Markets WRAP: Rand ends the day at R13.82/$

Markets WRAP: Rand ends the day at R13.82/$

OVERVIEW: European and Asian stocks dropped on Wednesday following the rout on Wall Street, though declines were contained and US equity futures rose after China pledged to start delivering on trade agreements reached with America. The pound stayed higher as the UK government published legal advice relating to its proposed Brexit deal.

Global markets were left reeling following Tuesday’s steep sell-off in New York, but nerves appeared to steady after China’s Commerce Ministry said Beijing will start to quickly implement specific items where there’s consensus with the US and will push forward on trade negotiations within the 90-day “timetable and road map”.

While the Stoxx Europe 600 Index slumped as much as 1.2%, that was far less than the 3.2% plunge recorded by the S&P 500 a day earlier. Futures for America’s benchmark gauge advanced, though the US market will be closed on Wednesday to mark the death of President George H. W. Bush.

Stocks fell in Japan, Korea, Australia and Hong Kong, and China’s yuan gave up some of its recent surge. The pound climbed as investors digested legal advice over Prime Minister Theresa May’s Brexit deal, which confirmed that the so-called customs backstop – the insurance mechanism that kicks in if the Irish border issue cannot be resolved – could remain “indefinitely”.

Benchmark German bunds rose before reversing, while Italian bonds jumped on mounting optimism for a positive end to the country’s budget spat with the EU. The break in trading in the US offers respite to investors after a roller coaster few days, and a chance to reassess what might be behind the latest bout of selling. From the trade war to flattening Treasury yield curve there’s no shortage of culprits, but the underlying narrative appears to be mounting concern that the global growth picture is not as robust as it seems.

China’s announcement, another twist in the trade war saga, was a dose of positive news. It ended days of silence from the Asian nation following a weekend meeting between Presidents Donald Trump and Xi Jinping. Upbeat statements from Trump had not been immediately matched by Beijing, helping fuel the equity tumult.

Elsewhere, Australia’s dollar slid after weaker-than-anticipated economic growth for the third quarter. West Texas oil prices hovered around $53 a barrel as traders await this week’s critical OPEC gathering. Some of the key events investors will be focused on this week: U.S. financial markets are closed Wednesday for a national day of mourning to honor former President George H.W. Bush. Fed Chairman, Jerome Powell’s testimony to Congress scheduled for Wednesday has been canceled. Friday brings the US monthly employment report for November. China November trade data are due on Saturday.

And here are the main moves in markets:

StocksFutures on the S&P 500 Index rose 0.7% as of 13:23 London time. The Stoxx Europe 600 Index declined 0.7% to the lowest in more than a week. The UK’s FTSE 100 Index decreased 1% to the lowest in more than two weeks on the largest dip in almost two weeks. Germany’s DAX Index decreased 0.7% to the lowest in more than a week. The MSCI Asia Pacific Index sank 1%, the largest tumble in more than two weeks.

The MSCI Emerging Market Index sank 1.2%, the biggest tumble in more than two weeks.

Currencies

The Bloomberg Dollar Spot Index declined less than 0.05%. The euro rose 0.1% to $1.1353. The British pound increased 0.5% to $1.2777, the first advance in a week. The Japanese yen declined 0.2% to 113.02 per dollar, the biggest drop in more than a week. BondsGermany’s 10-year yield rose one basis point to 0.27%, the first advance in a week and the biggest rise in more than a week. Britain’s 10-year yield jumped four basis points to 1.322%, the first advance in more than a week and the largest surge in more than three weeks. The spread of Italy’s 10-year bonds over Germany’s decreased eight basis points to 2.8144 percentage points to the smallest premium in two months.

Commodities

West Texas Intermediate crude fell 0.2% to $53.12 a barrel. Gold declined 0.1% to $1,237.52 an ounce. – Bloomberg

Credit: Markets WRAP: Rand ends the day at R13.82/$