Stocks Up, Futures Steady on Dovish Powell Stance

30/08/2021 Asian stocks rose Monday and Treasuries held an advance, bolstered by Jerome Powell’s signal that pandemic- era Federal Reserve policy support will be withdrawn cautiously and gradually. Japan led gains and Chinese technology stocks advanced on bargain hunting in the beaten-down sector. U.S. futures weresteady after a record Wall Street close in the wake of Chair Powell’s Jackson Hole speech. Powell said the Fed may start paring bond purchases this year but is in no hurry to raise interest rates and will be guided by data on Covid-19 risks. Powell didn’t give a specific timeline for scaling back stimulus. Traders are awaiting U.S. jobs data this week to assess whether the economic recovery merits an earlier tapering. Commodity markets are focused on Hurricane Ida. U.S. gasoline futures jumped and oil was steady after the storm barreled ashore in Louisiana, disrupting energy supplies. Elsewhere, gold pared recent gains and Bitcoin was trading around $48,000. Tencent trades 1.3% lower in HK. The Rand is firm around 14.74 vs the USD, with the FTSE JSE Top 40 futures indicating a slightly lower start down 125 points or 0.21%.
Here are some key events to watch this week:

  • The U.S. plans to pull out almost all American troops from Afghanistan Tuesday
  • OPEC+ meeting on output Wednesday
  • Euro zone manufacturing PMI Wednesday
  • China Caixin manufacturing PMI Wednesday
  • U.S. jobs report Friday
    On Friday the FTSE/JSE Africa All-Share Index closed up 0.9% to 67,646, with Woolworths leading the way closing up over 6% after reporting results and saying that it may divest David Jones as synergies unseen. Resources were also strong as commodity prices recovered, with platinum counters gaining the most, Amplats, Sibanye and Northam all surged over 3%. Discovery dropped 2% after the release of a trading statement. The Rand was up 1.4% to 14.73 per US$, with the Yield on 10-year govt rand bonds that fell 5.00 bps to 9.16%.
    Tiger Brands Ltd., the South African food producer, agreed to sell its 49% minority shareholding in UAC Foods Ltd. to parent UAC of Nigeria Plc. The purchase is expected to be completed in September, UAC of Nigeria said in a filing published on the website of the Nigerian Exchange Group.
  • ANC Official Says Infrastructure Key to S. Africa Jobs Drive
  • South African Vaccinations Rise to Record as Eligibility Widened
  • Gold Fields Would Consider Joint Ventures to Bolster Output
  • Impala Projected to Increase Dividend Next Week
  • Discovery Shores Up Life Insurance Arm as Covid-19 Claims Rise
  • Steinhoff 9-Month Revenue EU6.8 Billion vs EU5.9 Billion y/y
  • Massmart 1H Net Loss 1.09B Rand Vs. Loss 1.16B Rand Y/y
  • Business Day.za: Consortium completes SAA due diligence
  • Business Day.za: Blue Label secures funding to recapitalise Cell C

EARNINGS:

  • MAS Real Estate Inc. (MSP SJ)
  • Sun International Ltd (SUI SJ)
  • Super Group Ltd (SPG SJ)

ECONOMIC DATA:

  • 2pm: July Monthly Budget Balance, est. -133.1b, prior 63.1b

CORPORATE EVENTS:

