Stocks Near Record, Bond Curve Steeper After Fed

05/11/2021 A global stock rally paused in Asia following a tumble in bond yields as investors scaled back expectations about the likely pace of monetary-policy tightening to quell inflation. Shares fell in Japan and were mixed in China, where the central bank boosted an injection of short-term cash into the banking system. U.S. and European futures are lower after technology shares led Wall Street to a record last night. Company reports included an earnings beat from Airbnb Inc., a weak Uber Technologies Inc. forecast and a plunge in Peloton Interactive Inc.’s shares as a pandemic sales boom fizzles. Treasuries held a climb and the dollar rose. A surprise Bank of England move to hold interest rates spurred a global surge in bonds as investors reviewed the outlook for borrowing costs. Interest-rate futures had priced in two quarter-point Federal Reserve increases in 2022 but shifted the second one toward 2023. Jerome Powell this week said the Fed can be patient on hikes. In China, investors are monitoring Kaisa Group Holdings Ltd. for the next flashpoint in the property sector. Shares in the firm and several units were suspended in Hong Kong on Friday, a day after the developer flagged liquidity pressure and said it missed payments on wealth products it guaranteed. The focus turns to the U.S. jobs report due later today, since the level of progress on employment could shift views on monetary policy again, heralding further potential volatility in the bond market.
Tencent trades 2.3% lower in Hong Kong. The Rand is steady around 15.24 vs the USD. The FTSE JSE Top 40 futures are indicating a slightly better start, up 141 points or 0.23%.
Here are some events to watch this week:

  • U.S. unemployment, nonfarm payrolls, Friday
    The FTSE/JSE Africa All-Share Index closed down 0.6% to 68,156, with Naspers and Prosus weighing the most, closing down 2.3% and 2.7% respectively. Resources were also on the backfoot, with the sector giving up 1.4% on the day. The property and banking sector managed to eke out some gains closing up 1.2% and 0.69% respectively. MTN was the biggest gainer in the top 40 closing up 6.7% after the release of a positive quarterly update and also announcing plans of a shares sale in its Nigerian unit. The Rand was up 0.4% to 15.22 per US$, with the Yield on 10-year govt rand bonds that fell 15.40 bps to 10.04%.
    High-level coalition talks get underway after the Independent Electoral Commission of South Africa released the final results of the Nov. 1 local government elections. The ruling African National Congress secured 46% of the ballots cast, opposition Democratic Alliance garnered 21.8% of the vote and populist Economic Freedom Fighters got 10.4%. The EFF and ActionSA, a newcomer party headed by the city’s former mayor Herman Mashaba are seen as potential king-makers in the economic hub, Johannesburg and the capital Tshwane, after the ANC failed to regain control over both metropolitans.
  • Pfizer Vaccine Effective Against Delta in South African Study
  • Top-Performing South African Fund Rides Bet on Energy Stocks
  • Afrimat Jumps Most in 9 Months as Profit Rebounds From Lockdowns
  • Truworths Group Retail Sales Decreased 1.2% Y/Y in 1Q
  • Eramet Agreed to Sell Sandouville Plant to Sibanye Stillwater
  • MTN Plans Public Offer of 575 Million Shares in Nigerian Unit
  • Gold Extends Gains After Dovish BOE Follows Fed’s Lead on Rates
  • Daily Maverick: Naspers grilled at Competition Commission inquiry
  • Moneyweb: Pluczenik Diamond Co returns to SA, partners with local entrepreneur
  • Fin24: Patrice Motsepe’s energy firm is involved in half of all the latest approved green power projects


  • 9am: Presidential Climate Commission holds briefing on just energy transition
  • 11am: Doctors Without Borders Southern Africa hosts webinar on Covid-19 medical tools and local production in Africa


  • 12pm: South Africa to Sell 1.875% I/L 2029 Bonds
  • 12pm: South Africa to Sell 2.5% I/L 2046 Bonds
  • 12pm: South Africa to Sell 2.5% I/L 2050 Bonds
  • 1pm: South Africa to Sell ZAR2.7 Bln 182-Day Bills
  • 1pm: South Africa to Sell ZAR3.8 Bln 273-Day Bills
  • 1pm: South Africa to Sell ZAR4.2 Bln 364-Day Bills
  • 1pm: South Africa to Sell ZAR1 Bln 91-Day Bills
    European stocks closed higher on Thursday as markets reacted to the U.S. Federal Reserve’s announcement that it will start to taper its bond-buying program and the Bank of England’s decision to hold rates steady for now. The pan European Stoxx 600 added 0.4% by the close, with tech climbing 1.4% to lead gains while banks dropped 2% following the Bank of England’s latest policy announcement. Market focus was on the Bank of England’s decision to hold interest rates steady, defying some investors’ expectations that it would become the first major central bank to hike rates following the pandemic. The pound was down more than 1% against the dollar after the announcement. It was a busy morning for earnings in Europe on Thursday, with Credit Suisse, BMW, Commerzbank, Deutsche Post, Tate & Lyle, BT, Monte dei Paschi di Siena, Enel and SocGen among those reporting. Credit Suisse beat analyst estimates for the third quarter, but took a hit from charges settling allegations of corruption in Mozambique and other legal issues. The Swiss bank also revealed that it expects to report a net loss in the final quarter of 2021 and said it plans to scale back its investment banking operations. French bank Societe Generale posted better-than-expected third-quarter earnings on higher revenue in its corporate and investment banking business. Shares of the bank closed up 1%. Alstria Office REIT was the biggest climber on the Stoxx 600, soaring more than 17% after the German real estate investment trust announced a 3.5 billion euro ($4.1 billion) takeover bid from Brookfield Asset Management. BT shares climbed more than 11% after a strong earnings report. At the bottom of the European blue chip index, German chemicals company Lanxess fell more than 7% after warning that increased costs would mean its 2021 core profit will come in at the lower end of its guidance range. Virgin Money U.K. dropped more than 9% after flagging cost pressures associated with its accelerated move into digital banking.

