Stocks, Futures Fall as China Clampdown Hits Mood

26/07/2021 Asian stocks fell Monday as Beijing’s widening technology-sector crackdown hurt Hong Kong and Chinese equities, overshadowing a rally in U.S. shares to an all-time high last week on robust corporate earnings. A Hong Kong gauge of tech firms tumbled more than 6% and the city’s main market slid. Chinese equities are set for the worst retreat in a year. Beijing’s latest moves include reform of China’s $100 billion education tech industry and a vow to “improve order” in the property market, steps that roiled a slew of firms and stirred questions about what regulators may do next. Japanese shares bucked the sour mood, rising after a two- day holiday. U.S. equity contracts slipped following a record Wall Street close Friday, with the S&P 500 almost doubling from the depths of the pandemic. About 87% of the S&P 500 firms reporting results so far this season have beaten estimates. Treasuries pushed higher, and traders are braced for possible turbulence from a Fed meeting this week where officials are due to discuss when and how to taper stimulus. Crude oil declined below $72 a barrel. Tencent trades 7% lower in HK. The Rand is weaker at 14.90 vs the USD, with the FTSE JSE Top 40 futures indicating a lower start down 608 points or 0.99%.
The Hang Seng index in Hong Kong fell 3.24%, leading losses in the region. Hong Kong-listed shares of Chinese tech giant Tencent slipped 7.61% in Monday afternoon trade. Alibaba also dropped 5.17% while Meituan fell 9.15%. The Hang Seng Tech index plunged 6.58%. Those losses came after China’s antitrust regulator ordered Tencent to give up its exclusive music licensing rights and slapped a fine on it for anti-competitive behavior, marking yet another development in Beijing’s ongoing crackdown on its domestic internet titans.
Here are some key events to watch this week:

  • Tesla, Alphabet, Apple, Facebook, Amazon report earnings this week
  • Federal Reserve policy meeting concludes Wednesday
  • U.S. GDP data are due Thursday.
    On Friday the FTSE/JSE Africa All-Share Index closed up 1% to 68,063, mostly supported by resources with the index that closed up 1.47%. Banks and retailers also had a better day despite a weaker Rand closing the session up 1.1% and 0.52% respectively. The Rand was down 0.8% to 14.82 per US$, with the Yield on 10-year govt rand bonds that fell 2.90 bps to 9.35 %.
    South African President Cyril Ramaphosa on Sunday night announced relief measures to help businesses and individuals recover from a week of deadly riots earlier in the month and eased lockdown restrictions as coronavirus infections slowed.

NEWS:

  • South Africa Announces Post-Riot Relief, Eases Virus Lockdown
  • South Africa May Get as Much as $4.3 Billion in IMF SDRs
  • First Crude Loading From Saldanha Bay Storage Tanks Since April
  • South Africa Electoral Body to Ask Court to Delay Municipal Vote
  • Heineken Target Distell Gains as Sales Grow Outside South Africa
  • Platinum Giants Eye Solar Power as Green Answer to Blackouts
  • Famous Brands Says 90 Stores Damaged, Not Operating After Riots
  • Telkom Slumps by the Most This Year on News CEO to Step Down
  • Spar Re-Opens 38 Stores, 112 Remain Closed After Riots
  • Pepkor Rallies as Main Units Take South African Clothing Share
  • Clicks Says 47 Looted Stores and 15 Vaccination Sites Still Shut
  • S. African Banks at One-Week High as Risk-on Mood Sweeps Markets
  • Pepkor Group Revenue for 9 Months to June up 13.9% to 53.9b Rand

EARNINGS:

  • Anglo American Platinum Ltd. (AMS SJ)
  • Liberty Two Degrees Ltd. (L2D SJ)

CORPORATE EVENTS:

