Stocks Climb as Virus Studies Stir Recovery Hopes

23/12/2021 Stocks advanced Thursday after the latest coronavirus studies stirred hopes that the global recovery can weather the omicron flareup. Japan helped MSCI Inc.’s Asia-Pacific share index rise for a third day. Technology stocks in Hong Kong lagged amid a slide in JD.com Inc. on Tencent Holdings Ltd.’s plan to distribute shares in the online retailer as a one-time dividend. Trading volumes thinned in many markets ahead of Christmas. European futures were in the green and U.S. contracts were steady after the S&P 500 closed in on its record high. Brighter U.S. consumer confidence and home sales aided sentiment, as did studies signaling omicron may be less likely to land patients in hospital than the delta variant. But officials remain cautious since omicron spreads quickly. In China, the city of Xi’an was locked down to curb a Covid outbreak, the latest escalation in the nation’s efforts to extinguish local transmission of the delta strain.
Oil extended gains after U.S. crude stockpiles declined more than expected. Futures in New York rose near $73 a barrel after climbing 2.3% on Wednesday. Spot gold advanced 0.2% to $1,806.65, with Silver little changed after rising 1.3% on Wednesday. Palladium declined 0.8% after surging more than 7% in two days, while platinum was steady after a 3.2% climb on Wednesday. Zinc’s benchmark January contract rose as much as 3.1%, its highest since Oct. 27. Aluminium for January delivery jumped 2.6%, with copper up 0.2% at $9,625 a ton, extending gains to a fourth day. Iron ore declined for a second day as rising inventories in China take the steam out of a six-week rally, falling 1.2% to $124.25 a ton.
We in for a better start with IG markets calling us up over 700 points. Tencent is up 4.2% in HK, after the company announced it will distribute majority of its shares in JD.com to its shareholders, effectively diluting its stake in the e-commerce firm from around 17% to approximately 2.3%. The Rand is stronger at around the 15.73 level vs the USD.
Here are some events to watch this week:

  • Bank of Japan Governor Haruhiko Kuroda speaks Thursday
  • U.S. initial jobless claims, personal income, durable goods, University of Michigan consumer sentiment, new home sales on Thursday
  • Friday: U.S. markets are closed. European markets close earlier
    Locally the FTSE/JSE Africa All-Share Index closed up a mere 0.3% to 71,359.04, mostly supported by gains in Aspen and Discovery with the counters up 3.5% and 2.1% respectively. Banks and retailers also ended the session in the green on the back of a stronger currency, with the sectors adding 0.74% and 0.87% from the previous close. Volumes got to a standstill, with only R8.7b turnover recorded. The Rand was up 0.2% to 15.82 per US$, with the Yield on 10-year govt rand bonds that rose 3.70 bps to 9.85%.
    Authorities including the Department of Health and the National Institute for Communicable Diseases will publish the latest data on cases of Covid-19 amid a fourth wave of infections. There are no other economic data, company or major government events scheduled for today.
  • S. African Covid-19 Hospitalizations at 9,324 With 6.6% in ICU
  • Omicron Has 80% Lower Risk of Hospitalization, New Study Shows
  • S. Africa’s ABSA Faces Court Challenge From Former Director
  • De Beers Sells $332m of Rough Diamonds at 10th Sale of 2021
  • Sanlam, Allianz Exploring Options for African Businesses
  • Daily Maverick: See you in court: Activists take second stab at Shell interdict application

EU/UK
European markets were little changed on Wednesday as investors continue to monitor the threat posed by the omicron Covid-19 variant. The pan-European Stoxx 600 traded up 0.7%, with technology stocks climbing 1.5% to lead gains while utilities slipped 0.1%. Global markets have endured a volatile week thus far, and European shares rebounded 1.4% on Tuesday to retrace much of the loss accrued during a sharp sell-off in the previous session. Investors are juggling the rapid spread of the omicron variant, and the introduction of containment measures by governments around the world, with new scientific analysis of its severity and pharmaceutical developments on booster shots and treatments. AstraZeneca on Tuesday became the latest company to announce that it had begun work, alongside Oxford University, on an omicron-specific vaccine. Moderna has announced that a third dose of its mRNA vaccine appears to provide significant protection against the variant. German Chancellor Olaf Scholz said Tuesday that new social restrictions will be introduced before New Year’s Eve, including limiting private gatherings among vaccinated people to a maximum of 10. Britain on Tuesday pledged £1 billion ($1.3 billion) to businesses hit by the new Covid-19 variant, with the country’s hospitality sector and others once again under strain. On the data front, U.K. GDP grew 1.1% in the third quarter, final readings confirmed Wednesday, slightly below the 1.3% expected by economists in a Reuters poll. At the top of the Stoxx 600, shares of Delivery Hero added 7.4% after the German meal kit delivery company announced that it would scale back its German operations and sell off its Japanese unit in the first quarter of 2022. At the bottom of the Stoxx 600, Sweden’s Lundin Energy fell 11.4% after agreeing the $14 billion sale of its oil and gas business to Norway’s Aker BP.

