Asian stock markets dive as Delta variant spread spooks investors

03/08/2021 Trade in Asia-pacific faced a weaker lead from Wall Street after investors considered the impact of the increasing number global cases of corona virus Delta-strain and concerns that the global economic recovery, from the pandemic, is losing momentum. Markets slipped in Japan, Hong Kong and China, where stocks remain under a cloud due to Beijing’s clampdown on a range of private industries. Tencent Holdings Ltd. slumped as much as 10% after Chinese media brand online games “spiritual opium”. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.40% in early trading. Wall Street futures fluctuated. Treasury yield remained below 1.20% after falling as low as 1.15%. The real yield on 10-year Treasuries ,was close to a record low.

Crude oil prices reversed course on Tuesday, sentiment weighed down by concerns over coronavirus curbs combined with slowing factory activity in key markets. Brent crude oil futures 0.09%,to $72.93 a barrel, while U.S. WTI crude was down 0.1%, at $71.18 a barrel. Both markets dropped more than 3% on Monday.

Gold steadied as traders awaited a key U.S. jobs report this week which may offer clues on the Federal Reserve’s monetary policy path. The yellow metal is been hovering around $1,800 an ounce for the last few weeks. However, five- and two-year real yields are also poised to take out all-time lows, which could be the trigger to push gold to $1,900 in the next coming few months.

The JSE was firm for most part of the day on Monday along with its global peers as China’s regulatory crackdown seemed to have eased, while investors also welcomed progress in the US infrastructure bill. The rand reached an intraday best of R14.37, having gained 4.53% YTD against the US dollar. Miners pulled the JSE lower as concerns remained over the Delta variant of Covid-19; the pandemic remains a massive downside risk for many countries, especially those with very low vaccine rate. At the close, the JSE dipped 0.21% to 68,822 points and the Top 40 0.24%. Precious metals relinquished 1.16% and the oil, gas and coal index 1.02%. MTN bounced to close up almost 6% on Monday after trading update and the magistrate judge on the anti-terror case recommending to the district judge presiding over the case to grant the motion to dismiss for all defendants in the case, including as submitted by MTN. Top-40 futures own 700 points this morning as we take cue from Asian counterparts.

EQUITY PREVIEW:
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• S. Africa Stocks Are Near Record as Rand Boosts Banks, MTN Gains
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MEDIA SUMMARIES:
• Daily Maverick: Platinum class: Why Amplats is being so generous to its shareholders
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EARNINGS:
• Royal Bafokeng Platinum Ltd. (RBP SJ)
GOVERNMENT:
• 10am: Police Minister Bheki Cele gives an update on law enforcement and social cohesion interventions in KwaZulu-Natal province after riots in July resulted in the loss of life and damage to property in Gauteng and KZN

EU/UK/US
European stock markets continued advancing following a rebound in Asian shares overnight and after UK engineer Meggitt shares soared on a £6.3bn US buyout. Meggitt shareholders will receive 800p per share, which is a premium of around 70.5% to the closing share price on Friday. The pan-European Stoxx 600 index was up 0.59%, alongside a 0.16% gain for the German Dax while the Cac-40 jumped 0.95%. London’s FTSE100 closed firm 0.70%. The UK has opened its borders to vaccinated visitors from the EU and US, with the removal of quarantine rules raising the hopes that travel will receive a big boost in the months ahead. HSBC reversed earlier gains to close down 0.33%, after the bank said it would reinstate dividends as first-half profits more than doubled as an ongoing restructuring and pivot to Asia continues to pay off. European futures below the waterline this morning, with the FTSE100’s down 20 points.

The Dow opened 144 points higher on Monday, reversing losses recorded on Friday. Concerns regarding the delta variant of Covid-19 were seemingly in the rear-view on the first trading day of August, with investors betting on reopening plays like Carnival and US airlines. However, the S&P 500 pared its earlier gains as Treasury yields tanked, crude oil and cooper fell, and volatility jumped as risk-off sentiment rippled through markets. At the close: the Dow had given up 97 points, or 0.28%, the S&P500 retreated 0.18%, while the Nasdaq closed flat 0.06%.

Here are some key events to watch this week:
• Earnings are due this week from Alibaba, BP, Toyota, Uber, Roku, Moderna, KKR
• Reserve Bank of Australia policy decision Tuesday
• Bank of England is expected to keep its benchmark interest rate and its bond-buying target unchanged Thursday
• The U.S. jobs report is expected to show another robust month of hiring Friday

ASIA
Tencent Holdings Ltd. shares were on track to fall by their most in a decade on Tuesday after a Chinese state media branded online video games “spiritual opium”, stoking concern that the sector may be next in regulators’ crosshairs. China’s biggest social media and video game firm saw its stock tumble more than 10% in morning trade, wiping almost $60 billion from its market capitalisation. “No industry, no sport, can be allowed to develop in a way that will destroy a generation,” the newspaper said, likening online video games to “electronic drugs”.

Japan’s Nikkei225 slid 0.84%, dragged by a 8.71% plunge in online game producer Nexon. Hang Seng diving 0.95%, while Australia’s S&P/ASX200 on the backfoot 0.33% with weak commodity prices expected to weigh on local resource stocks, while investors await the central bank’s policy meeting later in the day.