Market Review: Shell, Nedbank Group, Absa, BHP Group

  • Market Overview

SOUTH AFRICA MARKET REVIEW

  • South African markets closed in the green yesterday, on prospects that the US Federal Reserve (Fed) would increase its interest rate as expected, amid persistent supply-chain constraints and high energy and food costs that fuelled inflation.
  • Mining companies, Anglo American (JO: AMSJ ), African Rainbow Minerals (JO: ARIJ ) and BHP Group (JO: BHPJ ) advanced 4.1%, 2.9% and 1.4%, respectively.
  • Financial sector stocks, Nedbank Group (JO: NEDJ ), Absa (JO: ABGJ ) Group and FirstRand (JO: FSRJ ) added 2.0%, 1.2% and 0.9%, respectively.
  • On the flipside, real estate property sector stocks, Delta Property Fund (JO: DLTJ ), Dipula Income Fund (JO: DIBJ ) and Emira Property Fund (JO: EMIJ ) shed 4.9%, 1.6% and 1.0%, respectively.
  • Telecommunications company, Telkom (JO: TKGJ ) SA SOC eased 0.3%,amid allegations of corruption and malfeasance in its affairs stretching back to 2006.
  • The JSE All Share index advanced 2.1% to close at 73,797.33.

UK MARKET REVIEW

  • The UK market finished firmer yesterday, buoyed by gains in travel and energy sector stocks.
  • Travel and leisure companies, International Consolidated Airlines Group (LON: ICAG ) SA, InterContinental Hotels Group (LON: IHG ) and Whitbread (LON: WTB ) soared 7.4%, 2.8% and 2.4%, respectively, after the UK government confirmed that Covid-19 testing would soon be scrapped for double-jabbed travellers arriving in the country.
  • Oil and energy companies, Royal Dutch Shell (LON: RDSa ) and BP (LON: BP ) surged 5.6% and 3.8%, respectively.
  • On the contrary, miner, Fresnillo (LON: FRES ) plummeted 14.6%, after the company slashed its production guidance, amid operational challenges and new labour laws.
  • Sage Group (LON: SGE ) plunged 6.5%, despite reporting a strong start to FY22. The FTSE 100 index advanced 1.3% to close at 7,469.78.

US MARKET REVIEW

  • US markets ended mostly lower yesterday, even after the US Fed kept its key interest rates unchanged.
  • However, the central bank indicated towards a tightening of its monetary policy.
  • AT&T (NYSE: T ) plummeted 8.4%, despite the telecommunications company reporting robust 4Q21 results that topped expectations.
  • Boeing (NYSE: BA ) shed 4.8%, after the company reported a more than expected loss as well as a substantial revenue miss in its 4Q21 results.
  • On the other hand, Texas Instruments (NASDAQ: TXN ) advanced 2.5%, after the company reported better than expected 4Q21 earnings.
  • The S&P 500 index fell 0.1% to settle at 4,349.93, while the DJIA index declined 0.4% to close at 34,168.09.
  • The NASDAQ index marginally climbed to end the trading session at 13,542.12.

ASIA MARKET REVIEW

  • Asian markets are trading lower this morning, tracking overnight losses on Wall Street.
  • In Japan, financial sector company, SoftBank Group has plunged 8.7%.
  • On the flipside, peer, Fukuoka Financial Group, Inc. (T: 8354 ) has gained 2.3%.
  • In Hong Kong, NetEase (NASDAQ: NTES ) has shed 5.9%. On the contrary, MTR Corporation has added 0.7%.
  • In South Korea, technology company, Samsung Electronics (KS: 005930 ) has shed 1.9%.
  • Meanwhile, the company reported a significant jump in its 4Q21 operating profit as compared to the year before.
  • On the other hand, SeAH Steel Corporation (KS: 003030 ) has soared 5.1%.
  • The Nikkei 225 index is trading 3.0% lower at 26,202.14.
  • The Hang Seng index has dropped 2.7% to trade at 23,645.32, while the Kospi index is trading 3.2% lower at 2,620.13.

