Asia Stocks Drift as Yields Trim Gain; Dow and S&P 500 slip from records to start the week; Oil Rises after sliding almost 4% over the past two sessions

10/08/2021 Asian stocks drifted Tuesday and commodity markets steadied after Monday’s selloff as investors weighed talk of stimulus withdrawal and a resurgence in the delta variant. The dollar held overnight gains, while 10-year Treasury yields dipped. Equities rose modestly in Japan, which reopened after a holiday. Stocks fluctuated in Hong Kong and China, and dipped in South Korea. U.S. futures edged lower. Earlier, the Dow fell 106 points, the S&P 500 closed little changed, while the Nasdaq 100 ticked up, after the Dow and S&P 500 closed at record highs on Friday following a strong jobs report. Crude oil pared a decline after it touched the lowest in three weeks on concern the delta strain will hamper demand growth. Gold was steady after Monday’s volatility and Bitcoin traded back around $46,000. Tencent trades 5.4% higher in HK. The Rand remains weak at 14.75 vs the USD, with the FTSE JSE Top 40 futures indicating a positive start up 700 points or 1.14%.
Investors mulled comments from Federal Reserve Bank of Atlanta President Raphael Bostic that the central bank should move to taper its asset purchases with another strong month or two of employment gains, and proceed faster than in past episodes. U.S. inflation data this week will be closely watched after Friday’s jobs report fanned expectations that unwinding will start soon. At the same time, the spread of the highly contagious delta in corners of the world has raised concern the recovery from the pandemic will be derailed. New coronavirus cases in the U.S. surged to the highest weekly level since early February, while deaths increased the most since December.
Here are some key events to watch out for this week:

  • Cleveland Fed President Loretta Mester; Kansas City Fed President Esther George among Fed speakers through the week
  • The U.S. consumer price index on Wednesday is forecast to show prices increased again in July
  • OPEC Monthly Oil Market Report due Thursday
    On Friday the FTSE/JSE Africa All-Share Index closed up 0.4% to 68,673. Mostly supported by the banking sector after positive trading statements from both Absa and Standard Bank, with miners that weighed on the market on lower commodity prices. The Rand was down 0.8% to 14.63 per US$, with the Yield on 10-year govt rand bonds that rose 9.00 bps to 9.33%.
    The graft case involving former President Jacob Zuma resumes in the Pietermaritzburg High Court at 10am. He faces criminal charges including corruption, money laundering and racketeering alongside co-accused arms manufacturer Thales SA.
  • Eskom Says Medupi Blast Caused Extensive Generator Damage
  • Fitch Sees S. Africa New Finance Head Forging Fiscal Policy Pact
  • CabinetReshuffle No ‘Nenegate’ as S. African Assets Steady
  • J&J Vaccine Effective Against Delta in South Africa Trial
  • Exxaro Projected to Increase Dividend Next Week
  • Standard Bank Sees 1H Headline EPS 45%-55% Higher Year-on- Year
  • Absa Sees 1H EPS Excl. One-Time Items Rising More Than 14- Fold
  • Sasol Sees FY Swing in Earnings per Share From Losses to Profit
  • AngloGold 1H Adjusted EPS Misses Estimates

ECONOMIC DATA:

  • 1pm: June Manufacturing Prod SA MoM, est. 0.5%, prior -2.6%
  • 1pm: June Manufacturing Prod NSA YoY, est. 14.7%, prior 35.3%

GOVERNMENT:

  • Mineral Resources & Energy Ministry briefs lawmakers on impact of looting and riots in KwaZulu-Natal and Gauteng provinces last month

BOND SALES/PURCHASES:

  • 11am: South Africa to Sell 1.3 Billion Rand of 8.25% 2032 Bonds
  • 11am: South Africa to Sell 1.3 Billion Rand of 7% 2031 Bonds
  • 11am: South Africa to Sell 1.3 Billion Rand of 8.5% 2037 Bonds
    EU/UK
    European stocks closed slightly higher on Monday, as investors kept an eye on the latest Covid-19 developments and falling commodity prices. The pan-European Stoxx 600 provisionally ended up 0.2%, with healthcare stocks adding 1% to lead gains while autos sank 0.6%. The muted start to the trading week in Europe echoed sentiment in Asia-Pacific, where markets were mixed on Monday. Data out of China Monday showed the country’s export growth unexpectedly slowed in July while imports also lost momentum. In terms of individual share price movement, Britain’s Deliveroo surged 4.5% on Monday after disclosing that German peer Delivery Hero had taken a 5.09% stake in the company. At the bottom of the Stoxx 600, British financial services company Hargreaves Lansdown plunged more than 11% after its earnings report.
    US
    The Dow Jones Industrial Average fell on Monday on concerns about global growth, after the 30-stock average notched a record close Friday. The Dow fell 106.66 points to 35,101.85, or 0.3%. The S&P 500 traded down 0.1% at 4,432.35. Meanwhile, the technology-heavy Nasdaq Composite rose 0.16% to 14,860.18. Stocks tied to the economic recovery, such as cruise lines and airlines, drifted lower on Monday. Norwegian Cruise Line dropped nearly 1% after a federal judge ruled that the cruise line can ask passengers for proof of COVID-19 vaccination. Carnival and Royal Caribbean also lost more than 1%. American Airline and United Airlines fell 2.2% and 2.5%, respectively. esla shares lead the Nasdaq higher on Monday. The electric carmaker gained 2.1% after Jefferies upgraded the stock and predicted a rally of more than 20% over the next 12 months. Berkshire Hathaway’s B shares climbed 0.6% on the back of a solid earnings report. The conglomerate’s operating income jumped 21% year over year to $6.69 billion in the second quarter as its myriad of businesses from energy to railroads benefited from the economic reopening.
    ASIA
    Shares in Asia-Pacific were mixed in Tuesday trade as South Korean game developer Krafton plunged in its debut, while Covid concerns weighed on investor sentiment regionally. South Korea’s broader Kospi slumped 0.62%. Shares of South Korean game developer Krafton slumped as much as 17% from its IPO price on its market debut, according to Refinitiv Eikon data. Krafton, the game maker behind the blockbuster game PUBG, later pared some of those losses but was still more than 12% lower in Tuesday afternoon trade. Shares of companies related to South Korean conglomerate Samsung declined in Tuesday afternoon trade. Shares of Samsung Electronics slipped 1.47% while Samsung C&T fell 1.75%. Samsung Life Insurance slipped 0.52% and Samsung SDS dropped 2.41%. South Korea’s justice ministry announced Monday that the firm’s heir Jay Y. Lee is set to be released on parole later this week, according to Reuters. Mainland Chinese stocks were subdued by Tuesday afternoon. The Shanghai composite fell 0.14% while the Shenzhen component declined 0.344%. Worries over a widening Covid resurgence in China continued to weigh on sentiment as China reported more infections this week, and cities embarked on mass testing. Hong Kong’s Hang Seng index edged 0.29% higher. Shares of Evergrande Property Services, an arm of indebted Chinese developer China Evergrande, soared around 11.87%. China Evergrande New Energy Vehicle Group jumped around 4%. Reuters had reported, citing sources, that Evergrande is in talks to sell stakes in its electric vehicle and property management businesses — China Evergrande New Energy Vehicle Group and Evergrande Property Services Group respectively. In other markets, the Nikkei 225 in Japan gained about 0.1% while the Topix index advanced 0.27%. Australia’s S&P/ASX 200 climbed 0.07%. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.04%.
    COMMODITIES
    Gold steadied near a four-month low after a volatile start to the week fueled by growing expectations for the Federal Reserve to start reining in massive stimulus. Better-than-expected U.S. jobs data last week triggered a slump that initially deepened Monday, before the metal pared losses. Gold rose 0.2% to $1,733.79 an ounce by 10:46 a.m. Shanghai time. Prices closed down 1.9% on Monday after earlier plunging more than 4%, the most since January. Silver also advanced, while platinum and palladium were steady.
    Oil rose from a three-week low as investors assessed the demand outlook amid the rapid global spread of the delta virus variant. Futures in New York traded near $67 a barrel after sliding almost 4% over the past two sessions. Delta has led to rising infections and renewed restrictions in some regions, including in China where air travel has slumped and oil refining is set to be scaled back. Despite the flare-up, expectations are that global demand will accelerate and tighten the market through year-end. Delta has raised concerns about the short-term demand outlook and interrupted a rally in oil that saw prices advance more than 50% over the first half of the year. The resurgence is crimping fuel consumption just as the OPEC+ alliance returns more supply to the market that it halted during the pandemic.
    Copper fell to the lowest in more than two weeks amid concerns that a resurgence in the fast-spreading delta virus variant may derail demand in top consumer China. Data showed China’s appetite for a range of commodities softened in July even before a surge of the delta variant, with copper and iron ore imports declining for a fourth straight month. Copper fell 1% to settle at $9,369 a ton, after declining 2.7% last week. Nickel also reached the lowest in more than two weeks, and other base metals retreated.