Market Commentry, Exxaro Resources, Nedbank, Harmony Gold

  • Market Overview

SOUTH AFRICA MARKET REVIEW

  • South African markets closed in the green yesterday, buoyed by broad based gains in mining sector stocks and following new movements in the Russian-Ukraine war and further sanctions against Russia.
  • Miner, Exxaro (JO: EXXJ ) Resources soared 8.8%, after the company revealed that it expects its FY21 earnings to advance as much as 64.0%, as coal prices soar in response to the global energy crisis.
  • Peer, Exxaro Resources Limited jumped 6.3%. Gold mining companies, Harmony Gold Mining (JO: HARJ ), AngloGold Ashanti (JO: ANGJ ) and Gold Fields (JO: GFIJ ) advanced 4.7%, 4.1% and 3.9%, respectively.
  • Bankers, FirstRand (JO: FSRJ ), Nedbank Group (JO: NEDJ ) and Capitec Bank (JO: CPIJ ) Holdings gained 2.9%, 1.5% and 1.1%, respectively.
  • On the flipside, real estate companies, Attacq (JO: ATTJ ) and Emira Property Fund (JO: EMIJ ) shed 4.5% and 3.4%, respectively.
  • The JSE All Share index advanced 1.3% to close at 77,110.69.

UK MARKET REVIEW

  • The UK market finished weaker yesterday, as the Ukraine crisis dragged down travel and leisure stocks.
  • International Consolidated Airlines Group (LON: ICAG ) S.A., Whitbread (LON: WTB ) and InterContinental Hotels Group (LON: IHG ) plunged 8.4%, 7.6% and 7.2%, respectively.
  • Flutter Entertainment (LON: FLTRF ) plummeted 12.4%, after the firm reported a drop in its FY21 earnings.
  • Shell (LON: RDSa ) eased 1.1%, after the company announced that it would exit all its Russian operations, including a major liquefied natural gas plant, following the country’s invasion of Ukraine.
  • On the flipside, AstraZeneca (LON: AZN ) gained 1.8%, after it partnered with Swiss biotechnology firm, Neurimmune to develop an antibody-based therapy for a rare, underdiagnosed condition that can lead to heart failure in a deal valued up to $760.00mn.
  • The FTSE 100 index declined 1.7% to close at 7,330.20.

US MARKET REVIEW

  • US markets ended lower yesterday, as investors react to Russia stepping up attacks on Ukraine and as it warned of beginning a high-precision strike on the capital, Kyiv.
  • Insurance companies, American Express (NYSE: AXP ) and Travelers (NYSE: TRV ) plunged 8.5% and 2.3%, respectively.
  • Financial firms, JPMorgan Chase (NYSE: JPM ) & Company and Goldman Sachs Group (NYSE: GS ) shed 3.8% and 3.3%, respectively.
  • Technology firms, Microsoft (NASDAQ: MSFT ), Apple (NASDAQ: AAPL ) and salesforce.com (NYSE: CRM ) eased 1.3%, 1.2% and 0.8%, respectively.
  • On the contrary, Target Corporation (NYSE: TGT ) soared 9.8%, after the retail company reported better than expected 4Q21 profits and further offered an upbeat guidance, offsetting a revenue miss.
  • The S&P 500 index fell 1.5% to settle at 4,306.26, while the DJIA index declined 1.8% to close at 33,294.95.
  • The NASDAQ index eased 1.6% to end the trading session at 13,532.46.

ASIA MARKET REVIEW

  • Asian markets are trading mostly lower this morning, tracking overnight losses on Wall Street.
  • In Japan, cement company, Taiheiyo Cement Corporation has plunged 5.7%.
  • On the flipside, metals company, Dowa Holdings Company has added 4.4%.
  • In Hong Kong, optical products company, Sunny Optical Technology Group (HK: 2382 ) has plummeted 6.2%.
  • Meanwhile, delivery company, Meituan (HK: 3690 ) has added 2.3%.
  • In South Korea, chemicals company, Lotte Chemical Corporation has shed 5.9%.
  • On the contrary, electronics company, Daidong Electronics (KS: 008110 ) has soared 11.3%.
  • The Nikkei 225 index is trading 1.9% lower at 26,336.45.
  • The Hang Seng index has declined 1.2% to trade at 22,484.26, while the Kospi index is trading 0.1% higher at 2,701.53.

