Stocks Skid on Tech as Policy Tightening Saps Mood / Nasdaq drops nearly 2.5%

17/12/2021 Stocks fell Friday amid a drop in technology shares as tightening monetary policy to fight inflation buffets sentiment, while growth risks from the omicron virus variant helped to sustain demand for Treasuries. MSCI Inc.’s Asia-Pacific index was down for the fifth session in six, with Chinese tech stocks sliding more than 2%. U.S. and European equity futures are all lower, after the Nasdaq 100 sank the most since September. The gauge skidded on reduced ardor for more richly valued tech plays amid the Federal Reserve’s pivot toward reducing outsized stimulus. The 10-year Treasury yield pared some of a decline from U.S. hours. Continued demand for Treasuries potentially reflects worries that the fast-spreading omicron strain will spark curbs that dim the economic outlook. A dollar gauge ticked up but remained in sight of a third- straight weekly drop.
Oil fell for the first time in three days on concerns about the demand impact from the omicron variant and tighter monetary policy. Futures in New York dropped below $72 a barrel after rising 2.3% over the past two sessions. Gold headed for the first weekly advance since the middle of November after the dollar tumbled overnight following several central bank announcements on monetary policy. Spot gold rose 0.2% to $1,803.08 an ounce. Silver, platinum and palladium dropped, after palladium posted the biggest gain since March 2020 on Thursday. Zinc traded near the highest level since the end of October as another smelter in Europe curbed production after an energy crunch sent regional power prices soaring. Zinc traded at $3,410 a ton. Other metals were mostly higher, led by a 0.8% gain in aluminum. Iron ore in Singapore gained 0.5% to $117.55 a ton. Prices also rose 0.5% in Dalian, while steel rebar and hot- rolled coil fell in Shanghai.
The JSE Top 40 futures are indicating a better start up 220 points or 0.34%, with Naspers and Prosus that could weigh on the market once again, as Tencent trades 2.8% lower in HK, with the Ausi metals & mining index up 1.4%. The Rand trades slightly better at around the 15.92 level vs the USD.
Here are some events to watch this week:

  • 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.
    Local markets were closed due to a public holiday (16 December: Day of Reconciliation), with the Rand that was little changed at 15.97 per US$.
    South Africa’s High Court to hear case brought to halt Royal Dutch Shell Plc’s seismic survey off the Wild Coast.
  • South Africa Records 24,785 Covid-19 Cases on Dec. 16
  • South African Covid-19 Hospitalizations at 7,614, 6.7% in ICU
  • South Africa to Eschew Tougher Virus Curbs Over Festive Season
  • Fitch Unexpectedly Upgrades South Africa Outlook to Stable
  • Moderna to Begin Africa Covid-19 Vaccine Trial in HIV Patients
  • Omicron Shield Rises on Two Pfizer Shots and Prior Infection
  • Rogoff Warns of ‘Accident Waiting to Happen’ in Emerging Markets
  • Shell says blasts won’t cause harm so new court application is not urgent

GOVERNMENT:

  • National health department holds virus briefing
  • Executive committee of South Africa’s ruling party holds two- day meeting

BOND SALES/PURCHASES:

  • 12pm: South Africa to Sell 2.5% I/L 2046 Bonds
  • 12pm: South Africa to Sell 1.875% I/L 2033 Bonds
  • 12pm: South Africa to Sell 2.5% I/L 2050 Bonds
  • 1pm: South Africa to Sell ZAR4.2 Bln 364-Day Bills
  • 1pm: South Africa to Sell ZAR3.8 Bln 273-Day Bills
  • 1pm: South Africa to Sell ZAR1 Bln 91-Day Bills
  • 1pm: South Africa to Sell ZAR2.7 Bln 182-Day Bills

EU/UK
European stocks jumped on Thursday as investors in the region digested monetary policy decisions from several major central banks. The pan-European Stoxx 600 ended the day up 1.2%, with oil and gas stocks jumping 2.8% to lead gains as all sectors and major bourses traded in positive territory. The Bank of England on Thursday hiked interest rates for the first time since the onset of the pandemic, despite concerns over the rapid spread of the omicron variant in the U.K. The Bank increased its main interest rate to 0.25% from its historic low of 0.1% as inflation pressures mount, arguing that the economic data satisfied policymakers’ criteria for a hike, while the impact of the variant remains uncertain. The European Central Bank further cut its bond purchases on Thursday but vowed to continue its unprecedented monetary policy support for the euro zone economy into 2022. The ECB left its benchmark refinancing rate unchanged at 0%, while the rate on its marginal lending facility remained at 0.25% and the rate on its deposit facility was kept at -0.5%, in line with expectations. In terms of individual share price movement, British online retail group THG gained 8.1% to lead the Stoxx 600 while at the bottom of the index, EDF shares plunged 15.5% after faults were found at one of its French nuclear power stations, leading the utility giant to cut its core profit goal for the year.

