Stocks Pare Losses on Gas Deliveries; Dollar Drops

21/07/2022 Stocks in Asia and US futures pared losses Thursday after Russia resumed sending gas to Europe through a key pipeline, alleviating some investor concerns. The dollar declined. Hong Kong and China remained a drag on an Asian stock gauge. The resumption of flows through Nord Stream is set to provide some relief for the continent that’s racing to store the fuel before the winter. Futures fell in Europe, also grappling with a potential collapse of Italy’s government.  The euro gained ahead of a European Central Bank meeting where it is expected to hike for the first time in more than a decade, almost certainly raising rates by 25 basis points. It will also unveil its new crisis management tool. The dollar edged lower. The yen was steady after the Bank of Japan maintained its policy rate and lowered its economic growth forecast for this year. Treasuries were steady.

Oil futures fell in Asia trade. U.S. crude slipped 0.77% to $99.11 per barrel, while Brent crude dropped 0.61% to $106.27 per barrel. Spot gold fell as much as 0.4% to $1,690.16 an ounce in early morning trade. Copper was 1.4% lower at $7,275 a ton, with aluminum, zinc and tin all dropping. Iron ore futures in Singapore sank 3.1% to $97.10.

The JSE Top 40 futures are indicating a lower start, trading down over 250 points, Tencent is 1.2% lower in HK. The SARB is expected to raise its key interest rate by 50 bps later today.

Key events to watch this week:
* European Central Bank rate decisions. Thursday

Locally the FTSE/JSE Africa All-Share Index closed down 0.2% to 67,652, with the Resource sector that erased earlier gains to close up marginally, Amplats lost 2.7%. Retailers and financials also weighed with the sectors shedding 1.7% and 0.45% respectively.  Prosus and Naspers capped further losses to close up 1.3% and 0.59% respectively. The Rand was little changed at 17.11 per US$, with the Yield on 10-year govt rand bonds fell 15.80 bps to 11.38%.

South Africa’s central bank is expected to raise its key interest rate for a fifth straight meeting. Forward-rate agreements, used to speculate on borrowing costs, show traders are fully pricing in a second consecutive half- point rate hike and an 77% chance of a 75-basis-point move. Of 20 economists in a Bloomberg survey, 13 predict the monetary policy committee will raise the key rate by half a point this
week, with the rest expecting a bigger increase. 

* Biden Administration to Host US-Africa Leaders’ Summit in Dec.
* South Africa to Import More Gas From Mozambique
* Mondi Cut to Equal-Weight at ABSA Securities; PT 1,662.29 pence
* Sibanye Stillwater Affirmed at BB by Fitch
* ArcelorMittal South Africa Sees 1H EPS 32%-42% Higher y/y
* Nedbank Group Sees 1H Headline Earnings Rising 23%-28%
* Vukile Property Fund May Sell 500m-750m Rand in Debt in August
* Sappi Cut to Equal-Weight at Morgan Stanley; PT 66 rand

* Bureau for Economic Research releases Inflation Expectation Survey (2Q)

* July SARB Announce Interest Rate, est. 5.25%, prior 4.75%

* Sales Results: AAL LN, AMS SJ, KIO SJ, VOD SJ

European stocks closed lower on Wednesday, as investors continued to digest corporate earnings, economic data and the potential path of monetary policy.   The pan-European Stoxx 600 closed down by 0.2% provisionally, after reversing initial gains earlier in the session. The banking and automotive sectors each fell more than 0.9% to lead losses. Tech shares climbed 1.7% after Netflix said it expects to return to subscriber growth in the third quarter. The slightly negative trade for European markets comes after a similarly volatile session on Tuesday as the relief rally seen in the previous two sessions lost some momentum. There were also reports that Russia and Ukraine are nearing a deal that would end the blockade on grain exports, and that Nord Stream 1 is likely to restart gas exports on schedule after maintenance is completed. The European Central Bank’s policy meeting in Frankfurt on Thursday is at the forefront of investors’ minds, with policymakers having given advance notice of a first hike in 11 years. Still, this comes against a backdrop of slowing growth, the war in Ukraine and threats to energy supplies. U.K. inflation hit yet another new 40-year high in June as food and energy prices continued to soar, escalating the country’s historic cost-of-living crisis. The consumer price index rose 9.4% annually, according to estimates out Wednesday, slightly above a consensus forecast among economists polled by Reuters and up from 9.1% in May. Uniper was the biggest climber on Wednesday. The German energy giant’s shares jumped nearly 13% amid bailout talks with the government. Toward the bottom of the Stoxx 600, Volvo Car fell more than 5% after the Swedish automaker lowered its retail sales forecast and missed second-quarter earnings expectations.


Stocks rose on Wednesday, fueled by a rally in tech stocks, as all major averages reached their highest point since early June. The Nasdaq Composite jumped 1.58% to 11,897 and the S&P 500 advanced 0.59% to 3,959. Meanwhile, the Dow Jones Industrial Average was up 47 points, or 0.15%, to 31,874 — lagging the other two benchmarks and alternating between gains and losses during the session. Those moves follow Tuesday’s rally as investors, betting that markets may have finally found a bottom, shifted into more risky assets such as tech stocks. Information technology and consumer discretionary stocks led gains in the S&P 500, with each sector up more than 1% on Wednesday. Meanwhile, more defensive sectors such as health care and utilities lagged the broader market index. Semiconductor stocks outperformed after the Senate pushed forward a $50 billion bill to bolster chip manufacturing in the U.S. Shares of Advanced Micro Devices jumped 4.1%, Nvidia was up 4.8%, and Qualcomm advanced 2.9%. Streaming stocks surged on the back of better-than-expected earnings from Netflix, which also said it lost 970,000 subscribers in the second quarter, less than the 2 million it had previously projected. Shares of Netflix jumped about 7.4%. Disney advanced roughly 3.8%. Paramount climbed 3.8%, and Roku surged 6.9%.  On the economic front, a report from the Mortgage Bankers Association pointed to more pain for home shoppers as they deal with higher prices and interest rates. Mortgage demand declined more than 6% last week compared with the prior week, dropping to its lowest level in 22 years. At the same time, existing home sales in June fell 5.4% from May, according to the National Association of Realtors.


Japan’s benchmark index rose modestly on Thursday after the Bank of Japan kept rates on hold, while Asia markets were mixed. The Nikkei 225 in Japan reversed earlier losses to rise 0.15% while the Topix index was fractionally lower after the central bank’s decision was announced.  In Australia, the S&P/ASX 200 was about flat. Rio Tinto shares fell 3.38% after the company said it will pay the Australian Taxation Office an additional tax of 613 million Australian dollars ($422 million) over a dispute. Rio previously paid the ATO 378 million Australian dollars. South Korea’s Kospi gained 0.67% and the Kosdaq was 0.5% higher. Shares of automaker Hyundai Motors were up 1.59% after the company’s earnings beat estimates. Revenue in the second quarter rose to 36 trillion Korean won ($27.4 billion), and net income jumped 55.6% from a year ago to 3 trillion Korean won. Hong Kong’s Hang Seng index slipped 1.37% with real estate and financial stocks pulling the index lower, while mainland China markets dropped. The Shanghai Composite fell 0.42% and Shenzhen Component declined 0.17%. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.33%. The Bank of Japan stuck to its ultra-easy monetary policy as expected, while lowering its growth forecast for 2022 and raising its inflation predictions.