COMMODITIES

  • At 06:00 SAST today, Brent spot prices rose 2.9% to trade at $114.24/bl, extending the previous session’s gains.
  • Yesterday, Brent spot prices rose 10.1% to settle at $110.97/bl, as a global agreement to release crude reserves failed to calm fears about supply disruptions from Russia's invasion of Ukraine. Meanwhile, the US and Japan agreed to release 60.00mn bls of crude from their reserves in order to quell the sharp increase in prices that pushed major benchmarks past $100.00/bl. Moreover, the American Petroleum Institute (API) reported that crude oil inventories declined by 6.10mn bls for the week ended 25 February.
  • Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 3.9% to $7.08/bushel.
  • At 06:00 SAST today, gold prices declined 0.5% to trade at $1,935.97/oz. Yesterday, gold gained 1.9% to close at $1,945.28/oz, as a weaker greenback gave boost to the safe haven yellow metal.
  • Yesterday, copper rose 1.7% to close at $10,092.00/mt. Aluminium closed 3.3% higher at $3,501.00/mt.

CURRENCIES

  • Yesterday, the South African rand weakened against the US dollar. South African manufacturing activity expanded further in February, as better demand supported new sales orders and output volumes. In the US, factory activity accelerated in February buoyed by strong demand and ease in supply-chain bottlenecks.
  • The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 7.92%. Further, the yield on 2023 bond advanced to 5.35%, while that for the longer-dated 2030 issue rose to 9.46%.
  • At 06:00 SAST, the US dollar is trading marginally lower against the South African rand at R15.4148, while the euro is trading 0.2% lower at R17.1421. At 06:00 SAST, the British pound has marginally gained against the South African rand to trade at R20.5311.
  • Yesterday, the euro declined against most of the major currencies. In Germany, inflation is expected to reach about 5.4% in February, as higher energy costs push prices to all-time highs, with January producer prices registering their biggest jump, extending a run of sharp increases likely to keep consumer inflation high. Germany manufacturing PMI eased down slightly from that in the previous month in February. In the eurozone, manufacturing activity expanded in February, amid growth in both output and new orders gaining further momentum following improvements in January.
  • At 06:00 SAST, the euro marginally slipped against the US dollar to trade at $1.112, while it has marginally gained against the British pound to trade at GBP0.835.

