Asia Stocks Dip on Wider China Curbs and Virus Spread / Dow hits another record / Inflation better than feared

12/08/2021 Most Asian stocks dipped Thursday as China’s regulatory push sapped sentiment, overshadowing a record Wall Street close on easing inflation and reduced concern about an imminent pull back in Federal Reserve stimulus. MSCI Inc.’s gauge of Asia-Pacific equities was set for its first retreat this week, with Japan steady but Hong Kong declining. U.S. and European contracts were little changed after the S&P 500 hit an all-time high and the tech-heavy Nasdaq 100 fell amid a rotation to cyclical shares. Ten-year Treasuries pared gains spurred by a strong auction and a U.S. inflation report that lent some support to the view that price pressures are transitory. The dollar held a drop. China released a five-year plan calling for greater business regulation as Beijing pursues a crackdown that has shaken investors. One of the latest steps is stepped up scrutiny of insurance technology platforms. The central bank also faces calls to cut interest rates as virus outbreaks hamper the economy. Credit in China expanded last month at the slowest pace since February 2020. Elsewhere, oil held a climb as a weaker dollar offset a smaller-than-expected decline in crude stockpiles. Tencent trades 0.62% lower in HK. The Rand has steadied to around 14.67 vs the USD, with the FTSE JSE Top 40 futures indicating a lower start down 271 points or 0.43%.
Here are some key events to watch out for this week:

  • OPEC Monthly Oil Market Report due Thursday
    Yesterday the FTSE/JSE Africa All-Share Index closed little changed at 69,617, with gold and platinum that shined after more moderate US inflation eases taper fears supporting gold and other commodities as the dollar weakened. Goldfields and Anglogold gained 6.1% and 5.4% respectively, with Naspers and Prosus that weighed on the index closing down 3.8% and 1.01% after gaining over 10% the previous session. The Rand was up 1% to 14.66 per US$, with the Yield on 10-year govt rand bonds that fell 0.30 bps to 9.33 %.
    South African President Cyril Ramaphosa resumes testimony at inquiry into government corruption during his predecessor’s rule
  • Gold Gains as More Moderate U.S. Inflation Eases Taper Fears
  • A Credit Upgrade Spurs RMB to Pick Ivory Coast Over South Africa
  • South African Court Postpones Case Against ANC’s Magashule
  • South African Business Mood Drops to Nine-Month Low After Riots
  • S. Africa’s Denel Cutting Units to Two From Six, Selling Assets
  • Nedbank Holder Offers 21m Shares via Goldman Sachs: Terms
  • Woodside’s Scarborough Nearshore Granted Environmental Approval
  • Steinhoff Proposes Holdings Unit Makes Extra ZAR3.2b Settlement
  • Quilter 1H Adj Pretax GBP85m, +20% Y/Y
  • Riots Prove a Reality Check as Nedbank Warns of Challenges

EARNINGS:

  • Exxaro Resources Ltd. (EXX SJ)
  • MTN Group Ltd. (MTN SJ)

GOVERNMENT:

  • Parliament holds hearings on Copyright Amendment Bill

CORPORATE EVENTS:

