Asia-pacific Markets Mixed, Factories Squeezed By Weak Demand; US Futures Dip

01/08/2022 China’s factory output unexpectedly shrank in July as fresh curbs in the wake of rising COVID-19 cases dented economic activity. The official purchasing managers index came in at 49 for July, below expectations of 50.4, and June’s reading of 50.2. South Korea’s factory activity fell for the first time in almost two years while Japan saw its slowest growth in activity in 10 months amid persistent supply chain disruptions. Surveys due out of the UK, Euro zone, and United States later in the day are expected to show similar trends in the world’s major industrialised economies. MSCI ASIA ex. Japan index traded  0.16$ lower earlier, while US futures and contracts in continental Europe dipped into the red. Alibaba shares drops as inclusion in US Delisting List fuels jitters. Australia closed for “Bank Holiday”.

Oil prices dropped on Monday, as weak manufacturing data from China and Japan for July weighed on the outlook for demand. Markets braced for this week’s meeting of officials from OPEC+ on the 3rd of August to consider oil output for September. A decision not to raise output would disappoint the US after US President Joe Biden visited Saudi Arabia this month hoping to strike a deal to open the taps. Brent crude futures were down $1.9, or 1.02% at $102.82.

Copper prices skid on Monday after weak Chinese data pointed to slowing demand for the metal, while gold prices steadied around three-week highs. At the writing, copper futures 1.1% to $3.5500 near their lowest level in over one year.  Gold sank 0.25% at $1,761.53, alongside silver sliding 0.33% at $20.13.

On Friday the JSE closed firm 0.47% to 68,934 points, while the Top-40 was up 0.49%; ending the week on a positive tone following a few days of earnings, and the US Fed raising rates by 75 basis points in bid to stymie inflation. The rand touched its strongest level in four weeks, reaching an intraday best of R16.3825. Earnings report expected from Oando today. Top-40 futures currently sluggish, up +70 points. Tencent

The Week Ahead:

  • Airbnb, Alibaba, BP and HSBC are among earnings reports
  • PMIs from US and euro area, among others, Monday.
  • US construction spending, ISM manufacturing, Monday.
  • Reserve Bank of Australia rate decision, Tuesday.
  • US JOLTS job openings, Tuesday.
  • OPEC+ meeting on output, Wednesday.
  • US factory orders, durable goods, ISM services, Wednesday.
  • BOE rate decision, Thursday.
  • US initial jobless claims, trade, Thursday.
  • Cleveland Fed President Loretta Mester due to speak, Thursday.
  • US employment report for July, Friday.

EU/UK/US

Markets in continental Europe were firm on Friday, after compact corporate news and positive surprise on 2Q Euro area GDP. Euro Stoxx600 notched up 1.30%. European contracts are indicating a softer start at the opening bell, with FTSE100 futures on the backfoot 0.60% alongside Dax futures down 0.75%. HSBC Holdings Plc reported a 15% drop in first-half profit as credit loss provisions more than offset the impact from rising net interest income. The multinational lender reported on Monday a pre-tax profit of $9.2 billion for the six months ending June 30, down from $10.84 billion a year ago and versus the $8.15 billion average estimate of analysts compiled by the bank. Earnings report expected from Heineken before closing bell.

Wall Street stocks traded higher on Friday during a busy week of corporate earnings. The Dow was up 0.97%, while the S&P 500 opened 1.42% firmer and the Nasdaq Composite came out the gate 1.88%. Another busy week with the likes of Berkshire Hathaway, Caterpillar, Starbucks to be releasing earnings reports. Futures benchmarks on the backfoot in the US: Dow futures -0.33%, S&P500 futures -0.42%, Nasdaq futures -0.37%.

ASIA Asian shares were sluggish on Monday as disappointing Chinese economic data fed doubts Wall Street’s rally could be sustained, while the dollar continued its retreat on the yen as speculators were forced out of suddenly unprofitable short positions. Chinese property shares dropped further Monday, as a housing slump continues and the nation’s most indebted developer appears to be struggling with its closely watched restructuring. Fujitsu Ltd. shares fell sharply Monday morning after the company reported its operating profit for the fiscal first quarter slipped around 24%. The Japanese electronics and information-technology services company said Friday after the market closed that its operating profit for the April-to-June quarter of its fiscal year ending next March dropped to Y25.60 billion from Y33.74 billion a year earlier, mostly owing to effects from scarcity of material supply.

Japan’s Nikkei225 firm 0.65. China’s blue-chip CSI300 firm 0.50%, while Hang Send slipped 0.35%. Australia’s ASX 200 closed for a holiday.