Global Stock Rebound Moderates as Dollar Advances

22/12/2021 A global rebound in stocks moderated in Asia on Wednesday amid uncertainty over the omicron virus strain’s economic impact and a foggy outlook for U.S. fiscal stimulus. Equities in Japan and China were steady, while Hong Kong pared gains as a rally in technology shares eased. U.S. futures turned lower and European contracts made modest gains. The S&P 500 and the tech-heavy Nasdaq 100 jumped on Tuesday as risk appetite revived somewhat. Sentiment got a boost after President Joe Biden said he still has a chance to strike a deal with Senator Joe Manchin to get his roughly $2 trillion economic plan, Build Back Better, through Congress.
Oil extended gains after an industry report pointed to another decline in U.S. crude inventories, while an energy crunch in Europe raised the prospect of greater demand for crude products in power generation. Futures in New York advanced toward $72 a barrel after rallying on Tuesday. Spot gold was steady at $1,789.76 an ounce as a global rebound in stocks moderated. Platinum declined 0.1%, while silver was little changed and palladium rose. Copper held onto two days of gains at $9,525 a ton, with Iron ore futures in Singapore that have averaged $157 so far in 2021, and are trading around $128 early morning.
We in for a flat start with the Top 40 futures barely giving us any direction. Tencent trades flat in HK, with the Ausi Metals & Mining index 0.41% lower. The Rand is weaker at around the 15.89 level vs the USD.
Here are some events to watch this week:

  • EIA crude oil inventory report Wednesday
  • Bank of Japan Governor Haruhiko Kuroda speaks Thursday
  • U.S. consumer income , new home sales, U.S. durable goods, University of Michigan consumer sentiment, initial jobless claims. Thursday
  • Friday: U.S. markets are closed. European markets close earlier
    Locally it was a complete opposite of the previous session with the FTSE/JSE Africa All-Share Index that closed up 1.5% to 71,119.36. Resources gained the most, with the sector adding 3% recovering most of the previous day’s losses. Sibanye (+4.7%), Impala (+4.4%), Northam Plats (+3.3%), were amongst the biggest winners, with Sasol surging 3.6% on a turnaround in oil prices. Banks and retailers also ended the session in the green despite a slightly weaker rand, with both sectors recovering some of the previous session’s losses, ending the day up 2.9% and 0.58% respectively. Naspers weighed somewhat, with heaven stocks like Clicks, Shoprite and Woolworths in negative territory. The Rand was down 0.7% to 15.87 per US$, with the Yield on 10-year govt rand bonds that rose 11.20 bps to 9.81 %.
    South Africa’s battle to resolve a vaccine hesitancy problem was laid out in full after research showed a quarter of the country’s uninoculated say they believe a shot will harm or kill them. One in Four Unvaccinated South Africans Insist Shots Are Unsafe
  • South Africa Reports 15,424 Covid-19 Cases, Positivity 27.6%
  • South African Covid Hospitalizations at 9,023 With 6.8% in ICU
  • South African Court Permits Zuma to Appeal Return-to-Jail Order
  • Omicron Set to Halve Fourth Quarter Global Economic Growth
  • Walmart Extends Term of Part of 4 Billion Rand Loan to Massmart
  • MEDIA SUMMARIES:
  • Fin24: Activists file leave to appeal failed bid against Shell’s Wild Coast blasting
  • Reuters Africa: Travel ban on southern Africa ‘inefficient’ but EU states oppose lifting – top official
    EU/UK
    European markets closed higher on Tuesday after the previous session’s sell-off, with concerns over the omicron Covid-19 variant still hanging over global stocks. The pan-European Stoxx 600 provisionally ended around 1.4% higher, retracing much of Monday’s loss. Travel and leisure stocks jumped 3.5% to lead gains as all sectors and major bourses ended the session in positive territory. European shares grabbed the baton from their counterparts in Asia-Pacific, where a bounce back for Japanese markets led broad regional gains overnight. Following a lengthy Cabinet meeting on Monday, U.K. Prime Minister Boris Johnson decided against imposing more stringent social restrictions over the Christmas period but refused to rule out new measures in the near future. Moderna announced Monday that the booster dose of its Covid-19 vaccine had shown itself to be effective against the omicron variant in laboratory testing. Meanwhile, the European Union has approved the use of Novavax’s vaccine in people aged 18 or over, making it the fifth shot available for use within the bloc. Central bank policymakers also continue to assess the outlook for inflation, and European Central Bank Vice President Luis de Guindos conceded Monday that spiking inflation in the euro zone will not be as temporary as the ECB first expected. On the data front, a flash euro zone consumer confidence reading for December is due at 3 p.m. London time. In terms of individual share price movement, French transportation conglomerate Bolloré jumped 12.5% after receiving a $6.4 billion bid from Mediterranean Shipping Company (MSC) for its African logistics assets. At the bottom of the European blue chip index, Swiss online pharmacy Zur Rose Group fell 16% after the introduction of e-prescriptions was postponed in Germany.

