SOUTH AFRICA MARKET REVIEW
- South African markets closed in the green yesterday, reversing the previous session’s losses, following an ease in worries about China’s crackdown on the technology sector.
- Naspers (JO:NPNJn) and DataTec (JO:DTCJ) rose 2.8% and 0.6%, respectively. Real estate stocks, Dipula Income Fund (JO:DIBJ), Attacq (JO:ATTJ) and Capital & Counties Properties (JO:CCOJ) surged 6.4%, 4.3% and 1.4%, respectively.
- Mining sector stocks, African Rainbow Minerals (JO:ARIJ), Anglo American (JO:AMSJ) and BHP Group (JO:BHPJ) added 1.2%, 1.1% and 0.6%, respectively.
- On the flipside, retail sector companies, Steinhoff International Holdings (JO:SNHJ) N.V., Cie Financiere Richemont SA (JO:CFRJ) and Cashbuild (JO:CSBJ) shed 2.9%, 1.8% and 1.0%, respectively.
- Banking sector stocks, FirstRand (JO:FSRJ), RMB Holdings (JO:RMHJ) and Absa (JO:ABGJ) Group dipped 0.8%, 0.7% and 0.6%, respectively.
- The JSE All Share index advanced 0.3% to close at 68,898.04.
- The UK market finished firmer yesterday, following the release of upbeat earnings reports.
- Legal & General (LON:LGEN) advanced 2.9%, after the company lifted its interim dividend and reported an increase in its 1H21 profits.
- Further, the company announced that its performance has reached above pre-pandemic levels.
- House building company, Taylor Wimpey (LON:TW) rose 1.9%, after lifting its FY21 earnings guidance, following an increase in its 1H21 profits, amid a growing domestic housing market.
- Rolls-Royce (LON:RR) Holdings added 1.4%, following an agreement to sell its Bergen Engines medium speed liquid fuel and gas engines business to Langley Holdings for an enterprise value of EUR63.00mn.
- On the flipside, education service provider, Pearson shed 3.6%.
- The FTSE 100 index advanced 0.3% to close at 7,123.86.
US MARKET REVIEW
- US markets ended mostly lower yesterday, after the US Federal Reserve (Fed) Vice Chairman, Richard Clarida indicated that the domestic economic rebound during the pandemic would strongly prepare for higher interest rates in 2023.
- General Motors (NYSE:GM) plummeted 8.9%, after the company forecasted a less than expected FY21 profit outlook.
- However, it reported better than expected 2Q21 earnings.
- Royal Caribbean Group (NYSE:RCL) shed 2.5%, after the company reported 2Q21 losses, with a decline in its revenue amid increased cash burn with ships returning into operations.
- On the other hand, Activision Blizzard (NASDAQ:ATVI) added 2.1%, following the release of an upbeat 2Q21 earnings report.
- The S&P 500 index fell 0.5% to settle at 4,402.66, while the DJIA index declined 0.9% to close at 34,792.67.
- The NASDAQ index climbed 0.1% to end the trading session at 14,780.53.
ASIA MARKET REVIEW
- Asian markets are trading mostly lower this morning, following the Fed’s hawkish monetary policy stance.
- In Japan, electronics company, Panasonic (T:6752) has added 1.5%.
- On the contrary, vehicle and diesel engine manufacturing company, Isuzu Motors (T:7202) has shed 4.3%.
- In Hong Kong, pharmaceuticals company, WuXi Biologics (HK:2269) has added 2.7%.
- On the contrary, manufacturing company, BYD Company has dropped 3.2%.
- In South Korea, technology company, LG Electronics (KS:066570) has shed 1.3%.
- However, media company, Galaxia SM(KS:011420) has surged 29.9%.
- The Nikkei 225 index is trading 0.5% higher at 27,711.36.
- The Hang Seng index is trading 0.1% lower at 26,401.89, while the Kospi index is trading marginally lower at 3,279.17.
COMMODITIES
- At 06:00 SAST today, Brent spot prices rose 0.5% to trade at $70.64/bl, reversing the previous session’s losses.
- Yesterday, Brent spot prices fell 2.8% to settle at $70.27/bl, after the Energy Information Administration (EIA) reported that US crude inventories unexpectedly advanced by 3.60mn bls to 439.20mn bls for the week ended 30 July. Further, the World Health Organization (WHO) has asked for a pause in the vaccine boosters until end of September, amid a widened gap between vaccinations in wealthy and poor countries.
- Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 0.8% to $6.03/bushel.
- At 06:00 SAST today, gold prices declined 0.1% to trade at $1,810.66/oz, as the dollar strengthened, after the Fed Vice Chairman, Richard Clarida’s comments that the central bank might start cutting down on its asset purchase programme later this year. Yesterday, gold gained 0.1% to close at $1,811.74/oz, as a weaker dollar boosted the demand for the safe haven metal.
- Yesterday, copper declined 0.8% to close at $9,443.75/mt. Aluminium closed 0.8% lower at $2,562.40/mt.
CURRENCIES
- Yesterday, the South African rand weakened against the US dollar. In SA, the IHS Markit purchasing managers index (PMI) dropped for the first time in 10 months in July, amid level 4 lockdown restrictions and the civil unrest. In the US, the Fed’s Vice Chairman, Richard Clarida stated that the central bank is likely to increase its interest rates in 2023. He added that inflation is accelerating to exceed its target of 2.0%. On the data front, mortgage applications fell for the first time since February, amid a decline in the interest rates. Private companies added less than expected jobs in July, amid concerns over the coronavirus infection. Service sector slowed down in July, amid slower growth in new businesses.
