Asia Stocks Climb as Traders Weigh Growth Outlook / Metal prices will be in the spotlight as China kicked off auctions

01/09/2021 Asian stocks are higher this morning as traders assessed the global recovery’s resilience to the delta virus variant and the outlook for central bank stimulus. Yields on U.S., Australian and New Zealand sovereign debt climbed. MSCI Inc.’s Asia-Pacific gauge hit the highest level in more than a month, bolstered by Japan and a continuing rebound in Chinese technology stocks on bets that the worst of Beijing’s regulatory clampdown may have passed. S&P 500, Nasdaq 100 and European futures are in the green. U.S. stocks edged back overnight from a record amid mixed data, including weaker consumer confidence and a jump in home prices. Treasuries declined, as did government bonds from Australia and New Zealand. Hawkish comments from some European Central Bank officials had put the spotlight on the prospect of a reduction in monetary-policy support as economies recover from the pandemic.
Metal prices will be in the spotlight as China kicked off auctions for another 150,000 tons of industrial metals earlier this morning, the third round of sales from its state reserves this year as Beijing aims to ease the pressure of high commodity prices on businesses. The world’s top metals consumer is offering processors and manufacturers the chance to bid for 30,000 tons of copper, 70,000 tons of aluminum and 50,000 tons of zinc reserves on online platforms operated by state run metals firms.
Tencent trades 1.6% higher. The Rand is firm around the 14.51 level vs the USD, with the FTSE JSE Top 40 futures indicating a better start up 370 points or 0.62%.
Here are some key events to watch this week:

  • OPEC+ meeting on output Today
  • Euro zone manufacturing PMI Today
  • U.S. jobs report Friday
    Yesterday the FTSE/JSE Africa All-Share Index closed up 0.5% to 67,427, mostly supported by a surge in Naspers and Prosus that gained 6.4% and 5.2% respectively after announcing the acquisition of India’s BillDesk and increasing it’s stake in Delivery Hero by another 2.5%, which will reduce Prosus’s cashpile from $17b to $11b. Financials were also strong on a firmer rand, with the banking sector closing up 1.9% and also supported retailers that gained 1.4%. The Rand strengthened 1.1% to 14.52 per US$, with the Yield on 10-year govt rand bonds that fell 0.10 bps to 9.11 %.
    State-owned power utility Eskom Holdings SOC Ltd. posted a fourth consecutive annual loss as it continued to service a mountain of debt, repaired aging plants and lost electricity revenue because of a drop in demand caused by the coronavirus pandemic.
  • More Than Half South African Tobacco Market Is Illegal, BAT Says
  • Steinhoff Says U.S. Unit Mattress Firm May Sell Stock in IPO
  • Prosus Strikes Deal to Buy India’s BillDesk for $4.7 Billion
  • South Africa’s Rand Attempts a Comeback After a Rough August
  • Anglo American Close to Appointing New CEO: Sky News

EARNINGS:

  • 5pm: Aspen Pharmacare, FY (APN SJ)
  • 5pm: Murray & Roberts, FY (MUR SJ)

ECONOMIC DATA:

  • 11am: Aug. Absa Manufacturing PMI, est. 48.0, prior 43.5
  • Aug. Naamsa Vehicle Sales YoY, est. 12.6%, prior 1.7%

GOVERNMENT:

  • South African Mineral Resources and Energy Minister Gwede Mantashe to brief lawmakers on the Risk Mitigation Independent Power Producers Program
  • The South African Health Products Regulatory Authority to brief lawmakers on Covid-19 vaccines
    EU/UK
    European stocks closed lower on Tuesday, as investors digested the latest economic data from the region and beyond. The pan-European Stoxx 600 index closed down 0.5% provisionally. However, the index was up over 1% month-on-month, marking its seventh consecutive month of gains. That’s despite August typically being a quieter month for trading given the summer vacation period. Markets turned lower on Tuesday following the release of euro zone inflation data for August which showed consumer prices increased by 3% this month from a year ago, according to preliminary estimates, far above expectations and the European Central Bank’s 2% target. The data will put pressure on the central bank to address inflation concerns at a key meeting next week. Looking at individual stocks, Belgium-based biotech company Galapagos, its share price rising 7% after it said its CEO would step down. Shares of British pharmaceutical firm GSK slipped over 1% after the company and SK Bioscience said they have begun a late-stage trial of their Covid-19 vaccine candidate. Meanwhile, British business supplies distributor Bunzl was down 1.6% after it said it was facing supply chain challenges and labor and materials shortages in some markets as it presented its earnings from the first half of the year. The pessimistic trade for European markets comes after data released on Monday showed euro zone economic sentiment eased more than expected in August, from a record high in July.
    US
    Stocks edged lower on Tuesday as the S&P 500 wrapped up its seventh-straight month of gains at just below all-time highs. The Dow Jones Industrial Average slipped 39.11 points, or 0.11%, to close at 35,360.73. The S&P 500 lost 0.13% to finish at 4,522.68, while the Nasdaq Composite was down just 0.04% to 15,259.24. Tuesday marked the last trading day of August, and major averages posted solid gains for the period. The S&P 500 rose 2.9% this month, while the tech-heavy Nasdaq Composite climbed roughly 4% for its third winning month in a row. The blue-chip Dow lagged but still added 1.2%. The strong run for the S&P 500 has come even as the delta variant of Covid-19 has raised concerns about the path for the economic recovery. On Tuesday, Google-parent Alphabet pushed back its voluntary return to office to January from mid-October. The S&P 500 was split roughly even between rising and falling stocks on Tuesday. Apparel company Nike was one of the biggest losers in the Dow, falling nearly 2%. Materials stocks including Nucor and chemical company Dow also struggled. Zoom shares fell about 16% on Tuesday after the video-conferencing software company showed slowing revenue growth in the second quarter, weighing on the Nasdaq. Shares of Apple also declined, but Amazon’s stock rose 1% to help offset those losses for the broader markets. Shares of Wells Fargo fell more than 5% in afternoon trading after Bloomberg News reported that the bank could face further sanctions as regulators are upset about the pace of progress in compensating victims of Wells Fargo’s previous scandals. Wells Fargo declined to comment to CNBC.
    ASIA
    Shares in Asia-Pacific were mostly higher in Wednesday trade, as a private survey showed shrinking Chinese factory activity in August. Mainland Chinese stocks were mixed as the Shanghai composite advanced 0.86% while the Shenzhen component rose 0.322%. Hong Kong’s Hang Seng index edged 0.62% higher. The Caixin/Markit manufacturing Purchasing Managers’ Index for August came in at 49.2 on Wednesday, below the 50 mark that separates expansion from contraction. Deutsche Bank International Private Bank’s Tuan Huynh said the August reading was not unexpected, adding that the company has lowered its growth forecast for Chinese GDP this year to 8.2% from 8.7%. Elsewhere in Japan, the Nikkei 225 gained 1.2% while the Topix index advanced 0.89%. Meanwhile, South Korea’s Kospi climbed 0.14%. Australian stocks lagged as the S&P/ASX 200 slipped 0.31%. Australia’s gross domestic product rose 0.7% in the June quarter, according to data released by the country’s statistics bureau. That was above expectations for a 0.5% increase, according to Reuters. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.26% lower. The Japanese yen traded at 110.17 per dollar, weaker than levels below 109.8 seen against the greenback earlier in the week. The Australian dollar changed hands at $0.7316 after climbing from below $0.73 yesterday.
    COMMODITIES
    Gold was steady as investors weighed hawkish comments from some European Central Bank officials on the prospects for reducing stimulus against the economic risks from the delta virus variant. Spot gold was little changed at $1,814.51 an ounce after adding 0.2% on Tuesday. Silver was steady, palladium climbed and platinum fell.
    Oil rose as September opened, with traders counting down the hours until an OPEC+ meeting that should result in a further rise in output. West Texas Intermediate was up 1% after losing more than 7% in August, the biggest monthly decline this year. The Organization of Petroleum Exporting Countries and its allies including Russia are expected to ratify a plan to add 400,000 barrels a day in October, wagering that the market can absorb the extra flows as demand recovers from the coronavirus pandemic.
    China kicked off auctions for another 150,000 tonnes of industrial metals on Wednesday, the third round of sales from its state reserves this year as Beijing aims to ease the pressure of high commodity prices on businesses. The sales, which resumed in early July for the first time more than a decade, come as prices of many commodities have hit records in 2021 and China’s President Xi Jinping has called for the country to better manage its state reserves system. The world’s top metals consumer is offering processors and manufacturers the chance to bid for 30,000 tonnes of copper, 70,000 tonnes of aluminum and 50,000 tonnes of zinc reserves on online platforms operated by state run metals firms from 0900 Beijing time (0100 GMT). The metal is being sold off in small batches, typically of 100-250 tons. Copper reserves sold in the morning session were at least around 1,300-1,500 yuan ($201-$232) per ton cheaper than market prices on Wednesday, data provider Shanghai Metal Exchange Market (SHMET) said. The most-active copper contract on the Shanghai Futures Exchange fell 0.9% to 69,550 yuan ($10,761) a ton.
    Iron ore futures extended their slide — falling as much as 6% in Singapore — as curtailed steel operations in China sapped demand for the raw material. The key steel-making ingredient fell for a third straight day as Beijing’s push to conserve electricity and curb emissions from the highly pollutive sector resulted in weaker demand. The decline over the last few days comes after iron ore rallied almost 14% last week on optimism China’s autumn construction season would boost consumption. Iron ore futures in Singapore fell 6.3% to $142.65 a ton as of 11:03 a.m. local time. Chinese iron ore prices were down more than 5%, while steel futures also retreated.