Asia-pacific Shares Dip On Inflation Risks, Crude Oil Retreats, Havens Shine

18/11/2021 Shares in Asian stock markets took a dive on Thursday as a hint of uneasiness crept in over the outlook for interest rates and global economic growth recovery. Safe havens such as government bonds, gold and the yen were supported in Asia. Markets slipped in Japan and China, while Australia remained flat. The mood was soft t in Hong Kong where concern over the earnings outlook weighed on tech stock. Alibaba dropped almost 5%, alongside Tencent sliding 2.5% during the day. European contracts were marginally in the red. Both the Dow futures and S&P500 futures fluctuated, while the Nasdaq futures rose. U.S. shares pulled back overnight amid home building data signalling high materials prices and labour shortages.
Traders are also waiting to see if President Joe Biden picks incumbent Jerome Powell or Lael Brainard as the Fed chair nominee.

Gold steady at $1,865 an ounce. The yen edged up to 113.94/$. Benchmark 10-year Treasury yields were steady in at 1.5889% after falling about 5.5 basis points overnight.
Oil: Reuters reported that the U.S was asking major oil consumers like China and Japan to consider a coordinated release of oil reserves to lower prices. U.S. crude was down 82 cents or 1.01% at $77.4 a barrel this morning, having fallen 3% overnight. Brent crude fell 44 cents or 0.55% to $79.84 a barrel after falling 2.6% to the lowest close since early October on Wednesday.

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

SARB MPC is scheduled to announce its latest interest-rate decision from 3pm local time. Of the 21 economists in a Bloomberg survey, 11 predict a 25-basis-point hike in the policy rate to 3.75%, with the rest expecting the central bank to hold. Local CPI was unchanged at 5% in October from the month before, in line with expectations, but at the higher end of the Bank’s 3%-6% target range. In light of higher short-term inflation pressures resulting from food and fuel, the SARB may opt to act pre-emptively to keep inflation expectations anchored. Policymakers around the world are under pressure to rein in rising prices without jeopardizing fragile global economic recovery.

The local bourse was unchanged on Wednesday, closing flat 0.01% at 70,942 points. Top-40 edged up 0.09%, with Woolies dragging along some of the retailers down with after the retailer announced a drop in profits for its 2022 half-year, weighed down by extended lockdowns in Australia and civil unrest and power cuts in SA. Spar slid over 7% on weak full-year performance. Top-40 futures are down -350 points, on IG markets.

The rand trades near 10-month low before today’s MPC’ meeting, R15.4650/$ this morning. The local currency is trading at its weakest level since January and is under strain from pressure on the Turkish lira. The rand, often a barometer of sentiment towards emerging market currencies, was also caught up as investors punished the Turkish lira over an anticipated rate cut. T

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European shares closed mixed on Wednesday, with the UK’s FTSE100 skidding while the DAX and CAC-40 managed to stay above the waterline. The pan-European Stoxx 600 was last up 0.17%, while Germany’s DAX was 0.02% firmer, and the CAC 40 in France gained 0.06%. The FTSE 100 ended down 0.5% , while the pound was 0.4% higher versus the dollar and the euro at 1.3480. Sterling gained after the latest UK inflation figures reinforced expectations of a rate hike. Central banks have been struggling to judge whether rising prices are the result of short-term factors as economies reopen, or were becoming entrenched. Richemont extended its rally for a fifth day, up 0.6% to an all-time high, after a slew of price target raises by brokers.
U.S stock futures opened mixed with investors giving back some gains as jitters over inflation remained and overshadowed the latest batch of solid corporate earnings results. Dow futures marginally down 0.05%, S&P500 up 0.10%, Nasdaq futures gaining 0.20%. Wall Street slipped on Wednesday as quarterly earnings reports from retailers, including Target Corp., contributed to investor concern over rising inflation. Visa shares slumped after Amazon stated it would cease to accept payments made via its UK-issued credit cards from 2022, while Boeing was in the green after the company received a $9.0bn order from Alaska Air for its 737 MAX aircraft. The Dow Jones gave up almost 0.60% at the close, alongside the S&P500 retreating 0.26%, and the Nasdaq 0.33% weaker at the end of the day. On Wednesday figures showed a jump in building permits and the backlog of house construction rose to a 15-year high – underscoring strong demand on the heels of a better-than-expected retail sales report on Tuesday.

Japanese shares eased on Thursday, with cyclicals and oil companies leading losses, after Wall Street’s rally took a breather on worries about inflation. The Nikkei225 share average down 0.77% at the writing. Australia’s S&P/ASX 200 up 0.27%, wirth real estate and health sector leading the index. Country Garden Services, the property management unit of China’s top developer Country Garden, is selling 150 million new shares (4.5% of the enlarged shares and the selling price represents a 9.5% discount to the last traded price). Hang Seng drifting lower 1.35%, alongside the Shanghai Composite on the backfoot 0.13%