Stocks Fall, Futures Waver Amid Fed, Virus Risks

14/12/2021 Stocks are lower in Asia and U.S. equity futures wavered amid caution over economic risks from the omicron virus strain and central bank efforts to curb high inflation. Treasuries held gains and the dollar edged up. MSCI Inc.’s Asia Pacific share index fell for a third session, with Chinese property and technology stocks struggling. Concerns about Beijing’s crackdown on China’s indebted property sector have flared anew, hurting sentiment. The nation’s real- estate downturn likely sapped economic activity in November. S&P 500, Nasdaq 100 and European equity contracts fluctuated. The S&P 500 slid Monday from a record and the tech- heavy Nasdaq 100 underperformed. The Fed policy decision due Wednesday is among 20 central bank meetings this week that could stir market swings.
In commodities, spot gold was steady at $1,785.82 an ounce after rising 0.6% in the previous two sessions. Silver fell, while platinum and palladium advanced. Oil extended declines as an increase in OPEC’s demand forecast for next quarter was offset by uncertainty over the omicron virus variant. Brent crude fell below $74 a barrel after slipping 1% on Monday. Other raw material prices also weakened, spurring declines in commodity currencies, led by the Australian dollar. The three-month LME copper contract fell 0.4% to $9,412.5 a ton, with Iron ore futures in Singapore declining 0.8% to $114.50 a ton after jumping 6.5% on Monday.
The JSE Top 40 futures are indicating a flat opening, with Naspers and Prosus that could weigh on the market, as the Hang Seng tech index trades down 2%, with Tencent 1.7% lower and Alibaba shedding 1.6%. The Rand remains weak at around the 16.03 level vs the USD.
Here are some events to watch this week:

  • Euro zone industrial production, Tuesday.
  • U.S. PPI, Tuesday.
  • China releases November industrial output, retail sales data, Wednesday.
  • Fed rate decision, Wednesday.
  • U.S. business inventories, retail sales, empire manufacturing, Wednesday.
  • BOE rate decision, Thursday.
  • ECB rate decision, Thursday.
  • U.S. housing starts, initial jobless claims, industrial production, Thursday.
  • BOJ monetary policy decision, Friday.
  • S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
  • “Quadruple witching” day in the U.S. market, when options and futures on indexes and equities expire, Friday.
    Locally the FTSE/JSE Africa All-Share Index closed down 0.4% to 71,429.88, with most sectors ending the session in the red as traders reacted to developments regarding the omicron Covid variant and looked ahead to monetary policy decisions by some of the world’s largest central banks. The property sector closed down 1.3%, followed by the banking sector that shed 0.87% as the rand remains weak above the 16.00 per $US level, with the Yield on 10-year govt rand bonds that fell 0.60 bps to 9.94%.
    The U.K. is poised to announce as soon as Tuesday the removal of all 11 countries from its so-called Covid-19 red list, ending mandatory hotel quarantine for travelers arriving from the riskiest countries.
  • S. Africa’s JSE Creates Private Placement Platform for Companies
  • African Bank to Create Business Banking Unit as It Expands
  • Wave of Rate Hikes No Cure to Emerging-Market FX Weakness
  • MTN Wins First 5G License in Africa’s Most Populous Country
  • Mine Worker Dies at Harmony Gold’s Kusasalethu Operation
  • Nigeria Tax Tribunal Adjourns Multichoice Tax Case Indefinitely
  • Bosnia’s Aluminij, Glencore Sign Supply and Offtake Agreement
  • Shoprite Sets Up On-Demand Delivery Joint Venture With RTT Group
  • Moneyweb: Christo Wiese takes R414m bet on Shoprite

ECONOMIC DATA:

  • 10am: 4Q BER Consumer Confidence, prior -10

GOVERNMENT:

  • Health Minister Joe Phaahla to receive Johnson & Johnson booster shot
  • Deputy President David Mabuza expected to chair National Coronavirus Command Council meeting

BOND SALES/PURCHASES:

  • 12pm: South Africa to Sell ZAR1.3 Bln 8.25% 2032 Bonds
  • 12pm: South Africa to Sell ZAR1.3 Bln 8.5% 2037 Bonds
  • 12pm: South Africa to Sell ZAR1.3 Bln 8.75% 2048 Bonds

EU/UK
European stocks slipped on Monday as traders reacted to developments regarding the omicron Covid variant and looked ahead to monetary policy decisions by some of the world’s largest central banks. The pan-European Stoxx 600 closed lower by 0.4%, with most sectors and major bourses in negative territory. The U.K. on Sunday raised its Covid threat level, with Prime Minister Boris Johnson warning of a “tidal wave” of Covid cases as a result of omicron. From this week, booster jabs will also be offered to all adults in England. On the data front in Europe, investors will be watching the Bank of England’s financial stability report and U.K. stress test results. Bank chief Andrew Bailey is expected to hold a press conference at 5:30 p.m. London time. When it comes to individual stock action, Credit Suisse announced an overhaul of its executive board early Monday. Shares were down 1.7%.
Meanwhile, Vifor shares jumped 18% after confirming that it was in merger talks with Australia’s CSL.