  • Earnings Calls: L2D SJ
    EU/UK
    European stocks closed higher on Friday, as investors digested economic data and corporate earnings from across the continent. The pan-European Stoxx 600 finished 1.1% higher, with autos jumping 2.6% to lead gains as almost all sectors and major bourses closed in positive territory. July’s flash PMI (purchasing managers’ index) readings on Friday showed euro zone business activity growing at its fastest pace in more than two decades, as an easing of social restrictions and expansion of vaccination programs unleashed pent-up demand. U.K. retail sales grew 0.5% in June after a surprise pullback in May, according to official figures published Friday. However, the country’s economic recovery ran into a wall in July as the number of people instructed to isolate by the government’s test-and-trace app soared due to rising infections. The IHS Markit/CIPS flash PMI dropped to 57.7 in July from 62.2 in June. Earnings season continued to gather steam in Europe, with Thales, Signify and Lonza among those reporting second-quarter results on Friday. In terms of individual share price movement, French car parts maker Valeo climbed 6% after beating second-quarter earnings expectations and confirming its outlook. Swedish builder Skanska also jumped 7.4% after beating profit expectations. British telecoms firm Vodafone rose 2.4% after reporting a better-than-expected rise in first-quarter service revenue. At the bottom of the European blue chip index, French cookware manufacturer Groupe SEB fell 7.6% after flagging cost headwinds. Dutch lighting company Signify dropped 5% despite reporting a 32% jump in second-quarter profit, as it continued to grapple with supply chain issues.
    US
    U.S. equities rose Friday with the the major averages hitting new records as they overcame concerns about economic growth from earlier in the week. The Dow closed above 35,000 for the first time ever, bringing its gain for 2021 to more than 14%.The blue chip average rose 238.20 points, or 0.68%, to 35,061.55, gaining for a fourth straight day. It made the 1,000-point trek rather quickly, having closed above 34,000 for the first time ever back in mid-April. The S&P 500 gained 1.01% to 4,411.79 and the Nasdaq Composite climbed 1.04% to 14,836.99, both new closing highs for the benchmarks. The 10-year Treasury yield bounced on Friday to 1.281%, easing concerns about the economy that the bond market triggered on Monday. The 10-year yield fell to a 5-month low of 1.13% earlier this week. Strong earnings from tech stocks made investors optimistic ahead of reports this week from the biggest names in the sector. Twitter and Snap each jumped Thursday following better-than-expected second-quarter earnings reports. Twitter traded 3% higher, while Snap shot up 24%. Facebook gained more than 5% on the results from its social media competitors. Alphabet added 3%. Both report next week along with Apple, Microsoft and Amazon. All three U.S. stock averages closed the week in the green, rebounding from last week’s losses and Monday’s sharp sell-off. The Dow dropped more than 700 points to start the week as yields fell, unnerving equity investors about the economy. The S&P 500 rose 2% for the week and the Nasdaq Composite added 2.8%. The Dow ended the week up 1%.
    ASIA
    Shares in Hong Kong dropped sharply in Monday afternoon trade, as Chinese tech and education stocks plunged on regulatory pressure and a summit between China and the United States got off to an acrimonious start. The broader Asia-Pacific markets were mixed, with mainland Chinese stocks also falling. The Hang Seng index in Hong Kong fell 3.24%, leading losses in the region. Hong Kong-listed shares of Chinese tech giant Tencent slipped 7.61% in Monday afternoon trade. Alibaba also dropped 5.17% while Meituan fell 9.15%. The Hang Seng Tech index plunged 6.58%. Those losses came after China’s antitrust regulator ordered Tencent to give up its exclusive music licensing rights and slapped a fine on it for anti-competitive behavior, marking yet another development in Beijing’s ongoing crackdown on its domestic internet titans. Shares of private education firms listed in Hong Kong also tumbled as Chinese authorities also stepped up restrictions on the sector. New Oriental Education & Technology Group, Koolearn Technology and China Beststudy Education Group all saw their shares plummeting more than 30% each. Mainland Chinese stocks declined, with the Shanghai composite down 2.42% while the Shenzhen component fell 2.963%. Geopolitical tensions between Washington and Beijing may have weighed on investor sentiment, as a high-level meeting between the two economic powerhouses got off to an acrimonious start. In other markets, South Korea’s Kospi edged 0.61% lower. In Australia, the S&P/ASX 200 was little changed. Returning to trade following holidays on Thursday and Friday, Japanese stocks bucked the overall trend regionally. The Nikkei 225 jumped 1.05% while the Topix index advanced 1.1%. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.75% lower. Singapore’s manufacturing output declined 3% in June on a seasonally adjusted, month-on-month basis, according to official data released Monday.
    COMMODITIES
    Gold steadied as investors awaited a Federal Reserve meeting this week for further guidance on the next steps monetary policy. Fed officials aren’t expected to signal a reduction in support for the U.S. economy when they meet July 27-28, but will debate how to scale back massive bond purchases when the time comes. Spot gold rose 0.3% to $1,806.80 an ounce at 10:03 a.m. in Singapore, after dropping 0.6% last week. Silver and platinum climbed while palladium fell.
    Oil headed for the first decline in five days as investors assessed the outlook for demand amid a resurgence in Covid-19. Futures in New York dropped below $72 a barrel after climbing 8.5% over the past four sessions. There are signs that demand for fuels such as gasoline has increased as vaccination programs are rolled out, although the fast-spreading delta variant has raised concerns about the short-term outlook.