Asia trades lower and U.S. Futures Fall as Inflation Fears Mount and a Chinese GDP miss

18/10/2021 Most Asian markets and U.S. futures slid today as surging energy prices cemented worries about inflation and as Chinese growth slowed. MSCI Inc.’s gauge of Asia Pacific shares was on track for its first decline in four sessions as equities dropped in Japan, Hong Kong and China, where economy slowed in the third quarter. U.S. contracts dipped after American stocks advanced on Friday, with the S&P 500 chalking its best week since July as earnings buoyed sentiment. China’s economy grew 4.9% in the third quarter of the year, less than the 5.2% expected by the market, while industrial production figures for September were also disappointing. Oil prices built on their eighth weekly gain with West Texas Intermediate crude rising above $83 a barrel to the highest since 2014. Brent approached $86 a barrel. Investors continue to grapple with worries about inflation amid surging energy shortages that are prompting more production cuts and sending bond yields higher. At the same time, the economic recovery remains patchy while central bankers are inching closer to paring back stimulus. U.S. consumer sentiment fell unexpectedly in early October, but retail sales advanced.

Locally the JSE All Share closed up 0.27 percent tracking Global markets higher, US producer inflation came in lower than expected on Thursday, rising 0.5% month-on-month, its slowest pace so far in 2021, while strong earnings reports from major US banks further boosted sentiment. The Rand traded as low as R 14.30/$ on Friday but has given up a bit of ground this morning trading R 14.67/$ and R 20.14/ GBP. We should be in for a softer open as Tencent trades down 1.78%, Asian Markets are softer and US Futures trade lower. IG Top 40 is down 166 points.

Eskom has started court proceedings to review the regulator’s rejection of a price plan into 2025 that outlines how much the utility can charge electricity consumers.

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Events to watch this week:
• Earnings roll in, including from AT&T Inc., Barclays Plc, Johnson & Johnson, Netflix Inc. and Tesla.
• China’s NPC Standing Committee starts a meeting Tuesday that goes on through Oct. 23.
• A review of anti-monopoly regulations is on the agenda.U.S. housing starts, Tuesday.
• EIA crude oil inventory report, Wednesday.
• China property prices, loan prime rates, Wednesday.
• U.S. Conference Board leading index, U.S. existing home sales, jobless claims, Thursday.
• Fed Chair Jerome Powell takes part in policy panel discussion, Friday.
European market are expected to open flat this morning as global markets gear up for more big earnings reports. In Europe today, earnings come from Philips and data releases include U.K. house price data from Rightmove. The U.K.’s FTSE index is seen opening 1 point lower, the DAX 3 points lower, the CAC 40 up 4 points and Italy’s FTSE MIB 21 points higher at 26,209, according to data from IG.
In the US the major averages had their best week in months amid a better than expected start to the earnings season. The Dow advanced 382 points on Friday, ending the week with a 1.58% gain for its best week since June. The S&P 500 rose 1.82% last week for its best week since July, while the Nasdaq Composite saw its best week since the end of August, with the tech-heavy index adding 2.18%. In addition to better-than-expected earnings from Goldman Sachs on Friday, positive economic data also boosted stocks. Retail sales rose 0.7% in September, the Census Bureau said Friday, while economists surveyed by Dow Jones were expecting a decline of 0.2%. The Dow is less than 1% from its record high, while the S&P 500 and Nasdaq Composite are 1.6% and 3.3% below their records respectively.
Asian markets are lower as investors react to the Chinese GDP number. China’s gross domestic product grew 4.9% in third quarter, that was below expectations of analysts in a Reuters poll for a 5.2% expansion. Industrial production also missed forecasts, rising 3.1% in September, against expectations in a Reuters poll for a 4.5% increase. CSI 300 -1.68%, Hang Seng – 0.68%, Nikkei – 0.26%. The Aussie market bucked the trend closing up 0.26% with the Mng Index up 1.04%.
Oil prices hit their highest level in years as demand continues its recovery from the Covid-19 pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel. The jet fuel market was buoyed by news that the U.S. will open its borders to vaccinated foreign travelers next month. Similar moves in Australia and across Asia followed. The U.S. oil and gas rig count, an early indicator of future output, rose 10 to 543 in the week to Oct. 15, its highest since April 2020, energy services firm Baker Hughes said last week. Brent + 0.90% $ 85.70, WTI + 1.37% $ 83.41.
Gold steadied after posting the biggest drop in a month on Friday as Treasury yields rebounded and n goldinvestors weighing the outlook for stimulus amid inflationary pressures. Gold has fluctuated recently as traders weighed concerns over inflation and the economic recovery with solid corporate earnings that have boosted sentiment. The looming reduction in asset purchases by the Fed and tightening by other central banks have also been considerations for investors. Holdings in bullion-backed exchange-traded funds dropped for a fourth straight week, according to initial data compiled by Bloomberg. Gold – 0.22% $ 1763, Platinum – 0.55% $ 1053 and Palladium – 0.33% $ 2071.