US
The S&P 500 pulled back Monday as investors remained cautious about how the omicron variant will affect the economy and what the Federal Reserve will announce Wednesday. The S&P 500 fell 0.9% to 4,668.97 and sits about 1.6% from its intraday record. The Dow Jones Industrial Average traded 320 points lower to 35,650.95, dragged down by a 3.7% drop in Boeing’s stock. The technology-focused Nasdaq Composite fell nearly 1.4% to 15,413.28. Reopening plays like airlines and cruise lines were some of the biggest losers on Monday. American Airlines fell 4.9%, and Delta Air Lines dropped 3.4%. United Airlines lost 5.2%. Carnival Corp. ticked about 4.9% lower. On the positive side, Moderna shares rose 5.8% a day after the White House’s top infectious disease expert Dr. Anthony Fauci called Covid booster shots “optimal care,” but said the definition of fully vaccinated would not change. Israeli researchers at the Sheba Medical Center and the Health Ministry’s Central Virology Laboratory concluded on Saturday that the three-shot course of the Pfizer-BioNTech Covid-19 vaccine was effective against the new omicron variant. Pfizer shares rose about 4.6%.

ASIA
Chinese stocks declined on Tuesday, tracking other losses in Asia-Pacific markets, as the omicron variant returned to focus. Meanwhile, bitcoin prices continued to tumble after some losses overnight. Hong Kong’s Hang Seng index led losses, tumbling 1.27%. Tech stocks dipped, with Alibaba down 1.65%, Tencent losing over 1%. JD tumbled more than 2%. The Hang Seng tech index was down about 2%. Shares of Chinese social media giant Weibo dropped more than 9%, as China’s cyberspace regulator says it has fined the firm’s operator three million yuan ($471,151). Since its trading debut in Hong Kong last week, the stock has lost over 10%. Meanwhile, Chinese telecommunications operator China Mobile announced in a filing that it has received approval from regulators for a secondary listing in Shanghai, for an offering of up to 845.87 million shares. Mainland Chinese shares were also in negative territory. The Shanghai composite was down 0.6%, while the Shenzhen component dipped 0.5%. Japan’s Nikkei 225 lost 0.48%, while the Topix was flat. Taiwan’s Taiex fell nearly 1%. South Korea’s Kospi fell 0.65%, with tech names in the red. SLG Electronics was down 2.61%. Australia’s S&P/ASX 200 dipped marginally, hovering near the flatline. The Japanese yen traded at 113.62 per dollar, weakening from around 113.2 in earlier sessions. The Australian dollar was at $0.7112, falling back from earlier levels of around $0.713.

COMMODITIES
Gold was steady after two days of gains as investors continued to assess elevated inflation and the threat of the omicron variant of the coronavirus before a meeting of the Federal Reserve starting Tuesday. Spot gold was steady at $1,785.82 an ounce after rising 0.6% in the previous two sessions. Silver fell, while platinum and palladium advanced.
Oil extended declines as an increase in OPEC’s demand forecast for next quarter was offset by uncertainty over the omicron virus variant. Brent crude fell below $74 a barrel after slipping 1% on Monday. The Organization of Petroleum Exporting Countries boosted estimates for oil consumption in the first quarter by 1.1 million barrels a day in its monthly report from the group’s research department. The cartel said it still sees a surplus, however.
Copper is lower in early Asian trade as the metal builds up in LME inventories. Monday marked the fourth consecutive day of stockpile gains, however, the base metals complex can find support amid expectations of further stimulus measures in China, after Beijing signaled that it would focus on economic stability at the recently concluded Central Economic Work Conference. The three-month LME copper contract falls 0.4% to $9,412.5 a ton. Other metals were mixed, with Zinc for delivery in three months’ time advanced as traders weighed an easing in nearby supplies against the possibility of production cuts at European smelters because of elevated energy costs. The spot contract on the London Metal Exchange traded at a premium of $18.50 a ton over three-month futures. That’s down from $130.50 at the end of November, which was the widest so- called backwardation since 2019 on a lack of nearby supplies.
Iron ore mostly held onto a jump in prices on Monday as traders weighed the outlook for China’s economy in 2022 and counted down to industrial production figures due on Wednesday. Iron ore futures in Singapore declined 0.8% to $114.50 a ton after jumping 6.5% on Monday. Prices fell in Dalian, while steel rebar and hot-rolled coil futures dropped in Shanghai.