The S&P 500 rose for a sixth day in a row on Thursday as investors took solace in the Federal Reserve’s patient stance on raising interest rates. Stronger-than-expected economic data also boosted sentiment. The broad equity benchmark gained 0.4% to hit another record close of 4,680.06. The tech-heavy Nasdaq Composite rose 0.8% to an all-time closing high of 15,940.31. The Dow Jones Industrial Average dipped 33.35 points, or nearly 0.1%, from a record to 36,124.23 as Goldman Sachs and JPMorgan struggled. The central bank said it will begin to slow its bond-buying program later this month, signaling that the economy can now handle an unwinding of pandemic stimulus. Investors had long anticipated the move and liked that the Fed did not signal it would be any more aggressive than necessary in raising interest rates once the bond tapering was finished next year. On the data front, U.S. jobless claims totaled 269,000 for the week ended Oct. 30, the lowest pandemic-era total and better than the 275,000 expected. October’s hotly anticipated jobs report will be released on Friday. Consensus estimates call for 450,000 jobs added. Nonfarm payrolls increased by 194,000 in September, far short of the 500,000 estimate. Qualcomm rallied 12.7%, following an earnings beat propelled by a 56% surge in smartphone chip sales. The company also provided strong guidance for the fourth quarter. Moderna shares cratered 17.8% after the drugmaker slashed its Covid-19 vaccine revenue outlook. Roku was under pressure, falling more than 7% after the streaming platform reported disappointing third-quarter revenue.

Stocks in Asia-Pacific were mixed in Friday trade as shares in Hong Kong led losses among the region’s major markets. Hong Kong’s Hang Seng index slipped 0.95% by the afternoon, paring some losses after a more than 1% drop earlier. Mainland Chinese stocks were mixed, with the Shanghai composite down 0.24% while the Shenzhen component gained 0.17%. Shares of Chinese property developers in Hong Kong fell. China Evergrande Group slipped 2.9% while China Vanke dropped 1.5% and Sunac China Holdings plunged nearly 6%. The Hang Seng Properties index dipped 0.13%. Trading in Hong Kong-listed shares of Chinese property developer Kaisa Group and several of its units was suspended on Friday, according to exchange notices. It came after Kaisa Group said Thursday its finance unit missed a payment on a wealth management product, according to Reuters. Kaisa is the second-largest issuer of U.S. dollar denominated offshore high-yield bonds among Chinese developers, according to Natixis. Evergrande ranks first. It comes as investors continue to watch for developments in China’s property sector following the fallout from heavily indebted Evergrande. A few other Chinese real estate firms had also been under the spotlight for going into default, or missing payments on their debt. Elsewhere, Asia-Pacific stocks were mixed as South Korea’s Kospi fell 0.44%. Shares in Japan also declined as the Nikkei 225 slipped 0.77% and the Topix index shed 0.88%. The S&P/ASX 200 in Australia gained 0.43%. MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.08%. The Japanese yen traded at 113.64 per dollar, stronger than levels above 114 seen against the greenback yesterday. The Australian dollar was at $0.7396, struggling to recover after a plunge from above $0.75 earlier in the trading week.

Gold held the biggest gain in three weeks as traders pared their expectations for interest rate hikes after dovish turns from the Federal Reserve and Bank of England. Spot gold steadied at $1,793.86 an ounce, after rising 1.3% on Thursday, the most since Oct. 13. The Bloomberg Dollar Spot Index was little changed after climbing 0.4% in the previous session. Silver, platinum and palladium all advanced.
Oil advanced as investors assessed the potential supply response from the U.S. to a gradual hike in production from OPEC+, which may include the release of strategic reserves. Futures in New York rose near $80 a barrel after losing more than 6% over the past three sessions. After a brief meeting, the alliance agreed to boost output by 400,000 barrels a day in December, maintaining its modest pace of monthly increases. The White House is considering a range of tools to deal with prices, a National Security Council spokesperson said after the OPEC+ decision.
In the ferrous market, iron ore in Singapore retreated 3% to $91.15 a ton, on track for the fourth weekly drop. Prices in Dalian tumbled 3.4% while rebar and hot-rolled coil slid in Shanghai.
Meanwhile, copper and nickel are both on track for a third weekly drop. Industrial metals have been grappling with demand and economic uncertainties as concerns mount over impacts from China’s power crunch, property-developer debt crisis and coronavirus outbreaks. Copper was little changed at $9,438 a ton on the London Metal Exchange. Aluminum slipped 0.3%, while nickel edged 0.6% higher.