- The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 7.33%. Further, the yield on 2023 bond advanced to 4.98%, while that for the longer-dated 2030 issue rose to 8.84%.
- At 06:00 SAST, the US dollar is trading 0.1% lower against the South African rand at R14.3681, while the euro is trading 0.2% lower at R17.0004. At 06:00 SAST, the GBP/ZAR has declined 0.2% against the South African rand to trade at R19.9450.
- Yesterday, the euro declined against most of the major currencies. Meanwhile, German services PMI rose in July at the fastest pace on record, as businesses enjoyed the benefit of the economy reopening after COVID-19 restrictions were lifted. Also, the eurozone business activity rose at its fastest pace in 15 years in July, as the lifting of lockdown restrictions and COVID-19 vaccine drives boosted the service industry. Retail sales in the eurozone rose in June, amid reopening of non-essential stores.
- At 06:00 SAST, the euro marginally slipped against the US dollar to trade at $1.1836, while it has marginally gained against the British pound to trade at GBP0.8524.
ECONOMIC UPDATES
- In July, the final services PMI fell to a level of 59.60 in the UK, lower than market expectations of a drop to 57.80. The preliminary figures had recorded a drop to 57.80. In the prior month, the services PMI had registered a reading of 62.40.
- In July, the services PMI in Spain recorded an unexpected drop to a level of 61.90. The services PMI had registered a level of 62.50 in the prior month.
- The services PMI in Italy rose to a level of 58.00 in July, less than market expectations for a rise to 58.30. In the prior month, the services PMI had recorded a reading of 56.70.
- The seasonally adjusted retail sales advanced 0.7% in Italy on a MoM basis, in June. Retail sales had fallen by a revised 0.1% in the prior month.
- In July, the final services PMI recorded a drop to 56.80 in France, more than market expectations for a fall to a level of 57.00. The preliminary figures had indicated a drop to 57.00. In the prior month, services PMI had registered a reading of 57.80.
- In Germany, the final services PMI advanced to 61.80 in July, less than market expectations for a rise to 62.20. The preliminary figures had indicated an advance to 62.20. In the previous month, services PMI had registered a reading of 57.50.
- The final services PMI climbed to 59.80 in the eurozone, in July, less than market expectations for an advance to 60.40. Services PMI had registered a level of 58.30 in the previous month. The preliminary figures had recorded an advance to 60.40.
- The seasonally adjusted retail sales in the eurozone recorded a rise of 1.5% on a MoM basis in June, compared with a revised rise of 4.1% in the previous month. Markets were anticipating retail sales to climb 1.7%.
- In the US, the number of mortgage applications slid 1.7% on a weekly basis, in the week ended 30 July 2021. In the prior week, the number of mortgage applications had climbed by 5.7%.
- The Fed’s Vice Chairman Richard Clarida said that the central bank is likely to increase its interest rates in 2023, he added that the inflation is accelerating to exceed its target of 2.0%, the stage to hit the “substantial further progress” benchmark it has set before it will start tightening policy.
- In July, the final Markit services PMI recorded a drop to 59.90 in the US, less than market expectations for a fall to a level of 59.80. The preliminary figures had indicated a fall to 59.80. In the previous month, Markit services PMI had recorded a reading of 64.60.
- The ISM Services Index recorded a rise to 64.10 in the US, in July, higher than market expectations of an advance to 60.50. The ISM Services Index had registered a level of 60.10 in the prior month.
- In Canada, building permits recorded a rise of 6.9% on a monthly basis in June, higher than market expectations of a rise of 5.5%. In the previous month, building permits had fallen by a revised 12.9%.
CORPORATE UPDATES
SOUTH AFRICA
- Nedbank Group (JO:NEDJ) Limited: The banking company, in its 1H21 trading statement, stated that it expects its HEPS for the period to increase between 145.0% and 150.0% compared to the prior comparative period, resulting in a range of between R10.73 and R10.95 per share; and EPS for the period to increase between 297.0% and 302.0% compared to the prior comparative period, resulting in a range of between R10.72 and R10.85 per share.
- Liberty Holdings (JO:LBHJ) Limited: The financial services and property holding company, in its 1H21 results, indicated that its revenue rose to R20.88bn from R18.14bn posted in the corresponding period of the previous year. Its diluted EPS stood at 80.40c, compared with a loss per share of 867.70c posted in the same period of the previous year.
- Telkom (JO:TKGJ) SA SOC Limited: The telecommunications company, in its 1Q22 trading statement, reported that its revenue advanced 3.5% from the same period of the preceding year to R10.62bn. Separately, the company announced that Mr. Serame Taukobong, current Chief Executive Officer (CEO) of the Telkom Consumer Business and a Group Executive Committee Member, has been appointed as Group CEO Designate with effect from 1 October 2021. He will assume the role of the Group CEO from 1 July 2022.
- Telkom (JO:TKGJ) sees signs of pressure for SA’s consumers even as revenue picks up: SA’s third-largest mobile operator, Telkom, says it has returned to revenue growth in its first quarter to end-June, but there are signs customers are under strain, including many opting to switch to prepaid options.
- Naspers (JO:NPNJn) backs Naked Insurance with R120.00mn investment: In a move that further cements its focus on the insurance industry, Naspers’s SA-focused venture capital unit has invested R120.00mn in digital insurer Naked Insurance, its largest deal yet.