(BoE) Unexpectedly Hiked Its Key Interest Rates, Gains in Retail And Real Estate

  • Market Overview

SOUTH AFRICA MARKET REVIEW

  • South African markets closed in the red on Wednesday.
  • However, losses were capped by broad based gains in retail and real estate property sector stocks.
  • Retailers, Steinhoff International Holdings (JO: SNHJ ) N.V., Cashbuild (JO: CSBJ ) and Massmart Holdings (JO: MSMJ ) soared 22.6%, 1.5% and 1.4%, respectively.
  • Real estate property companies, Delta Property Fund (JO: DLTJ ), Attacq (JO: ATTJ ) and Emira Property Fund (JO: EMIJ ) gained 3.7%, 2.1% and 1.1%, respectively.
  • Miners, Pan African Resources, Merafe Resources and African Rainbow Minerals (JO: ARIJ ) advanced 2.9%, 1.8% and 1.2%, respectively.
  • Bankers, Capitec Bank (JO: CPIJ ) Holdings, FirstRand (JO: FSRJ ) and Nedbank Group (JO: NEDJ ) rose 2.6%, 2.5% and 1.7%, respectively.
  • Healthcare companies, Life Healthcare Group Holdings (JO: LHCJ ) and Mediclinic International (LON: MDCM ) added 1.4%, each.
  • However, peer, Aspen (JO: APNJ ) Pharmacare Holdings shed 3.5%.
  • The JSE All Share index declined 0.1% to close at 71,467.17.

UK MARKET REVIEW

  • The UK market finished firmer yesterday, after the Bank of England (BoE) unexpectedly hiked its key interest rate by 15 basis points, as it estimates domestic inflation to be three times higher than its target in April.
  • Financial sector stocks, Lloyds Banking Group (LON: LLOY ), Standard Chartered (LON: STAN ) and HSBC Holdings (LON: HSBA ) gained 4.6%, 3.9% and 3.7%, respectively.
  • Pharmaceutical company, AstraZeneca (LON: AZN ) added 2.2%. However, peer, Hikma Pharmaceuticals (LON: HIK ) declined 1.3%.
  • Schroders (LON: SDR ) advanced 2.0%, after the company confirmed its plans to acquire a significant stake in Greencoat Capital (LON: GRPG ), a renewable energy investor.
  • On the contrary, distribution and outsourcing company, Bunzl (LON: BNZL ) shed 1.3%. The FTSE 100 index advanced 1.3% to close at 7,260.61.

US MARKET REVIEW

  • US markets ended lower yesterday, dragged down by losses in technology sector stocks.
  • Apple (NASDAQ: AAPL ), Microsoft (NASDAQ: MSFT ) and salesforce.com (NYSE: CRM ) shed 3.9%, 2.9% and 2.7%, respectively.
  • Lennar (NYSE: LEN ) declined 4.1%, after the company reported a less than expected increase in its FY21 profits.
  • Airliner, Delta Air Lines (NYSE: DAL ) dropped 2.2%, after the company announced its updated financial goals for the upcoming years ahead of its scheduled Capital Markets Day.
  • Biogen (NASDAQ: BIIB ) fell 0.2%, after the company announced its plan to submit a protocol for a Phase 4 confirmatory study for its Alzheimer’s disease drug to US regulators in March.
  • The S&P 500 index fell 0.9% to settle at 4,668.67, while the DJIA index declined 0.1% to close at 35,897.64.
  • The NASDAQ index eased 2.5% to end the trading session at 15,180.43.

ASIA MARKET REVIEW

  • Asian markets are trading lower this morning, tracking overnight losses on Wall Street.
  • In Japan, pharmaceutical company, Chugai Pharmaceutical Co., Ltd. (T: 4519 ) has shed 3.7%.
  • On the flipside, automobile company, Nissan Motor (T: 7201 ) has added 1.6%.
  • In Hong Kong, glass manufacturing company, Xinyi Glass Holdings Ltd (HK: 0868 ) has plunged 5.4%, Meanwhile, optical products company, Sunny Optical Technology Group (HK: 2382 ) has gained 1.2%.
  • In South Korea, electronics company, Sunny Electronics (KS: 004770 ) has surged 8.1%.
  • On the other hand, SsangYong Motor (KS: 003620 ) has plummeted 19.2%.
  • The Nikkei 225 index is trading 1.3% lower at 28,673.98.
  • The Hang Seng index has declined 1.2% to trade at 23,204.11, while the Kospi index is trading 0.4% lower at 2,994.79.