US
The major averages rebounded sharply on Tuesday following three days of losses amid fears about the fast-spreading Covid omicron variant. The Dow Jones Industrial Average gained 560.54 points, or 1.6%, to 35,492.70, helped by gains in Nike and Boeing. The S&P 500 jumped nearly 1.8% to 4,649.23 as nine of the 11 sectors registered gains. The technology-focused Nasdaq Composite added 2.4% to 15,341.09. The small-cap benchmark Russell 2000 climbed 2.9% for its best day since July 20. Reopening plays, like airlines, cruise lines and entertainment stocks, saw some relief buying on Tuesday. Delta Air Lines rose 5.9%, United Airlines gained nearly 6.9% and Carnival added about 8.7%. Las Vegas Sands surged 8.4%. Boeing rallied 5.8%. President Joe Biden said in a Tuesday address that people with booster shots are “highly protected,” urging Americans to get their extra doses. The president reiterated that the U.S. is not going back to March 2020 at the height of the initial outbreak where the country went into a forced lockdown. Micron shares surged more than 10% after the memory-chip maker posted much better than expected earnings for the prior quarter and gave bullish guidance. NXP Semiconductors gained 3%, and Advanced Micro Devices added 6.2%. Nike shares jumped 6.1% after the sneaker maker reported quarterly earnings and sales that exceeded analysts’ expectations, despite ongoing supply chain pressures. Other retailers like Gap, Dick’s Sporting Goods and Macy’s also gained. The 10-year Treasury yield rebounded to nearly 1.5% after concerns regarding omicron slowing the recovery dragged it down as low as 1.36% late last week. Oil bounced back to above $70 a barrel, settling at $71.12. This spurred a rebound in energy names like Devon Energy, ConocoPhillps and Chevron.

ASIA
Shares in Asia-Pacific were higher in Wednesday trade as investors continued to assess the impact of the omicron Covid variant. Hong Kong’s Hang Seng index gained 0.33%, paring earlier gains of more than 1%. Mainland Chinese stocks were higher, with the Shanghai composite hovering above the flatline and the Shenzhen component advancing 0.683%. In Japan, the Nikkei 225 sat 0.15% higher, paring earlier gains. The Topix index climbed 0.13%. South Korea’s Kospi gained 0.21%. Elsewhere, the S&P/ASX 200 in Australia recovered from earlier losses as it advanced around 0.1%. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.31%. Singapore travel stocks fell in Wednesday trade after the country’s health ministry announced a freezing of new ticket sales for quarantine-free travel starting Thursday in a bid to limit exposure to imported omicron cases. Shares of Singapore Airlines fell 0.82% while SATS declined 0.52%. The broader Straits Times index in Singapore hovered fractionally higher. Those moves contrasted against gains largely seen elsewhere in the region for travel stocks. Japan Airlines shares in Japan surged 3.49% while ANA Holdings rose 1.75%. Australia’s Qantas Airways climbed 0.52%. In Hong Kong, shares of Cathay Pacific were up 1.11% while China Eastern Airlines slipped 1.05%. In Hong Kong, shares of Chinese tech giants pared earlier gains but remained in positive territory. Alibaba was up 0.44% while Tencent gained 0.18% and Meituan advanced 0.96%. The Hang Seng Tech index traded 0.77% higher. Over in Japan, Softbank Group’s stock gained 0.39% while South Korea-listed shares of chipmaker SK Hynix climbed 2.01% and Kakao Games added 2.72%. Those moves followed similar gains by their U.S. counterparts overnight, with the Nasdaq Composite jumping 2.4% to 15,341.09. The Japanese yen traded at 114.10 per dollar following a recent weakening from levels below 113.7 against the greenback. The Australian dollar was at $0.7127 after climbing from below 0.712 earlier this week.

COMMODITIES
Gold steadied as a global rebound in stocks moderated, with investors grappling with uncertainty over the omicron virus strain’s impact and an unclear outlook for President Joe Biden’s economic agenda. Spot gold was steady at $1,789.76 an ounce by 9:59 a.m. in Singapore. Platinum declined 0.1%, while silver was little changed and palladium rose.
Oil extended gains after an industry report pointed to another decline in U.S. crude inventories, while an energy crunch in Europe raised the prospect of greater demand for crude products in power generation. Futures in New York advanced toward $72 a barrel after rallying on Tuesday with other financial assets following a two- day slump. The American Petroleum Institute reported crude stockpiles declined by 3.67 million barrels last week, according to people familiar with the figures. If confirmed by government data later on Wednesday, it would be a fourth weekly draw.

Copper held onto two days of gains amid positive signs over the outlook for treatment of Covid-19 and for President Joe Biden’s roughly $2 trillion economic agenda. Copper is higher this week as investors expect more monetary easing in China that could bolster demand in the top commodities consumer. Prices were at $9,525 a ton on the London Metal Exchange by 10:58 a.m. in Shanghai after rising almost 1% on Tuesday. Other metals were mixed.
Iron ore, a barometer for the Chinese economy and driver of the Australian dollar, is probably having its wildest year ever. Prices jumped to a record above $230 a ton in May, crashed to about $85 in November on a government pledge to reduce steel output, and have now rallied 50% in just six weeks. “Iron ore demand will broadly, gradually decline,” said CITIC Futures Co. analyst Zeng Ning. “The property industry is rather weak, steel consumption is likely to contract and more mills will use scrap to reduce emissions.” The brokerage expects China’s steel output to fall by 50 million tons in 2022. The country buys about 70% of the world’s seaborne iron ore and is set to produce 1.03 billion tons of steel this year, more than half of global supply. In terms of what this all means for prices, UBS Group AG expects iron ore to average $85 a ton in 2022, while Citigroup Inc. sees $96. Capital Economics Ltd. predicts $70 by the end of next year. Futures in Singapore have averaged $157 so far in 2021, and traded around $128 on Wednesday, up for a fifth day.