  • Annual General Meetings: REIN LX
  • Other Events: HCI SJ
    EU/UK
    European markets closed higher on Friday after Federal Reserve Chairman Jerome Powell indicated the central bank was likely to begin withdrawing some of its easy-money policies before year-end. The pan-European Stoxx 600 provisionally ended up around 0.4%, with mining stocks climbing 2% to lead gains, while utilities stocks fell 0.4%. The European blue chip index began Friday’s session roughly unchanged from where it started the week, with markets in suspended animation ahead of the Jackson Hole meeting. On the economic data front, French consumer confidence pulled back fractionally in August, the INSEE official statistics agency said on Friday. The monthly consumer confidence index slipped to 99 from 100 in July. Just Eat Takeaway shares slipped 7.5% to the bottom of the Stoxx 600, after the New York City Council passed a bill capping commissions charged to restaurants by delivery apps. Toward the top of the index, Switzerland’s Siegfried added 2.4%.
    US
    Stocks rose on Friday heading for a winning week as Federal Reserve Chairman Jerome Powell prepared the markets for the central bank to pull back on some of its monetary stimulus, saying it’s likely to start tapering its $120 billion in monthly bond purchases this year. The Dow Jones Industrial Average gained 242 points, or 0.6%, to 35,455. The S&P 500 rose 0.8% to hit a new high and closed at 4,509. The Nasdaq Composite added 1.2%, also hitting a new record during the session, closing at 15,129. The three major stock averages closed the week in the green. The Dow finished up 0.9%, while the S&P 500 added 1.5% and the Nasdaq Composite gained 2.8%. The 10-year Treasury yield, which ran up this week into the Powell speech, eased slightly after the Fed chief’s remarks as he made clear that interest rate hikes would not immediately follow after tapering was over. “The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test,” Powell said. Powell also said inflation is solidly around the central bank’s 2% target rate, one of the goals of the Fed’s dual mandate. Energy stocks led the S&P 500, after being among the hardest hit on Thursday. Occidental Petroleum climbed 6.9%, Cimarex Energy rose 6.5% and APA Corp rose 5.9%. Automakers got a boost with Ford and General Motors rising 3% and 2%, respectively. Travel stocks, including air carriers, cruise lines and hotels were lifted as well. The Invesco Dynamic Leisure and Entertainment ETF gained 2.2%. Shares of Workday surged 9.1% after reporting strong currently earnings and subscription revenue that jumped 23% from last year, while Peloton shares dropped after the exercise equipment company’s fourth-quarter financial results missed Wall Street estimates. Peloton fell 8.5%.
    ASIA
    Shares in Asia-Pacific rose in Monday trade as investors look ahead to the release of Chinese food delivery giant Meituan’s earnings. In Japan, the Nikkei 225 advanced 0.41% while the Topix index gained 0.89%. South Korea’s Kospi traded 0.35% higher. Mainland Chinese stocks nudged higher as the Shanghai composite rose 0.34%, while the Shenzhen component gained 0.237%. Hong Kong’s Hang Seng index traded 0.35% higher. The S&P/ASX 200 in Australia recovered from an earlier slip, last trading about 0.2% higher. The country’s most populous state New South Wales had reported on Monday a record one-day rise in new Covid-19 infections, according to Reuters. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.59%. Investors in the region looked ahead to the release of earnings from Chinese food delivery giant Meituan on Monday. In other Chinese tech developments, Beijing is reportedly looking at new rules that would restrict domestic internet firms from going public in the U.S., according to the Wall Street Journal. Shares of Meituan in Hong Kong were up 0.36% by Monday afternoon in the city. Other Chinese tech shares in Hong Kong were mixed: Tencent slipped 1.29% while Alibaba gained 1.28%. The Hang Seng Tech index climbed 0.76%.
    COMMODITIES
    Gold held near the highest level in more than three weeks after Federal Reserve Chair Jerome Powell signaled a cautious approach to the withdrawal of stimulus from the U.S. economy. Spot gold slipped 0.2% to $1,814.72. It touched $1,823.31 earlier, the highest intraday level since Aug. 4. The Bloomberg Dollar Spot Index was little changed after dropping 0.5% Friday. Palladium and platinum edged lower.
    U.S. gasoline futures jumped and oil was steady after Hurricane Ida barreled ashore in Louisiana, disrupting energy supplies in the world’s largest economy at a time of rising commodity prices. Gasoline for October spiked more than 4% higher in New York before paring gains, while West Texas Intermediate crude was little changed. Last week, WTI rallied 10% as investors wagered global demand would weather the setback posed by the spread of the delta coronavirus variant. Both crude oil and gasoline have been hit by volatile trading this month as investors weighed the challenge to consumption posed by the delta variant. This week traders will weigh the fall-out from Ida, as well as the likelihood that the Organization of Petroleum Exporting Countries and its allies will go ahead with an increase in output when it meets on Sept.
    Base metals in Shanghai extended last week’s gains after comments from the Federal Reserve chair soothed concerns about an imminent tapering of stimulus in the U.S. Aluminum rallied to the highest level since 2008 amid intensified curbs in China that may crimp output. Aluminum extended a rally as China banned preferential power tariffs to the sector, further stretching local production, which depends on electricity. Nationwide output has already dropped from a record hit in April amid a power shortage in the south, and supply cuts in provinces including Xinjiang. Aluminum rose as much as 3.1% to 21,530 yuan a ton on Shanghai Futures Exchange, the highest since March 2008, and traded at 21,405 yuan. Copper gained 1.2% to 69,990 yuan, and nickel surged 3.1%. There was no trade on the London Metal Exchange with a holiday in the U.K.
    Iron ore futures in Singapore steadied after their biggest weekly jump this year, as the world’s top producer delivered a cautious outlook on price prospects. The raw material for making steel rebounded last week as investors bet on a recovery in demand heading deeper into the second half. But Baoshan Iron & Steel Co., the listed unit of China’s biggest producer, flagged the potential for renewed declines after posting a tripling of first-half net income. Iron ore futures on the Singapore Exchange rose 0.2% to $155.95 a ton. In China, iron ore futures were lower, while steel futures gained. Australia’s Fortescue Metals Group Ltd., the world’s fourth-biggest iron ore supplier, reported record profits Monday on high iron ore prices earlier in the year.