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

22/09/2021 Most Asian stocks are trading off its lower levels and U.S. futures fluctuated as concerns about indebted developer China Evergrande Group lingered after an update on a bond interest payment. Treasuries were steady before the Federal Reserve policy decision. MSCI Inc.’s Asia-Pacific index declined for a third day. Equities were lower in China but avoided a bigger selloff after trading resumed following a holiday during which global markets where whipsawed by fears of contagion radiating from crisis-hit Evergrande. The Chinese central bank boosted a cash injection, shoring up sentiment. S&P 500 and Nasdaq 100 contracts were modestly in the green after swinging between gains and losses. European futures also advanced. The yen weakened and commodity-linked currencies such as the Australian dollar pushed higher. The U.S. dollar ticked up.
Commodities are higher across the board, led by a rally in industrial metals. Copper is up more than 3%, while crude is also higher. Iron ore in Singapore rose 4%. Spot gold gained 0.2% to $1,778. an ounce, after rising 0.6% on both Monday and Tuesday. Silver climbed 1.5%, palladium rose 0.6%, and platinum advanced 0.5% after surging 4.7% on Tuesday.
No read through from Tencent as HK is closed for a holiday. The Rand is trading off its weaker levels from 14.88 to around 14.75 vs the USD, with the FTSE JSE Top 40 futures indicating a better start, up 580 points or +1.02%.
Here are key events to watch this week:

  • 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 had a nice turn-around from the previous session’s fall-out closing up 1.5% to 62,362. Most sectors were in the green with industrials and resources leading the way gaining 1.98% and 1.25% respectively. Banks and retailers gave up earlier gains as the rand started weakening towards the end, but still managed to eke out small gains. The Rand was down 0.3% to 14.83 per US$, with the Yield on 10-year govt rand bonds that rose 1.60 bps to 9.43%.
    A median of 16 economists’ estimates forecast inflation to accelerate to 4.9% in August, compared with 4.6% the previous month, driven by higher fuel prices. Despite the uptick, the South African Reserve Bank is expected to leave its benchmark repurchase rate at a record low on Thursday to support an economy seen contracting in the third quarter after deadly riots and a cyber-attack at the state-owned ports and rail operator hit activity.
  • Ethos Hires Absa to Sell S. African Car-Parts Firm AutoZone
  • S. Africa Power Regulator Approves Karpowership Licenses: Fin24
  • South African Economy’s Current State Unsustainable: Godongwana
  • Fitch Sees Smaller South Africa Budget Gap After GDP Revisions
  • South Africa Leading Indicator Drops to Five-Month Low on Riots
  • Coal Seen Above $100 ‘For a Long Time’ on Supply Constraints
  • South African Union Plans Engineering Industry Strike on Oct. 5
  • Telkom of South Africa Set to Begin Listing Spree With Towers
  • Nedbank Considering Making Offer to Repurchase Preference Shares
  • Sasol, Imperial Sign Agreement to Explore Hydrogen Use
  • Aspen Pharmacare Cut to Hold at Investec; PT 250 rand
  • Two Sibanye Workers Dead and One Missing at Kloof Gold Mine
  • Mediclinic Southern Africa Unit Gets ZAR8.45b 5-Year Refinancing
  • Amplats Rated New Underweight at ABSA Securities; PT 1,000 rand

EARNINGS:

  • Remgro Ltd. (REM SJ)

ECONOMIC DATA:

  • 10am: Aug. CPI MoM, est. 0.3%, prior 1.1%
  • 10am: Aug. CPI Core MoM, est. 0.1%, prior 0.5%
  • 10am: Aug. CPI YoY, est. 4.9%, prior 4.6%
  • 10am: Aug. CPI Core YoY, est. 3.0%, prior 3.0%

GOVERNMENT:

  • South African ex-President Jacob Zuma’s corruption trial resumes
  • South African ruling party holds briefing on registration of candidates for municipal elections
  • South African opposition Democratic Alliance launches election manifesto before municipal election

CORPORATE EVENTS:

