Asian Shares Dip, China Retreats, South Korea Hikes Rates

26/08/2021 Asian stock markets pulled back after a sharp rebound this week, with Chinese stocks resuming a retreat amid Beijing’s crackdown on private industries. Wall Street performance overnight contained losses in the region as rising vaccinations offset worries over persistently high COVID-19 cases worldwide. MSCI’s broadest index ex. Japan dropped 0.23%, with declines in Chinese blue-chips, Hong Kong down and Australia retreating. South Korean shares dipped after a central bank rate hike that makes the nation the first major Asian economy to start exiting record-low borrowing costs. U.S. equity futures declined ahead of the Jackson Hole’s event, after the S&P 500 and Nasdaq 100 edged up to records overnight. The dollar was little changed, sitting around a week low against a basket of major peers.

Oil dropped after three-day gain, with the latest Covid-19 resurgence still clouding the outlook for fuel demand. Futures in New York fell below $68 a barrel after rising almost 10% over the past three sessions. U.S. WTI was down 79 cents, or 0.72%, at $67.87 a barrel, while Brent crude slid 37 cents, or 0.51%, at $71.88 a barrel.

Gold dropped for a third day, the bullion fell back below $1,800 an ounce this week as an uptick in 10-year Treasury yields weighed on the non-interest bearing precious metal. Spot gold is currently floating at $1787.14, down 0.22%

The JSE and the Top-40 were little changed, with the former at 67,452.86 points. Banks gained 0.28% and financials 0.24%. Precious metals fell 3.02% and resources 0.23%. Shares in DRDGold fell 4.32% to R13.30, despite the company declaring a final dividend for the 14th consecutive year as strong gold prices pushed the group’s profit higher. MultiChoice Group was ordered by a Nigerian tribunal to pay 50% of a disputed 1.8 trillion naira ($4.4 billion) tax bill, the latest crisis facing a South African company in the continent’s most populous nation – share price slumped 7.25% at the close to R105.73. South Africa’s economy is 11% bigger than previously estimated, after statistics authorities changed the way they calculate gross domestic product. Rand up 0.2% to 14.97 per US$, Yield on 10-year govt rand bonds fell 0.30 bps to 9.23%

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• Blue Label Telecoms Ltd. (BLU SJ)
• Distell Group Holdings Ltd. (DGH SJ)
• Italtile Ltd. (ITE SJ)
• Resilient REIT Ltd. (RES SJ)
• Sibanye Stillwater Ltd. (SSW SJ)
• Woolworths Holdings Ltd/South (WHL SJ)
• 11:30am: July PPI MoM, est. 0.6%, prior 0.8%
• 11:30am: July PPI YoY, est. 7.1%, prior 7.7%
• Annual General Meetings: KARO US, MCG SJ
• Earnings Calls: BLU SJ, DGH SJ, SSW SJ

Wednesday’s session saw stocks drift slightly higher across the Continent, as investors digested weak German business sentiment data and eyed a key gathering of US Federal Reserve officials on Thursday and Friday. The pan-European Stoxx 600 was 0.01% higher, alongside a 0.28% dip for the German Dax. Germany’s DAX was lower after a survey by the Ifo Institute showed business sentiment deteriorated again in August amid supply chain issues. The FTSE 100 ended the session up 0.34% .

U.S. shares inched higher with the S&P 500 closing at its 51st record high of the year, gaining 0.22%. The Dow Jones Industrial Average closed up 0.11% and the Nasdaq Composite added 0.15%. Historically, markets struggle to gain ground in the days before the Fed. Reserve Chair speaks due to fear of an attempted taper or slowdown in balance sheet expansion. In virus news: Johnson & Johnson said a booster of its Covid-19 vaccine provided a rapid and strong increase in antibodies. Stock futures remain subdued this morning.

Here are some events to watch this week:
• Fed officials attend the Jackson Hole Economic Policy Symposium from Thursday through Saturday
• U.S. GDP, initial jobless claims Thursday
• July U.S. personal income and spending data Friday. Investors will scrutinize the personal consumption expenditures price index, an inflation measure closely watched by the Fed.
South Korean stocks and the won fell on Thursday after the country’s central bank raised policy rates, while most other equity markets in the region pulled back from a recent rebound ahead of the U.S. Federal Reserve’s symposium
later this week. Hong Kong and China stocks pulled back on Thursday; China Evergrande Group’s profit warning knocked down property developers and banks, which are heavily exposed to the sector. Hang Seng dropped 1.30%, China’s blue-chip CSI300 retreated 1.38%, Aussie’s ASX200 pulling back 0.61% weighed down by IT and Materials sector, while Japan’s Nikkei remained flat as market participants stayed away from making big bets ahead of the U.S. Federal Reserve’s Jackson Hole symposium this week.