  • Earnings Calls: MTN SJ
    EU/UK
    European stocks closed higher on Wednesday as data out of the U.S. offered a tentative sign that inflation may have peaked. The pan-European Stoxx 600 provisionally closed up by 0.4%, with construction and materials adding 1.1% to lead gains with most sectors and major bourses in positive territory. German non-harmonized CPI inflation came in at 3.8% year on year and 0.9% month on month in July, the Federal Statistics Office confirmed Wednesday. Harmonized inflation was 3.1% and 0.5%, respectively. Earnings releases in Europe came from E.On, Thyssenkrupp, Uniper, ABN AMRO, Prudential, Deliveroo and Admiral Group. ABN AMRO shares climbed 8.6% after swinging back to a second-quarter profit of 393 million euros ($460.32 million), beating analyst expectations. The Dutch bank also announced plans to resume dividend payments. At the top of the Stoxx 600, British aerospace and defense company Meggitt surged 16.1% after announcing that it had received an unsolicited takeover offer from U.S. rival TransDigm. The proposal valued Meggitt at 900 pence per share ($12.47 per share), exceeding the 800 pence-per-share agreement currently in place with Parker-Hannifin. At the bottom of the European blue chip index, British wealth manager Quilter fell 7.2% after a adopting cautious tone regarding market volatility in its half-year earnings report. Meanwhile, U.K. food delivery firm Deliveroo sank 6.1% after reporting results for the first time since its disastrous IPO. The company doubled orders in the six months to June 30, while losses narrowed slightly to £104.8 million.
    US
    The Dow Jones Industrial Average and the S&P 500 rose on Wednesday after inflation jumped, but not by quite as much as investors feared when stripping out volatile food and energy prices. The 30-stock Dow gained 220.30 points, or 0.6%, to 35,484.97 to close at a new record. The index was lifted by names like Caterpillar and Home Depot. The S&P 500 traded up 0.2% to 4,447.70, also notching an all-time high. The technology-heavy Nasdaq Composite traded over 0.1% lower to 14,765.14. July’s Consumer Price Index released Wednesday showed prices jumped 5.4% since last year, compared to expectations of 5.3%, according to economists surveyed by Dow Jones. The government said CPI increased 0.5% in July on month-to-month basis. But investors were concentrating on the core rate of inflation, which could signal inflation will remain tempered and the economy will remain strong. CPI, excluding energy and food prices, rose by 0.3% last month, below the 0.4% increase expected. Core prices still jumped 4.3% on a year-over-year basis. The inflation reading supported the Federal Reserve’s belief that high price pressures are “transitory” as the economic recovers from the pandemic-triggered recession.
    ASIA
    Asia-Pacific stocks mostly declined on Thursday, as U.S. markets again notched highs after data showed inflation was not as bad as feared. The dollar weakened while Asian currencies rose. Chinese stocks were subdued. The Shanghai composite edged down 0.12%, while the Shenzhen component was down 0.57%. Hong Kong’s Hang Seng index edged lower. In its Hong Kong debut, Chinese electric vehicle maker Li Auto’s shares dipped as much as 1.8% below their offer price, according to Refinitiv Eikon data. It later pared some of those losses to edge down marginally. The Nikkei 225 in Japan was just below the flatline, while the Topix was up 0.12%. In South Korea, the Kospi fell 0.32%. Australia’s S&P/ASX 200 was just below the flatline. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.35%. In earnings, Taiwan’s Hon Hai Precision Industry, better known as Foxconn, is due to report its second-quarter financial results Thursday. Markets will continue to monitor the Covid situation in the region after the World Health Organization warned global cases could pass 300 million by early next year if the pandemic continues in its current direction. The projection came just a week after the WHO reported 200 million Covid cases worldwide and six months after the globe topped 100 million cases. Meanwhile, South Korea reported a new daily record of more than 2,200 cases, its health minister said Wednesday, according to Reuters. In Australia, Melbourne extended its lockdown by another week as it struggles to contain the highly infectious delta variant.
    COMMODITIES
    Gold wavered after its biggest gain in three months as moderating U.S. inflation clouded the outlook for when the Federal Reserve may start easing stimulus. Consumer prices in the U.S. climbed at a slower pace last month than in June, according to data released on Wednesday. That triggered a move higher for gold as concerns about the Fed’s urgency to pull back on monetary stimulus softened, though prices are still lower this week after a flash crash on Monday. Spot gold was down 0.1% at $1,749 an ounce, after rising 1.3% on Wednesday. Silver, platinum and palladium all fell.
    Oil prices were steady on Thursday following two days of gains after a call from the United States, the world’s top oil consumer, for major producers to boost output reinforced supply concerns as economies ease their coronavirus restrictions. They were also boosted by a pullback in U.S. dollar, which can send speculative investors into greenback-denominated assets like commodities. Brent crude futures edged higher by 8 cents, or 0.1%, to $71.52 a barrel by while U.S. West Texas Intermediate (WTI) crude futures gained by 5 cents to $69.30.
    Iron ore futures fell toward a four-month low on signs that rising global supply will coincide with China’s intensifying steel output curbs. The steel-making material has lost around a quarter of its value since mid-July amid a push by Beijing to curb steel production to cut pollution. Now, it also seems to be facing supply headwinds. Guidance from Rio Tinto Group and Vale SA implies they will lift output in the second half, UBS Group AG said in a note. Iron ore futures in Singapore fell 2.2% to $160.10 a ton. They finished at $159.91 on Tuesday, the lowest close since April 2. Prices are down around 5% since Friday, heading for a fourth weekly decline. The most active Chinese contract dropped 3.4%, while steel rebar and hot-rolled coil also declined in Shanghai.
    Copper; Workers at the Andina mine in Chile will begin a strike Thursday after rejecting owner Codelco’s final wage offer, in a stoppage that may further tighten global copper supplies. About 82% of members of the two main unions at Andina voted to walk off the job, snubbing a proposal delivered by the state- owned company during mediated talks. A stoppage at Andina, a mid-sized mine that produced 184,500 metric tons last year, adds to labor tensions in the biggest copper-producing nation, where workers at a mine owned by JX Nippon Mining & Metals started a strike this week and union members at the giant Escondida mine are voting on a final wage offer from owner BHP Group.