Asian Stock Markets Wobble, Wall Street Extend Gains, Dollar Firm

17/11/2021 The dollar is near its highest level in a year, more that 4 years high against the yen, after better-than-expected U.S. retail data on Tuesday which boosted Wall Street – although Asian shares failed to follow suit. U.S. retail sales rose faster-than-expected in October, somewhat encouraging the U.S. Federal Reserve to accelerate the tapering of its asset purchase programme as inflation remains stubbornly high. MSCI’s broadest index of Asia-Pacific ex. Japan slipped 0.41%; with declines in Japan, Hong Kong and Australia. The dollar reached a high of 114.97 yen in early Asian hours, its strongest since March 2017, while the euro languished at a 16-month low at $1.1320. U.S futures little changed, while European contracts were marginally in the red. Traders are waiting to see the strength of demand at an auction of 20-year notes Wednesday. The ten-year treasuries held above 1.60%.

The UK releases its October CPI inflation data today, 09H00 local time. A high print is likely to add pressure on the BOE to raise rates in December after surprising markets by holding fire last month.

Oil prices dropped after U.S. gasoline stocks fell more than expected last week. U.S. West Texas Intermediate crude futures fell 60 cents, or 0.74%, to $80.47 a barrel. Brent crude futures fell 55 cents, or 0.67%, to $81.89, erasing a 53 cent gain from Tuesday.

Spot gold rose 0.25% to $1,854.55 an ounce, climbing back towards the five-month high of $1,876.9 hit a day earlier on rising inflation concerns. Rival inflation hedge Bitcoin was steady around $60,240 having shed 5% a day earlier and briefly falling below $60,000.

What to watch this week:
• Euro region CPI. Wednesday
• U.S. housing starts. Wednesday
• Conference Board U.S. leading index, initial jobless claims. Thursday
• Fed’s Richard Clarida and Mary Daly speak at Asia Economic Policy Conference. Friday

The rand came under pressure late Tuesday afternoon just after the publishing of the U.S retail sales data. The local currency drifted from R15.20/$ to just about R15.53/$, currently, as the dollar marched ahead towards 12-month high. This “bad move” comes ahead of interest rate decision on Thursday. According to Bloomberg’s survey, the SARB will probably raise rates by 25 basis points to 3.75% when its monetary policy committee wraps up its scheduled meeting on Thursday. Policymakers around the world are under pressure to rein in rising prices without jeopardising fragile global economic recovery. Turkey’s lira plunged nearly 4% to a new record low of 10.45 to the dollar on Tuesday, as Turkey signalled it would cut rates at its next policy meeting on Thursday.

The All-share gained for straight five sessions on Tuesday to close 1.21% higher at 70,938.41 points, Top-40 added 1.26%. Precious metals rose 3%, industrials 1.55%, resources 1.53% and industrial metals 1.07%. Naspers gained the most in more than a month, despite reporting in the afternoon that HEPS for the six months to end-September could fall as much as 12%, partly due to higher finance costs.

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• 7am: Spar (SPP SJ), FY
• 8am: Brait (BAT SJ), 1H
• Woolworths (WHL SJ) trading update expected
• 10am: Oct. CPI MoM, est. 0.2%, prior 0.2%
• 10am: Oct. CPI Core MoM, est. 0.2%, prior 0.3%
• 10am: Oct. CPI Core YoY, est. 3.2%, prior 3.2%
• 1pm: Sept. Retail Sales, est. 2.6%, prior 4.9%
• 1pm: Sept. Retail Sales Constant YoY, est. 0.7%, prior -1.3%

European stock markets extended their record rally on Tuesday, boosted by shares of Prosus and French luxury group Kering and lifted by optimism over easing in U.S.-China tensions. The pan-European Stoxx 600 was last up 0.24%, while Germany’s DAX was 0.61% firmer and France’s CAC 40 pushed 0.34% higher. Prosus NV rose 4.2% after forecasting higher profit for the first half of 2022 as it raised $12.3 billion from selling part of its stake in Tencent in April. Kering advanced 4.4% after its top brand Gucci said it expected 2021 revenues to be in line or higher than their pre-pandemic level. HSBC upgraded the stock to “buy”. Euro zone GDP rose 2.2% quarter-on-quarter in the July-September period, as expected. The telecom sector was boosted by a 0.5% jump in Vodafone after the company lifted its annual free cash flow outlook. The UK unemployment rate fell to 4.3% in the three months to September from 4.5% in August, coming in slightly below consensus expectations of 4.4%. FTSE100 futures drifting lower -35points, alongside Dax futures on the back foot -38 points.

Wall Street stocks closed higher as market participants digested important retail sales report. The Dow Jones Industrial Average was up 0.15%, while the S&P500 was 0.39% firmer and the Nasdaq Composite saw out the session 0.76% stronger. US retail sales grew at a quicker than expected pace last month, driven by an early start to holiday shopping. Retail giant Walmart suggested it’s bracing for more pressure from global transportation snarls despite a broadly positive outlook. President Joe Biden told reporters to expect him to announce a nominee for Federal Reserve chair in “about four days.”

Japanese shares reversed early gains as concerns over rising costs and a weaker yen outweighed gains made by technology heavyweights after a strong finish on Wall Street. The yen’s weakness against the dollar is good for some companies but also a negative factor for others. The Nikkei share average fell 0.4%. Hong Kong benchmark slipped 0.52%, weighed by property developers and casinos. China’s blue chip CSI300 was flat. Australian shares slipped 1.02%, weighed by Commonwealth Bank of Australia, the country’s largest bank, whose shares slipped 6% after it flagged hit to margins from the low interest rate environment and mortgage competition.