US
U.S. stocks rose on Wednesday, rallying for a second day as the market continued to rebound from a three-day losing streak spurred by fears about the omicron variant. The Dow Jones Industrial Average gained 261.19 points, or 0.7%, to 35,753.89, bringing its two-day rally to more than 800 points. The S&P 500 climbed 1% to 4,696.56, on track for a winning week. The Nasdaq Composite climbed about 1.2% to 15,521.89. Trading stayed relatively thin ahead of the holidays. Caterpillar rose 1.9% after Bernstein upgraded the stock, saying the machinery maker will be a key beneficiary of a rebound in global growth. Tesla shares jumped 7.4% after Elon Musk said in a podcast that he had reached his goal of selling 10% of his shares for tax reasons. The Food and Drug Administration on Wednesday granted emergency use authorization for Pfizer’s Covid pill, the first antiviral drug against the virus for at-home use. Pfizer shares gained about 1%. December, normally the calmest month for markets, has so far been the most volatile month of 2021, according to Bespoke Investment Group. The firm looked at the S&P 500′s average absolute daily change since 1953. Wall Street’s “fear gauge,” the Cboe Volatility Index, spiked above 35 earlier this month and has traded around the 20 threshold. President Joe Biden in a press conference Tuesday urged Americans to get their booster shots, saying those who have are “highly protected.” He also reiterated that the U.S. will not bring back the strict lockdowns that were imposed at the start of the pandemic.

ASIA
Shares in Asia-Pacific rose in Thursday trade, as fears over the omicron Covid variant eased. Hong Kong-listed shares of Chinese e-commerce titan JD.com plunged 7.09% while Tencent surged 4.02%. Those moves came after Tencent announced it will distribute majority of its shares in JD.com to its shareholders, effectively diluting its stake in the e-commerce firm from around 17% to approximately 2.3%. Hong Kong’s Hang Seng index shed earlier gains, rising 0.16% by the afternoon. Mainland Chinese stocks were higher, with the Shanghai composite up 0.13% while the Shenzhen component climbed 0.256%. Investors continued monitoring Covid developments in the country after the major Chinese city of Xi’an entered a lockdown on Thursday as authorities seek to control a flare-up of Covid cases. The Nikkei 225 in Japan nudged 0.49% higher while the Topix index gained 0.6%. South Korea’s Kospi climbed 0.23%. Elsewhere, the S&P/ASX 200 in Australia gained 0.22%. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.53% higher. The Japanese yen traded at 114.12 per dollar after weakening earlier this week from levels below 113.6 against the greenback. The Australian dollar was at $0.7206 after yesterday’s surge from around $0.712.

COMMODITIES
Gold held an advance as the dollar weakened, while silver got a boost from signs of an improving U.S. economy. The Bloomberg Dollar Spot Index steadied on Thursday after its biggest three-day drop since the end of November, boosting bullion’s appeal. Silver held gains after the final U.S. gross domestic product reading was revised higher, bolstering the outlook for metals exposed to industrial production. Spot gold advanced 0.2% to $1,806.65, with Silver little changed after rising 1.3% on Wednesday. Palladium declined 0.8% after surging more than 7% in two days, while platinum was steady after a 3.2% climb on Wednesday.

Oil extended gains from the highest settlement in four weeks after U.S. crude stockpiles declined more than expected. Futures in New York rose near $73 a barrel after climbing 2.3% on Wednesday. U.S. crude inventories dropped by 4.72 million barrels last week, according to government data, almost twice the median estimate in a Bloomberg survey.

Zinc and aluminium futures in China advanced on Thursday, underpinned by worries about supply, while easing concerns about the Omicron coronavirus variant and upbeat U.S. economic data pushed copper prices higher. Zinc’s benchmark January contract on the Shanghai Futures Exchange rose as much as 3.1% to 24,465 yuan ($3,840.78) a ton, its highest since Oct. 27. Shanghai aluminium for January delivery jumped 2.6% to 20,335 yuan a ton, its loftiest since Nov. 4. LME copper was up 0.2% at $9,625 a ton, extending gains to a fourth day.
Iron ore declined for a second day as rising inventories in China take the steam out of a six-week rally. Stockpiles at the country’s ports are at the highest in more than three years, with material from Brazil last week ballooning to a record, according to Shanghai SteelHome E- Commerce figures. Iron ore in Singapore declined 1.2% to $124.25 a ton, heading for a weekly advance of 3.6%. Prices in Dalian eased 0.4%, while steel rebar and hot rolled coil futures rose in Shanghai.