COMMODITIES

  • At 06:00 SAST today, Brent spot prices fell 0.2% to trade at $73.93/bl, reversing the previous session’s gains, amid fears about a dent in demand following a surge in Omicron cases.
  • Yesterday, Brent spot prices rose 0.2% to settle at $74.10/bl, following an increase in demand and an upbeat economic outlook from the US Federal Reserve (Fed) which stated that it would put an end to its bond purchases in March 2022 and increase its interest rate 3 times by the end of 2022 as the US economy reaches full employment and as the central bank copes with a surge in inflation. Meanwhile, the US Energy Information Administration (EIA) reported that US crude inventories fell by 4.58mn bls for the week ended 10 December.
  • Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 1.0% to $5.77/bushel.
  • At 06:00 SAST today, gold prices advanced 0.2% to trade at $1,803.31/oz. Yesterday, gold gained 1.3% to close at $1,799.35/oz, as a weaker greenback gave a boost to the safe haven yellow metal.
  • Yesterday, copper rose 3.4% to close at $9,524.50/mt. Aluminium closed 2.8% higher at $2,656.00/mt.

CURRENCIES

  • Yesterday, the South African rand strengthened against the US dollar. In South Africa, inflation accelerated to its highest level in more than four years amid soaring fuel prices. The producer price index (PPI) increased more than expected in November. In the US, the Fed revealed that it is likely to put an end to its bond purchase programme in March 2022 and increase its key interest rate 3 times by the end of 2022. Meanwhile, in the US, manufacturing activity decelerated to a one year low in December, despite strong demand for goods and extremely thin inventories at businesses, dragged down mostly due to supply chains bottlenecks. Service sector activity accelerated less than expected in December. Initial jobless claims dropped more than expected for the week ended 11 December.
  • The yield on benchmark government bonds rose on Wednesday. The yield on 2026 bond rose to 7.79%. Further, the yield on 2023 bond advanced to 5.14%, while that for the longer-dated 2030 issue rose to 9.43%.
  • At 06:00 SAST, the US dollar is trading 0.2% higher against the South African rand at R15.9677, while the euro is trading 0.1% higher at R18.0882. At 06:00 SAST, the British pound has gained 0.2% against the South African rand to trade at R21.2711.
  • Yesterday, the euro advanced against most of the major currencies. In Germany, industrial sector slowed in December as stricter pandemic restrictions to curb the spread of the Omicron variant of Covid-19 dampened the service sector. In the eurozone, manufacturing and service activity grew slower than expected following a surge in Covid-19 cases.
  • At 06:00 SAST, the euro marginally slipped against the US dollar to trade at $1.1328, while it has marginally weakened against the British pound to trade at GBP0.8503.