  • Annual General Meetings: OMN SJ
  • Other Events: SOL SJ
  • Other/M&A: IPF SJ
    EU/UK
    European stocks closed higher on Tuesday, bouncing back from heightened investor nerves over a Chinese property developer and ahead of a two-day meeting of the U.S. Federal Reserve. The pan-European Stoxx 600 index closed up 1%, led by travel and leisure stocks which climbed 3.2%, as most sectors and major bourses entered positive territory. Oil and gas stocks rose 1.4% amid consumer and business worries over a shortage of natural gas in the region. Looking at individual shares, Entain surged 18% to the top of the Stoxx 600 after CNBC reported DraftKings had made a $20 billion takeover offer for the British online sports betting and gambling firm. In a filing with the London Stock Exchange, Entain’s board confirmed it received a proposal from DraftKings. The filing did not contain any information on the price of the offer. Meanwhile, Universal Music Group shares surged in its stock market debut on Tuesday which marked Europe’s largest listing, so far, of 2021. The company was last trading at around 25.25 euros ($29.59) per share, more than 36% above the reference price of 18.5 euros per share. Travel shares got a boost from news that the U.S. is to ease travel restrictions on fully vaccinated travelers from the U.K. and EU. Airline group IAG and hotels firm IHG rose 3.1% and 2.2% respectively. Shares of British DIY group Kingfisher were trading 4.9% lower, making it among the worst performers on the Stoxx 600, despite the company reporting a 61.6% jump in first-half pretax profit largely thanks to a home improvement boom during the pandemic.
    US
    U.S. stocks on Tuesday fought to rebound from Monday’s rout, but failed as the Dow Jones Industrial average trended lower for most of the session and closed in the red. The Dow Jones Industrial average lost 50 points, or 0.15%, to 33,919. The S&P 500 shed about 0.1% to 4,354, following its worst day since May on Monday. However, the Nasdaq Composite rose 0.2% to 14,746 as investors bought some major tech shares like Apple on the dip. Stocks roared back earlier in Tuesday’s session with the Dow up more than 300 points at one point before giving up all those gains as trading continued. The S&P 500 was up 0.9% at its high of the day. Investors were also cautious ahead of the Federal Reserve’s decision on interest rates and release of economic forecasts on Wednesday. Investors are looking for more information from Fed Chairman Jerome Powell on Wednesday about the central bank’s plans to taper its bond buying, specifically when that will happen. Powell said last month that he sees the Fed slowing its $120 billion in monthly purchases at some point this year. The Fed will release its quarterly economic forecasts, the so-called dot plot, along with the statement on interest rates at 2 p.m. ET Wednesday. Powell will have a press conference after the announcements. Also weighing on markets this month is the delta variant, which remains a global health threat as the colder months approach and vaccination hesitancy persists among some Americans. Johnson & Johnson said on Tuesday that its Covid vaccine booster shot is 94% effective. J&J shares added 0.4% on Tuesday. There were other winners as well. Uber shares were a standout, jumping 11% after raising its outlook for the third quarter. ConocoPhillips gained nearly 4% as energy stocks initially bounced following oil’s snap back from the Monday sell-off. Meanwhile, Disney shares fell 4% as CEO Bob Chapek warned investors about potential headwinds for Disney+ subscriber growth in the third quarter, at a Goldman Sachs conference Tuesday.
    ASIA
    Markets in mainland China fell more than 1% on Wednesday’s open before bouncing back slightly amid the ongoing Evergrande crisis, as markets reopened for trade after a two-day holiday. With global markets selling off earlier this week, investors kept a close watch on the China markets for any fallout surrounding the embattled developer. Both the Shanghai composite and Shenzhen component dropped more than 1% in early trade, before easing off on some of those losses. Meanwhile, the CSI 300 index that tracks the largest stocks listed on the mainland declined more than 1%. Markets in Hong Kong were closed for a holiday. Investor sentiment may have been soothed on Wednesday after Evergrande unit Hengda announced it will make a coupon payment on its domestic bonds on Thursday. Still, questions remain over whether the interest on Evergrande’s offshore U.S.-dollar denominated bond — also due Thursday — will be made. The People’s Bank of China on Wednesday injected substantially more liquidity into the markets through “reverse repurchase agreements,” or buying short-term bonds from some commercial lenders so banks have more cash on hand, data from the central bank showed. China on Wednesday also kept its benchmark lending rate unchanged, with the one-year loan prime rate (LPR) held steady at 3.85%. The five-year LPR remained at 4.65%. That was largely in line with expectations. Elsewhere in Asia, the Nikkei 225 in Japan slipped 0.59% while the Topix index shed 0.79%. The Taiex in Taiwan dropped 1.97%. In Australia, the S&P/ASX 200 edged 0.83% higher. South Korea was closed for a holiday. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.32% lower. The Bank of Japan on Wednesday held steady on monetary policy, keeping its short-term interest rate target at -0.1% while that for 10-year Japanese government bond yields was kept at around 0%.
    COMMODITIES
    Gold advanced on rising demand for haven assets amid concerns over the potential fallout from the debt crisis at China Evergrande Group, with investors also awaiting the outcome of a Federal Reserve meeting. Spot gold gained 0.2% to $1,778.83 an ounce, after rising 0.6% on both Monday and Tuesday. Silver climbed 1.5%, palladium rose 0.6%, and platinum advanced 0.5% after surging 4.7% on Tuesday.
    Oil rallied after a U.S. industry report showed another big draw in crude inventories, pointing to a tightening market, and China’s central bank added liquidity to quell concern about a major developer’s debt woes. West Texas Intermediate traded above $71 a barrel after rising as much as 1.2%. Nationwide stockpiles sank more than 6 million barrels, including a drop at the key storage hub in Cushing, Oklahoma, according to the industry-funded American Petroleum Institute. The breakdown, which comes before official figures later Wednesday, also flagged lower gasoline and distillate holdings.
    Iron ore’s rollercoaster ride in 2021 shows no signs of easing, with prices in China rallying on optimism over a reprieve for a giant property developer’s financial woes, and as an injection of liquidity from the central bank added support. Futures in Dalian jumped 2.2%, erasing earlier losses of as much as 3.7%. Traders had expected a harsher reopen on Wednesday as China returned from a two-day holiday, during which time iron ore prices in Singapore had tumbled to the lowest since May last year.