to maintain tighter controls on its operations. In terms of individual share price action, Associated British Foods climbed 4.8% after raising its flagship retail chain Primark’s full-year outlook. Toward the bottom of the European blue chip index, Luxembourgish real estate company Grand City Properties fell 2.5% after a dividend announcement.
    US
    S&P 500 hits sixth-straight record, Dow adds 100 points as Wall Street kicks off the second half. The S&P 500 rose on Thursday and hit another record high as Wall Street kicked off the second half of 2021 on a positive note. The benchmark index rose 0.5% and notched its sixth-straight record close, settling above 4,300 for the first time at 4,319.94. The Dow Jones Industrial Average was higher by 131 points to close at 34,633.53, while the tech-heavy Nasdaq Composite ticked up about 0.1% to 14,522.38. The rise for stocks was widespread, with energy stocks leading the way as West Texas Intermediate crude rose above $75 per barrel. Shares of Chevron rose 1.4%, making the stock one of the best performers in the Dow. Apparel company Nike was another winner, rising more than 2%. However, shares of Walgreen Boots Alliance fell more than 7% despite releasing a better-than-expected earnings report, weighing on the 30-stock average. A stretch of strong economic news continued on Thursday as weekly initial jobless claims came in at 364,000, setting a pandemic-era low. Additionally, the Institute for Supply Management’s June manufacturing index showed an expansion that was roughly in line with expectations, and the Congressional Budget Office hiked its estimates for economic growth.
    ASIA
    Asia-Pacific stocks were mixed in Friday trade as investors look ahead to a closely-watched U.S. jobs report set to be released later. Mainland Chinese stocks were among the biggest losers regionally as the Shanghai composite fell around 1.6% while the Shenzhen component dropped 1.856%. Hong Kong’s Hang Seng index declined 1.6%. Elsewhere, the Nikkei 225 in Japan nudged 0.23% higher while the Topix index gained 0.7%. South Korea’s Kospi climbed about 0.1%. Shares in Australia rose as the S&P/ASX 200 advanced 0.44%. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.82%. The Japanese yen traded at 111.56 per dollar, still weaker than levels below 110.8 seen against the greenback earlier in the week. The Australian dollar changed hands at $0.7464 following its slip from above $0.755 earlier in the trading week.
    COMMODITIES
    Gold steadied as investors weighed the outlook for the Federal Reserve’s monetary policy path while awaiting a key U.S. jobs report. Spot gold added 0.1% to $1,778.24 an ounce at 12:50 p.m. in Singapore, and is down 0.2% this week. Prices tumbled 7.2% in June, the most since November 2016. Silver and palladium steadied, while platinum rose.
    Oil held overnight gains after infighting within OPEC+ delayed a much-anticipated decision on raising output levels, risking an inflationary spike in prices if the group can’t come to an agreement. Futures in New York traded above $75 after jumping 2.4% Thursday. The alliance was forced to postpone a decision on output after the United Arab Emirates blocked a deal. The standoff could ultimately lead to OPEC+ not increasing supply, according to a delegate, which would mean the cartel would fall back on terms that call for production to remain steady until April 2022.
    Copper prices are tracking for a weekly loss as China prepares its first release of state metals stockpiles in over a decade. China’s auction of base metals on Monday and Tuesday is its latest bid to keep a lid on prices, reduce manufacturing costs, and prevent inflationary pressures from derailing the economy. Copper -0.7% in Shanghai.
    On the ferrous front, iron ore investors are closely watching China’s next steps to roll back production in the steel industry, which is well on course to top last year’s record of more than 1 billion tons. The world’s biggest steel producer will need to cut output by more than 50 million tons in the second half, according to Mysteel. Futures in Singapore slid 1% to $202.75 a ton by 11:09 a.m. local time, on track for a weekly drop. Prices in Dalian fell 1%. In Shanghai, rebar and hot-rolled coil futures also eased lower.
    Base metals on the London Metal Exchange were mixed, with zinc down 0.3%, while aluminum steadied after rallying to the highest close in almost 10 years.