ECONOMIC UPDATES

  • In December, the flash manufacturing PMI in the UK recorded a drop to 57.60, compared with a level of 58.10 in the previous month. Market anticipations were for the manufacturing PMI to drop to 57.60.
  • In December, the preliminary services PMI eased to 53.20 in the UK, compared with a reading of 58.50 in the prior month.
  • In December, the preliminary manufacturing PMI in Germany climbed unexpectedly to a level of 57.90. In the prior month, manufacturing PMI had recorded a level of 57.40.
  • In December, the flash services PMI eased to 48.40 in Germany, higher than market expectations of a fall to 51.00. In the prior month, services PMI had registered a reading of 52.70.
  • The preliminary manufacturing PMI fell to a level of 58.00 in December, in the eurozone, less than market expectations for a fall to 57.80. In the previous month, the manufacturing PMI had registered a reading of 58.40.
  • The flash services PMI in the eurozone dropped to 53.30 in December, compared with a reading of 55.90 in the previous month. Markets were expecting services PMI to ease to a level of 54.10.
  • The non-seasonally adjusted trade surplus in the eurozone fell to EUR3.60bn in October, from a trade surplus of EUR7.30bn in the previous month. Markets were expecting the nation to record a trade surplus of EUR7.60bn.
  • The Bank of England surprisingly hiked its interest rate by 15 basis points to 0.25%, against market expectations of an unchanged rate of 0.1%.
  • The Fed kept its interest rate steady at 0.25%. Markets were expecting the central bank to keep its interest rate unchanged at 0.25%.
  • In the US, the seasonally adjusted number of initial jobless claims registered a rise to 206.00K in the week ended 11 December 2021, compared with a revised level of 188.00K in the previous week.
  • Philadelphia Fed manufacturing index registered a drop to 15.40 in December, compared with a level of 39.00 in the previous month. In the US. Market anticipations were for Philadelphia Fed manufacturing index to ease to a level of 30.00.
  • Industrial production in the US recorded a rise of 0.5% on a monthly basis in November, lower than market expectations of an advance of 0.7%. Industrial production had registered a revised rise of 1.7% in the prior month.
  • In November, manufacturing production in the US registered a rise of 0.7% on a monthly basis, in line with market expectations of an advance of 0.7%. In the previous month, manufacturing production had advanced by a revised 1.4%.
  • In December, the preliminary Markit manufacturing PMI in the US recorded an unexpected drop to a level of 57.80, against market expectations of a rise to a level of 58.50. In the prior month, the Markit manufacturing PMI had recorded a reading of 58.30.
  • In December, the preliminary Markit services PMI fell unexpectedly to 57.50 in the US, compared with a level of 58.00 in the previous month. Markets were anticipating Markit services PMI to rise to a level of 58.50.

CORPORATE UPDATES

SOUTH AFRICA

  • MTN (JO: MTNJ ) Group Limited: The telecommunications company announced that Godfrey Motsa will be stepping down as the CEO of MTN SA with effect from 1 January 2022, after almost five years in the role. The company would like to thank Godfrey for his leadership of MTN SA during a time when the business built a leading network position and improved its competitive position in the consumer postpaid and enterprise businesses. Charles Molapisi will assume the position of CEO of MTN SA, effective 1 January 2022. Charles, who joined MTN in 2009, is an experienced executive who has held senior positions within the Group.
  • Capitec Bank Holdings Ltd (JO: CPIJ ): The banking company, in its FY21 trading statement, revealed that its HEPS will be more than R69.40 as compared with R39.66 reported in corresponding prior year. It expects its EPS to be more than R69.30 as compared with R38.50 reported in the previous year.
  • Steinhoff Investment Holdings Limited: The investment holding company, in its FY21 results, stated that its revenue increased to R77.33bn from R70.83bn posted in the previous year. Its diluted EPS rose from the prior year to R116.86.
  • Pan African Resources Plc (JO: PANJ ): The mining company announced that it has entered into a conditional agreement to acquire the entire issued share capital of Blyvoor Gold Operations (Pty) Ltd from Blyvoor Gold Ltd. The transaction includes six historical Tailings Storage Facilities (TSFs) with total Mineral Resources of more than 1.40mn ounces of contained gold. A technical study to Pre-feasibility (PFS) level indicates potential to produce 25-30k ounces of gold by processing 6.00mn tonnes (Mt) of tailings per annum over a mine life of 15 years. The company has a demonstrable track record of developing and operating similar high-margin tailings processing operations at its Barberton Tailings Retreatment Plant (BTRP), Evander Tailings Retreatment Plant (ETRP) and Elikhulu operations; and staged acquisition process.
  • SA Corporate Real Estate gives upbeat 2022 outlook: SA Corporate Real Estate said its industrial portfolio comprising primarily logistics, and convenience-orientated retail properties has proven defensive during the pandemic and this would continue into 2022.

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