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Market Review: Markets DownAmid Rising Recession Fears As Surge in US Inflation

Published 2022/06/14, 07:41
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South Africa Market Review

JSE All Share - Last Month

South African markets closed in the red yesterday, as concerns for an aggressive tightening of monetary policy by the US Federal Reserve (Fed) kept investors sentiment low. Platinum miners, Impala Platinum (JO:IMPJ) Holdings, Anglo American (JO:AMSJ) and Royal Bafokeng Platinum (JO:RBPCBe) shed 4.5%, 2.9% and 1.5%, respectively. Cashbuild (JO:CSBJ), SPAR (JO:SPPJ) Group and Cie Financiere Richemont (JO:CFRJ) S.A. declined 3.5%, 2.5% and 2.0%, respectively. Real estate companies, Capital & Counties Properties (JO:CCOJ), Attacq (JO:ATTJ) and Delta Property Fund (JO:DLTJ) dropped 3.4%, 3.1% and 2.4%, respectively. Gold miners, Gold Fields (JO:GFIJ), AngloGold Ashanti (JO:ANGJ) and Harmony Gold Mining eased 3.2%, 3.0% and 2.8%, respectively. Lenders, RMB Holdings (JO:RMHJ) and Nedbank Group (JO:NEDJ) fell 2.1% and 1.3%, respectively. The JSE All Share index declined 2.1% to close at 66,381.03.

UK Market Review

The UK market finished weaker yesterday, dragged down by an unexpected drop in Britain’s economic growth in April. Travel and leisure companies, InterContinental Hotels Group (LON:IHG), Whitbread (LON:WTB) and International Consolidated Airlines Group (LON:ICAG) S.A. plummeted 7.9%, 5.6% and 4.6%, respectively. Miners, Glencore (LON:GLEN), Antofagasta (LON:ANTO) and Anglo American shed 4.8%, 2.8% and 2.6%, respectively. Real estate companies, Barratt Developments (LON:BDEV), Persimmon (LON:PSN) and Berkeley Group (LON:BKGH) Holdings fell 3.8%, 3.4% and 2.1%, respectively. Retail companies, J Sainsbury (OTC:JSAIY), Tesco (LON:TSCO) and Next (LON:NXT) dropped 3.9%, 1.6% and 1.5%, respectively. Oil and energy firms, BP (LON:BP) and Shell (LON:RDSa) declined 3.8% and 2.6%, respectively. The FTSE 100 index declined 1.5% to close at 7,205.81.

US Market Review

US markets ended lower yesterday, amid rising recession fears as surge in US inflation to a 40-year high raised prospects of faster interest rate hike by the US Fed. Astra Space plummeted 23.8%, after the orbital launch services company stated that it has failed to deliver a payload after launch. Coinbase (NASDAQ:COIN) Global plunged 11.4%, amid broader weakness in cryptocurrencies. Technology companies, salesforce.com (NYSE:CRM), Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) shed 7.0%, 4.2% and 3.8%, respectively. Healthcare companies, Merck & Company (NYSE:MRK) and Amgen (NASDAQ:AMGN) declined 2.5% and 1.4%, respectively. The S&P 500 index fell 3.9% to settle at 3,749.63, while the DJIA index declined 2.8% to close at 30,516.74. The NASDAQ index sharply declined 4.7% to end the trading session at 10,809.23.

Asia Market Review

Asian markets are trading lower this morning, tracking overnight losses on Wall Street. In Japan, chemical company, Nissan Chemical Corporation has plunged 6.8%. On the flipside, Tokuyama Corporation has added 2.1%. In Hong Kong, solar products company, Xinyi Solar Holdings (HK:0968) has declined 3.8%. On the contrary, technology company, Lenovo Group (HK:0992) has gained 1.2%. In South Korea, Hankook Steel company has plummeted 8.2%. On the other hand, pharmaceutical company, Samsung (KS:005930) Pharmaceutical company has jumped 12.2%. The Nikkei 225 index is trading 2.1% lower at 26,432.52. The Hang Seng index has declined 0.9% to trade at 20,877.13, while the Kospi index is trading 1.1% lower at 2,476.81.

Commodities

At 06:00 SAST today, Brent spot prices marginally fell to trade at $126.33/bl, reversing previous sessions gains.

Yesterday, Brent spot prices rose 0.5% to settle at $126.38/bl, as global supply constraints outweighed concerns for a drop in demand pressured by a flare-up in COVID-19 cases in Beijing. Moreover, oil production in Libya have almost fully halted as a political crisis led to more shutdowns of ports and fields.

Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 0.5% to $7.6625/bushel.

At 06:00 SAST today, gold prices advanced 0.4% to trade at $1,827.11/oz. Yesterday, gold declined 2.8% to close at $1,819.26/oz, as stronger dollar boosted by expectations for a steep interest rate hike by the US Fed, dented demand for the safe haven yellow metal.

Yesterday, copper declined 1.7% to close at $9,285.50/mt. Aluminium closed 2.2% lower at $2,602.50/mt.

Currencies

Yesterday, the South African rand weakened against the US dollar, as a surge in the US inflation raised hopes for an aggressive interest rate hike by the Fed.

The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 8.92%. Further, the yield on the longer-dated 2030 issue rose to 10.43%.

At 06:00 SAST, the US dollar is trading 0.5% lower against the South African rand at R16.0393, while the euro is trading 0.4% lower at R16.7141. At 06:00 SAST, the British pound has declined 0.3% against the South African rand to trade at R19.5073.

Yesterday, the euro advanced against most of the major currencies. In the UK, economy unexpectedly shrank in April, adding to fears of sharp slowdown.

At 06:00 SAST, the euro advanced 0.1% against the US dollar to trade at $1.042, while it has weakened 0.1% against the British pound to trade at GBP0.8567.

Economic Updates

In the UK, construction output recorded a rise of 3.9% in April on an annual basis. In the prior month, construction output had advanced 4.7%.

Gross domestic product (GDP) in the UK fell 0.3% in April on a MoM basis, compared with a drop of 0.1% in the previous month. Market anticipations were for GDP to climb 0.2%.

In the UK, industrial production registered a drop of 0.6% in April on a MoM basis, compared with a drop of 0.2% in the prior month. Markets were anticipating industrial production to advance 0.3%.

Manufacturing production in the UK eased 1.0% on a MoM basis, in April. In the previous month, manufacturing production had fallen 0.2%.

In Italy, the unemployment rate registered a drop to 8.6% in 1Q22. In the previous quarter, the unemployment rate had registered a revised reading of 9.0%.

In May, the business conditions index in Australia dropped to a level of 16.00, compared with a revised reading of 19.00 in the prior month.

Corporate Updates

South Africa

Oil drops as Beijing battles ‘ferocious’ Covid-19 flare: Oil dropped about $2.00 a barrel as a flare-up in Covid-19 cases in Beijing dented hopes of a Chinese demand rebound, while worries about more interest rate hikes to control rampant inflation added further pressure.

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