U.S. and European Futures Climb as Selloff in Asian Stocks Moderates / China and South Korea remain closed for a holiday.

21/09/2021 A selloff in stocks moderated in Asia on Tuesday as traders assessed risks from China’s crackdown on the real-estate sector and looked ahead to this week’s Federal Reserve meeting. Treasury yields edged up. Japan fell after reopening following a holiday, while Hong Kong slipped but avoided a repeat of the property-led tumble from a day earlier. U.S. and European futures advanced, suggesting a degree of improvement in sentiment. Dip-buyers in the last hour of trading helped the S&P 500 pare some losses overnight, though the index still posted the biggest drop since May. A Hong Kong gauge of real-estate firms steadied, after developers disputed a report of pressure from the Chinese government. China Evergrande Group slid deeper in equity and credit markets. Concerns remain about broader contagion after S&P Global Ratings said the developer is on the brink of default. China’s markets and those in South Korea remain closed for a holiday. Treasuries pared an advance and the dollar dipped. Aside from worries over Evergrande’s ability to make good on $300 billion of liabilities, Wednesday’s Federal Reserve meeting also looms. Policy makers are expected to start laying the groundwork for paring stimulus. Elsewhere, Bitcoin slid in volatile trading, tumbling as much as 7.6% before bouncing back to above $42,000. Oil pushed higher and gold slipped, after rising 0.6% Monday. Silver was steady near the lowest level since November, while platinum rose 0.9%. Palladium climbed 1.2% after tumbling 6.6% on Monday. Copper and zinc recovered some ground after Monday’s slump, with iron ore that steadied.
Tencent trades 0.97% lower in HK. The Rand is a tad stronger at 14.67 vs the USD, with the FTSE JSE Top 40 futures indicating a slightly better start, up 58 points or +0.09%.
Here are key events to watch this week:

  • Bank of Japan rate decision, Wednesday
  • Federal Reserve rate decision, Wednesday
  • Bank of England rate decision, Thursday
  • Fed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday
    Yesterday the FTSE/JSE Africa All-Share Index closed down 2.2% to 61,453; with the resource index weighing the most shedding 2.4%. Banks and retailers also got a hit on a weaker rand, with the sectors closing down 1.9% and 1.3% respectively. Gold shares closed higher as investors returned to the safe haven. The Rand 0.6% weaker at 14.81 per US$ as of 7:28 p.m., with the Yield on 10-year govt rand bonds that rose 7.70 bps to 9.41 %.
    South African ex-President Jacob Zuma’s corruption trial is set to resume, while former social development minister Bathabile Dlamini will face charges of perjury in relation to a debacle over welfare payments.
  • Goldman Hires From Barclays, Standard Bank for South Africa Team
  • India to Resume Exports of Covid-19 Vaccines Starting Next Month
  • South African Coal Miner Exxaro Plans Move Into Green Metals
  • Billionaire-Backed RMI to Shake Up South Africa Insurer Group
  • South Africa’s RMI Jumps to 31-Month High After Unbundle Plans
  • South African Stocks Sink to 8-Month Low in Risk-Off Pullback
  • MEDIA SUMMARIES:
  • Business Day.za: UK red listing blow to SA could cause lasting damage

ECONOMIC DATA:

  • 9am: July Leading Indicator, prior 125.8

GOVERNMENT:

  • South African finance minister and presidency’s Trudi Makhaya to speak on structural transformation of the economy

BOND SALES/PURCHASES:

  • 8am: South Africa to Sell 1.3 Billion Rand of 8.75% 2048 Bonds
  • 8am: South Africa to Sell 1.3 Billion Rand of 8.75% 2044 Bonds
  • 11am: South Africa to Sell 1.3 Billion Rand of 8% 2030 Bonds

CORPORATE EVENTS:

  • Africa Travel & Tourism Summit 2021
    EU/UK
    European stocks closed sharply lower on Monday as market sentiment was shaken by fears surrounding embattled property developer China Evergrande Group. The pan-European Stoxx 600 index ended the session down by 1.7% provisionally. European banking stocks tanked 4.1% on average, posting their worst session so far this year. Among major bourses, the German Dax was down around 2.3%. The negative session for Europe come as global stocks continue to struggle in September, traditionally a weak month for markets, with the Dow Jones Industrial Average on track for its biggest one-day drop since July 19. Hong Kong’s Hang Seng index led losses among Asia-Pacific markets in overnight trade on Sunday, with shares of embattled Chinese developer China Evergrande Group continuing to drop. Markets in mainland China, Japan and South Korea were closed on Monday for holidays. There were no major earnings releases in Europe on Monday. In individual stocks news, Prudential shares tanked 8.4% after the company announced a Hong Kong share sale. Meanwhile, AstraZeneca shares rose 6.2% after announcing promising results for a breast cancer drug.
    US
    U.S. stocks began the week deeply in the red as investors continued to flock to the sidelines in September amid several emerging risks for the market. The S&P 500 fell 1.7% to 4,357.73, posting its worst daily performance since May 12. It was a broad sell-off with each of the main 11 sectors of the benchmark registering losses. The Dow Jones Industrial average lost 614.41 points, or 1.8%, to 33,970.47 for its biggest one day drop since July 19. The tech-heavy Nasdaq Composite dropped 2.2% to 14,713.90. One optimistic sign from Monday’s rout: The Dow closed well off its session low. The 30-stock average was down 971 points at it’s low for the day. There were a number of reasons for the sell-off:
    • Investors fear a contagion sweeping financial markets from the troubled China property market. Hong Kong equities saw a big sell-off during the Asia trading session on Monday. The benchmark Hang Seng index plunged 4% with embattled developer China Evergrande Group on the brink of default.
    • The Federal Reserve begins a two-day meeting Tuesday and investors are worried the central bank will signal it’s ready to start pulling away monetary stimulus amid surging inflation and improvement in the job market.
    • Covid cases because of the delta variant remain at January levels as colder weather approaches in North America.
    • September has the worst track record of any month, averaging a 0.4% decline, according to the Stock Trader’s Almanac. History shows the selling tends to pick up in the back half of the month.
    • Investors are also concerned about brinkmanship in DC as the deadline to raise the debt ceiling approaches. Congress returned to Washington from recess rushing to pass funding bills to avoid a government shutdown.
    ASIA
    Shares in Asia-Pacific were mixed in Tuesday trade as investors continued monitoring the situation surrounding embattled developer China Evergrande Group. Japanese stocks declined as they returned to trade following a Monday holiday. The Nikkei 225 closed 2.17% lower at 29,839.71 as shares of conglomerate Softbank Group plunged 4.98%. The Topix index shed 1.7% on the day to 2,064.55. Hong Kong’s Hang Seng index, which was dragged down by more than 3% on Monday amid investor fears around Evergrande, sat 0.17% in Tuesday afternoon trade. Shares of China Evergrande Group fell 0.44%, while the Hang Seng Properties index climbed 2.08%, bouncing back partially from Monday’s losses. Meanwhile, S&P Global Ratings credit analysts said in a report: “We believe Beijing would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” according to the Monday report. “Evergrande failing alone would unlikely result in such a scenario.” In Australia, the S&P/ASX 200 advanced 0.35% on the day to 7,273.80. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.11% lower. Markets in mainland China and South Korea are closed on Tuesday for a holiday.
    COMMODITIES
    Gold held an advance as concerns over the spillover effects of the debt crisis at developer China Evergrande Group and Beijing’s crackdown on the real-estate sector boosted demand for haven assets. Spot gold slipped 0.1% to $1,761.75 an ounce, after rising 0.6% Monday. Silver was steady near the lowest level since November, while platinum rose 0.9%. Palladium climbed 1.2% after tumbling 6.6% on Monday.
    Oil rose after a two-day decline with Hurricane Ida still having an impact on U.S. crude output three weeks after making landfall. Futures in New York climbed toward $71 a barrel after losing more than 3% over the past two sessions. Royal Dutch Shell Plc said production from two of its largest Gulf of Mexico fields won’t resume until next year due to damage from Ida. The market is also focused on a global energy crunch, particularly for natural gas, that may increase demand for crude.
    Copper and zinc recovered some ground after Monday’s slump even as concerns about a spillover from China Evergrande Group’s debt woes ripple through global markets. Copper on the London Metal Exchange rose 0.5% to $9,076.50 a ton. Prices fell as much as 3.6% to the lowest in a month on Monday. Zinc rose 0.4% following a 2.4% drop on Monday. Nickel and aluminum were little changed.
    Iron ore futures took a breather following Monday’s rout, though stayed below $100 a ton on China’s steel output curbs and concerns about its property market. Futures in Singapore were near the lowest since May 2020 as China remains closed for a holiday. Prices tumbled more than 11% on Monday as the world’s biggest steelmaker stepped up output restrictions to meet a target for lower volumes this year and to improve air quality.