COMMODITIES

  • At 06:00 SAST today, Brent spot prices fell 1.0% to trade at $88.7/bl, as tight supply and rising political tensions between Russia and Ukraine added to concerns about further disruption in an already-tight market.
  • Yesterday, Brent spot prices rose 2.3% to settle at $89.64/bl, as low cushing and distillate inventories combine with supply jitters in Europe, Russia-Ukraine tensions, and falling Russian seaborne crude imports from the Baltics. However, the US Energy Information Administration (EIA) reported that US crude inventories advanced by 2.40mn bls for the week ended 21 January.
  • Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 1.2% to $6.10/bushel.
  • At 06:00 SAST today, gold prices declined 0.2% to trade at $1,816.09/oz. Yesterday, gold declined 1.5% to close at $1,819.59/oz, after the US Fed Chairman, Jerome Powell’s hawkish stance gave strength to the greenback, thus denting demand for the safe haven yellow metal.
  • Yesterday, copper rose 1.2% to close at $9,952.50/mt. Aluminium closed 0.1% higher at $3,106.00/mt.

CURRENCIES

  • Yesterday, the South African rand weakened against the US dollar. In the US, the Fed signalled that it is likely to raise US interest rates in March and reaffirmed plans to end its bond purchases that month as well before launching what was characterized as a significant reduction in its asset holdings. FOMC members also agreed on a set of principles for "significantly reducing" the size of the Fed's massive asset holdings by limiting how much of the principal from maturing bonds it would reinvest each month. Meanwhile, sales of new US single-family homes jumped to a nine-month high in December, boosted by a severe shortage of previously owned houses on the market.
  • The yield on benchmark government bonds mostly fell yesterday. The yield on 2026 bond fell to 7.71%. Further, the yield on 2023 bond advanced to 5.35%, while that for the longer-dated 2030 issue fell to 9.33%.
  • At 06:00 SAST, the US dollar is trading 0.5% higher against the South African rand at R15.4107, while the euro is trading 0.3% higher at R17.2929. At 06:00 SAST, the British pound has gained 0.3% against the South African rand to trade at R20.7063.
  • Yesterday, the euro declined against most of the major currencies. The World Health Organisation’s Europe Director, Hans Kluge stated that once the current Omicron wave is over in Europe, the pandemic situation could be over in the region even as the virus may come back by the end of this year.
  • At 06:00 SAST, the euro slipped 0.2% against the US dollar to trade at $1.1222, while it has marginally gained against the British pound to trade at GBP0.8352.

ECONOMIC UPDATES

  • Consumer confidence fell to a level of 99.00 in January, in France, compared with a level of 100.00 in the prior month. Market anticipations were for consumer confidence to drop to a level of 98.00.
  • The number of mortgage applications in the US slid 7.1% on a weekly basis, in the week ended 21 January 2022. The number of mortgage applications had climbed 2.3% in the previous week.
  • The flash wholesale inventories registered a rise of 2.1% in the US on a monthly basis, in December. The wholesale inventories had recorded a revised rise of 1.7% in the previous month.
  • The US had registered advance goods trade deficit of $101.00bn in December, following an advance goods trade deficit of $98.00bn in the previous month.
  • On a monthly basis, new home sales registered a rise of 11.9% in December, in the US. New home sales had climbed by a revised 11.7% in the previous month.
  • Fed kept its interest rate steady at 0.25%. Markets were expecting the central bank to keep its interest rate unchanged at 0.25%.
  • Industrial profits (YoY) rose 4.2% in China on an annual basis, in December. In the prior month, industrial profits (YoY) had recorded a rise of 9.%.
  • The consumer price index in New Zealand recorded a rise of 1.4% on a QoQ basis in 4Q21, compared with an advance of 2.2% in the prior quarter. Markets were expecting the consumer price index to advance 1.3%.

CORPORATE UPDATES

SOUTH AFRICA

  • Adcock Ingram (JO: ADEOJ ) Holdings Limited: The pharmaceutical company, in its 1H22 trading statement, revealed that the company expects its EPS and HEPS to improve by between 27.0% and 30.0% as compared with the 186.50c posted in the corresponding period of the previous year.
  • Harmony Gold Mining Company Limited: The gold mining company, in its production update as at the end of December 2021, announced that gold production for 1H22 from the South African operations remains steady at 22,355 kilograms (718,726oz) compared to the 22,031 kilograms (708,310oz) produced during the previous six-month period ended 30 June 2021. Gold production at Hidden Valley was down 26.0% to 1,871 kilograms (60,153oz) against the comparable period as a result of geotechnical issues which prevented the effective mining of stage 6 of the open pit, resulting in more lower grade stockpiles being processed.
  • Sasol’s chemicals business soars despite lower sales volumes: Higher crude oil prices and a demand recovery in the chemicals market, spurred by the easing of Covid-19 lockdown regulations, contributed to a 31% revenue jump in the chemicals business of Johannesburg-based energy and chemical company Sasol (JO: SOLJ ).

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