US
U.S. stocks slid on Thursday as weakness among large tech stocks dragged down major market averages.
The tech-heavy Nasdaq Composite fell 2.47% for its worst day since September, closing at 15,180.43. The S&P 500 shed 0.87% to 4,668.67. The Dow Jones Industrial lost a modest 29.79 points, or 0.08%, after being up more than 200 points earlier in the session, closing at 35,897.64.
Thursday’s trading action was marked by struggles for some large tech names, with Apple falling 3.9% and major semiconductor stocks like AMD and Nvidia dropping nearly 5.4% and 6.8%, respectively. Shares of Adobe fell more than 10% after the company’s forward guidance came in lower than analysts expected. Bank stocks helped the Dow hold up better than its counterparts, with Goldman Sachs rising 1.9% and JPMorgan adding nearly 1.6%. Shares of Verizon jumped more than 4% to be one of the best performers in the Dow.
Thursday’s moves erased much of a rally in the previous session that was spared by the Federal Reserve announcing a more aggressive plan to wind down its asset purchases and hike rates in 2022. On the economic data front, weekly jobless claims came in slightly higher than expected, while housing starts for November were much stronger than economists projected after declining in the prior month.

ASIA
Asia-Pacific markets traded mostly lower on Friday, following overnight losses on Wall Street, as investors assessed monetary policy decisions from two key central banks. Japan’s Nikkei 225 fell 0.92% while the Topix index slid 0.7%. Chinese mainland shares also tumbled, with the Shanghai composite falling 0.59% while the Shenzhen component shed 1%. In Hong Kong, the Hang Seng index slipped 0.79% while the tech-focused Hang Seng Tech Index dropped 2.14%. Hong Kong-listed shares of Chinese tech companies sold off sharply: Alibaba shares fell 3.07%, JD was down 3.65%, Meituan declined 3.27%, search engine giant Baidu tumbled 1.01% and Tencent slipped 2.25%. The United States on Thursday said it was imposing trade restrictions on more than 30 Chinese research institutes and entities over human rights violations and the alleged development of technologies, such as brain-control weapons, that undermine U.S. national security. South Korea’s Kospi traded near flat, up just 0.06% after erasing earlier losses. In Australia, shares bucked the downward trend with the benchmark ASX 200 gaining 0.68%. Friday’s session follows overnight declines on Wall Street where weakness among large tech stocks dragged down major market averages. The Japanese yen strengthened from above 114 to 113.65 against the greenback while the Australian dollar changed hands at $0.7173, down some 0.14%.

COMMODITIES
Gold headed for the first weekly advance since the middle of November after the dollar tumbled overnight following several central bank announcements on monetary policy. Spot gold rose 0.2% to $1,803.08 an ounce and is set for a 1.1% gain this week. The Bloomberg Dollar Spot Index edged higher after dropping 0.5% in the previous session. Silver, platinum and palladium dropped, after palladium posted the biggest gain since March 2020 on Thursday.
Oil fell for the first time in three days on concerns about the demand impact from the omicron variant and tighter monetary policy. Futures in New York dropped below $72 a barrel after rising 2.3% over the past two sessions. Daily Covid-19 cases in the U.K. have jumped to a record, while hospitalizations have surged across the U.S. The Bank of England unexpectedly raised interest rates for the first time since the pandemic struck in a sign that inflation is now of bigger concern to leading central banks than the virus. Signs are also emerging of softening oil demand in Asia, while the International Energy Agency said this week that the global market had returned to surplus as omicron impedes travel. The weakness is showing up in the market’s structure, with Brent momentarily flipping into a bearish contango on Tuesday.London copper prices held steady on Wednesday as investors cautiously awaited cues on how soon the U.S. Federal Reserve would start raising interest rates, while sentiment got a lift amid hopes of further stimulus measures from top consumer China.
Zinc traded near the highest level since the end of October as another smelter in Europe curbed production after an energy crunch sent regional power prices soaring. Nyrstar, a leading global producer owned by Trafigura Group, said it will halt production at a smelter in France in the first week of January. Nyrstar’s plant in Auby, in northern France, has been running at reduced capacity since October and the other two plants in the Netherlands and Belgium have also been operating at a reduced rate, and will continue to do so, it said. Zinc traded at $3,410 a ton. Other metals were mostly higher, led by a 0.8% gain in aluminum.

Iron ore futures are heading for a fifth week of gains, the longest winning stretch since May, as China’s steel output shows signs of rebounding and on optimism the government will add fiscal stimulus in 2022. Iron ore in Singapore gained 0.5% to $117.55 a ton. Prices also rose 0.5% in Dalian, while steel rebar and hot- rolled coil fell in Shanghai.