Asian-Pacific Stock Markets Bounce Despite Wall Street’s Pullback

10/09/2021 Equities markets rallied in Asia on Friday as investors stepped up buying despite another decline on Wall Street that kept the S&P 500 and the Nasdaq on track for their first weekly losses in three weeks. MSCI’s broadest index of Asia-Pacific shares ex. Japan gained almost 0.50% in early trading, with both markets in Japan and Hong Kong climbing more than 1%. Chinese technology stocks rebounded as newspapers clarified that China has slowed rather than frozen new game approvals. U.S. and European contracts ticked up. On Thursday the ECB announced a “moderate” reduction in its emergency bond buying programme for over the last quarter of 2021, Christine Lagarde (ECB head) insisted that the shift was only a “recalibration” of existing stimulus — not a signal that pandemic support is being phased out. The yield on benchmark 10-year Treasury notes edged up to 1.311%.

OIL: prices edged up on growing signs of tightness in U.S. markets after Hurricane Ida hit offshore output, although prices were heading for weekly losses after China announced plans to sell crude from its strategic reserves. Brent crude futures for November rose 45cents, or 0.63%, to $71.90 a barrel at the time of writing, while U.S. light-sweet WTI crude futures up 38cents, or 0.54%, at $68.50 a barrel.

GOLD: prices steadied just below $1,800 level, around $1,797, as the dollar index remained flat after easing overnight alongside U.S. Treasury yields. Gold is viewed as a hedge against inflation and currency debasement. Fed’s tapering would tackle both those conditions thereby diminishing gold’s appeal.

What to watch this week:
• U.S. President Joe Biden may make his choice this week on whether to renominate Fed Chair Jerome Powell to a second term

Local Market

The JSE slipped 2.06% to 64,176.53 on Thursday, alongside the Top-40 retreating 2.30%. The local bourse was weighed down by Naspers and Prosus, which tracked losses by Tencent after China extended its crackdown on the tech sector. Naspers slumped 7.8%, while Prosus dropped 6.3%. On the upside, Aspen shrugged off yesterday’s slump to advance 6.82% at the close to R213.50. The company said on Thursday it has received two offers to buy parts of its global active pharmaceutical ingredients (API), which manufacturers the active ingredients used in medications. Aspen Pharmacare Holdings Ltd. has gained 70% YTD. Rand steady at R14.1900/$ this morning, Top-40 contracts +220 firm on IG markets at the moment; the local market we’ll be taking cue from Asia-pacific counterparts.

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European markets pared losses after ECB slows stimulus – as expected. European Stoxx 600 closed flat 0.06%, after falling as much as 0.9% in morning trade. London’s blue-chip FTSE100 retreated 1.03%, while both the German’s and Paris’ CAC-40 notched up 0.08% and 0.24% respectively. Analysts now expect the ECB to outline plans for major policy changes by December, and a gradual phasing out of the PEPP by March 2022.

Wall Street closed below the watermark level as traders’ risk-off mode concerned itself with Federal Reserve speakers who may give details on tapering plans in the U.S. and the rise in new Covid-19 cases. At the close, the Dow was down 0.43%, while the S&P 500 was 0.46% weaker and the Nasdaq Composite saw out the session 0.25% softer. Initial unemployment claims data dropped by 35,000 to 310,000. Economists were expecting to see initial claims slip from 340,000 to 335,000. Multiple US airlines lowered their full-year forecasts amid a resurgence in Covid-19 cases as a result of the Delta variant, with United Airlines, American Airlines and Southwest Airlines all providing cautious comments. Dow futures 0.33% firm, S&P500 and Nasdaq futures both edged up 0.25%.

The news that U.S. President Joe Biden and Chinese counterpart Xi Jinping had held talks on the phone supported the rally in Asian markets by easing concerns about simmering Sino-U.S. tensions. Japan’s Nikkei hit a six-month high on Friday, extending the bull run since the end of August on hopes for a new government and further improvement in earnings. The Nikkei average up 1%. Australian rallied helped by mining stocks after aluminium prices hit multi-year highs, with investors also cheering exiting of COVID-19 lockdowns in most regions in the state of Victoria. The S&P/ASX 200 index rose 0.71%. Bonds of heavily indebted developer China Evergrande Group staged a rally on news that some creditors had agreed to loan payment extensions. Evergrande shares have tumbled more than 76% this year. The Hang Seng jumped 1.61%, with Tencent firm almost 2%, while the Shanghai Composite index gained 0.45%.