Sunday , February 28 2021

Equities remain positive as G20 approaches



Wednesday 07.00 GMT

What you need to know

  • Investors look for warning from top Trump adviser on trade progress
  • Hopes remain for progress in relations at presidential meeting at G20
  • European equities are set to rise after gains in China
  • Dollar index holds its 2018 highs ahead of speech from Fed chair
  • Jay Powell due to address at Economic Club of New York at 5pm London time
  • Oil prices recover with Brent back over $ 61

Hot topic

Investors have moved back into stock markets in Asia and Europe to expect growth as investors continued to measure political rhetoric in the run-up to the G20 summit.

The CSI 300 index of major Shanghai and Shenzhen stocks rose 1.3 per cent, while in Hong Kong, the Hang Seng China Enterprises index was up 0.9 per cent. According to opening calls, London 'FTSE 100 and Frankfurt's Xetra Dax 30 will rise by about 0.5 per cent.

Haven assets were subdued, with the Japanese yen 0.1 per cent weaker at ¥ 113.83 against the dollar and gold steady at $ 1,214 a ounce.

The trading pattern came after a statement from Larry Kudlow, Donald Trump's top economic adviser, that it was up to Chinese President Xi Jinping to "step up and come up with new ideas" to break the deadlock when the two leaders meet.

However, if both leaders move further apart, the result would be "negative not only for China, but the US, emerging Asia and Europe, which has already slowed momentum," said Trinh Nguyen, Senior Senior Member economist.

"Other than Turkey and Argentina, China is the worst performing equity market year-to-date in [US dollar terms], although high-trade and China-exposed Asian economies such as South Korea, Singapore, Malaysia, Thailand and Vietnam are also in the crossfire. The US, too, is not spared, "Ms Nguyen said.

While the two sides are likely to engage in dialogue in Buenos Aires, "major breakthrough is unlikely," said Tai Hui, JPMorgan Asset Management Strategist. "There's just not enough time for both sides to work through their differences when mid-level senior level discussion resumed in early November."

Equities

The broader Hang Seng index in Hong Kong was up 0.9 per cent with most segments in positive territory and technology stocks gaining 2.6 per cent. Tokyo's Topix was up 0.5 per cent, buoyed by gains for the telecoms and technology segments.

In Sydney, stocks fared less well, with the S & P / ASX 200 off 0.1 per cent as the recent slump in Chinese steel futures – which also hit iron and coal prices – continued to weigh on miners.

Overnight, Wall Street ended up after vacillating as investors weighed the prospects for upcoming US-China trade negotiations, and following a threat by the US president late on Monday to expand tariffs on Chinese imports.

Forex and fixed income

Sovereign debt and foreign exchange markets were steady, with the US dollar index holding on gains from the previous day at 97,399.

China's onshore renminbi exchange rate, which moves within a trading band of 2 per cent of a daily midpoint set by the People's Bank of China, was a touch swing at Rmb6.9535 per dollar. The offshore rate was unchanged at Rmb6.9511.

The UK pound was off 0.1 per cent at $ 1.2737 as Theresa May fights to convince the UK Parliament to support a Brexit deal with the EU.

In the sovereign debt markets, the yield on the US 10-year Treasury was basically unchanged at 3.059 per cent. That on the Australian equivalent was 1 base point lower at 2.618 per cent while the 10-year Japanese government bond yield was unmoved at 0.083 per cent.

Commodities

Oil prices climbed but were still far from recovering all the ground lost in the last week's rout. Brent crude was 1 per cent higher at $ 60.86 a barrel while West Texas Intermediate was up 1.1 per cent at $ 52.11.

Iron ore futures on China's Dalian Commodity Exchange rose 1.1 per cent. However, iron ore prices remain under pressure as the Chinese steel outlook weakens, ANZ analysts noted.

"Steel rebar prices in China have fallen by 16 per cent this month, which is likely to have negative impact on profitability of steel mills as the winter production curbs come into effect in China, raising concerns that steel production will fall greater than expected", the analysts said.

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