ECONOMIC UPDATES

  • The manufacturing PMI recorded a rise to 58.60 in February, in South Africa. In the prior month, the manufacturing PMI had registered a level of 57.10.
  • In February, the final manufacturing PMI recorded an unexpected rise to a level of 58.00 in the UK. The preliminary figures had recorded an unchanged reading of 57.30. In the previous month, the manufacturing PMI had registered a reading of 57.30.
  • The BRC shop price index in the UK climbed 1.8% on an annual basis, in February. The BRC shop price index had advanced 1.5% in the prior month.
  • The SVME manufacturing PMI registered an unexpected drop to a level of 62.60 in February, in Switzerland, compared with a reading of 63.80 in the previous month.
  • In February, the manufacturing PMI remained steady at 58.30 in Italy, unchanged from the previous 58.30 in the prior month. Markets were anticipating the manufacturing PMI to drop to 58.00.
  • In February, on a monthly basis, the preliminary consumer price index (CPI) in Italy advanced 0.9%. In the prior month, the CPI had recorded a rise of 1.6%.
  • The flash EU normalised CPI climbed 0.8% on a MoM basis in Italy, in February, compared with an unchanged reading of 0.0% in the prior month. Markets were anticipating the EU normalised CPI to advance 0.2%.
  • The final manufacturing PMI recorded a rise to 57.20 in February, in France, compared with a reading of 55.50 in the previous month. Markets were anticipating manufacturing PMI to rise to a level of 57.60. The preliminary figures had recorded a rise to 57.60.
  • In February, the final manufacturing PMI in Germany dropped to 58.40, more than market expectations for a drop to 58.50. In the prior month, manufacturing PMI had recorded a level of 59.80. The preliminary figures had recorded a fall to 58.50.
  • The final manufacturing PMI fell to a level of 58.20 in the eurozone, in February, higher than market expectations of a drop to a level of 58.40. The preliminary figures had recorded a fall to 58.40. In the prior month, the manufacturing PMI had registered a level of 58.70.
  • In February, the preliminary CPI advanced 0.9% on a monthly basis in Germany, at par with market expectations of a rise of 0.9%. In the previous month, the CPI had registered a rise of 0.4%.
  • In February, the final Markit manufacturing PMI in the US recorded a rise to 57.30, less than market expectations for an advance to 57.50. The preliminary figures had recorded a rise to 57.50. In the prior month, the Markit manufacturing PMI had recorded a level of 55.50.
  • On a monthly basis, construction spending in the US advanced 1.3% in January, more than market expectations for a rise of 0.2%. In the previous month, construction spending had registered a revised rise of 0.8%.
  • The ISM manufacturing activity index in the US rose to a level of 58.60 in February, compared with a reading of 57.60 in the previous month. Markets were anticipating the ISM manufacturing activity index to rise to 58.00.
  • In February, ISM new orders in the US rose to a level of 61.70. In the prior month, ISM new orders had registered a level of 57.90.
  • In the US, the ISM prices paid index dropped to 75.60 in February, compared with a level of 76.10 in the prior month. Markets were anticipating the ISM prices paid index to ease to 74.60.
  • On a quarterly basis, annualized gross domestic product (GDP) in Canada climbed 6.7% in 4Q 2021. In the previous quarter, annualized GDP had recorded a rise of 5.4%.
  • The manufacturing PMI climbed to 56.60 in Canada, in February. The manufacturing PMI had recorded a reading of 56.20 in the previous month.

CORPORATE UPDATES

SOUTH AFRICA

  • Standard Bank (JO: SBKJ ) Group Limited: The financial services company, in its FY21 trading statement, stated that it expects its EPS to be between 95.0% and 105.0% higher as compared with 777.00c reported in the previous year. It expects its HEPS to be between 50.0% and 60.0% higher as compared with 1,002.60c reported in the prior year.
  • Impala Platinum Holdings Limited (JO: IMPJ ): The mining company, in its 1H22 results, indicated that its revenue fell to R55.62bn from R58.12bn posted in the corresponding period of the previous year. Its diluted EPS decreased 43.7% from the same period of the prior year to R16.88.
  • Exxaro Resources Limited (JO: EXXJ ): The mining company, in its FY21 trading statement, revealed that its HEPS is expected to increase between 50.0% and 64.0% as compared with the previous year. Despite the logistical challenges experienced in its coal business and the impact of the stronger ZAR/USD exchange rate on export revenue, this was more than offset by the higher prices realised on both export and domestic sales, and an increase in the equity-accounted income, mainly from Sishen Iron Ore Company (Pty) Ltd. There was a slight decrease in the weighted average number of shares (WANOS) from 251.00mn for the year ended 31 December 2020 to 247.00mn for the year ended 31 December 2021, as a result of shares repurchased and cancelled in terms of the R1.50bn share repurchase programme.
  • Fortress REIT Limited: The real estate investment trust company, in its FY22 trading statement, stated that the company hereby revises its distributable earnings guidance for the year ending 30 June 2022 to R1.70bn from the R1.78bn previously provided.
  • JSE Limited: The capital market company, in its FY21 results, stated that its revenue increased to R2.52bn from R2.45bn posted in the previous year. Its diluted EPS fell 6.9% from the prior year to 866.40c.
  • Wilson Bayly Holmes-Ovcon Limited (JO: WBOJ ): The engineering company, in its 1H22 results, reported that its revenue declined 21.6% from the same period of the preceding year to R15.96bn. Its diluted loss per share stood at R25.31, compared with an EPS of R0.32 recorded in the corresponding period of the previous year.
  • Oil prices jump after Russia-Ukraine ceasefire talks fail: Oil prices surged as concerns over potential supply disruptions after Russia’s invasion of Ukraine and related sanctions outweighing talks of a co-ordinated global crude stocks release.

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