Market Review, Corporate Updates, Commodities & Currencies - 06.08.21

SOUTH AFRICA MARKET REVIEW

• South African markets closed in the red yesterday, pulled down by losses in mining and technology sector stocks.
• Miners, African Rainbow Minerals (JO: ARIJ ), Anglo American (JO: AMSJ ) and BHP Group (JO: BHPJ ) plunged 5.2%, 3.9% and 3.8%, respectively.
• Technology company, Naspers (JO: NPNJn ) declined 1.4%, tracking losses in its subsidiary, Tencent Holdings (HK: 0700 ), as China took aim towards online gaming companies, referring to addiction for teenagers and a favourable tax treatment.
• On the flipside, banking sector stocks, Nedbank Group (JO: NEDJ ), Absa Group (JO: ABGJ ) and FirstRand (JO: FSRJ ) soared 9.3%, 8.3% and 4.6%, respectively.
• Insurance companies, Old Mutual (LON: OMU ), Sanlam (JO: SLMJ ) and Liberty Holdings (JO: LBHJ ) surged 5.4%, 2.5% and 2.3%, respectively.
• Real estate firms, Attacq (JO: ATTJ ) and Capital & Counties Properties (JO: CCOJ ) advanced 3.8% and 2.6%, respectively.
• The JSE All Share index declined 0.8% to close at 68,371.23.

UK MARKET REVIEW

• The UK market finished weaker yesterday, after the Bank of England ( BoE ) left its monetary policy unchanged in its latest meeting.
• Mining sector stocks, Anglo American, BHP Group and Antofagasta (LON: ANTO ) plummeted 5.0%, 3.8% and 1.4%, respectively.
• Retail companies, Tesco (LON: TSCO ) and Kingfisher (LON: KGF ) shed 0.6% and 0.5%, respectively.
• On the flipside, Rolls Royce (LON: RR ) surged 5.9%, after the company announced that it is on track to meet its 2H21 cash flow guidance.
• Mondi (LON: MNDI ) added 3.3%, after reporting better than expected 1H21 EBITDA.
• WPP (LON: WPP ) advanced 2.7%, after the company reported an increase in its 1H21 profit.
• The FTSE 100 index marginally declined to close at 7,120.43.

US MARKET REVIEW

• US markets ended higher yesterday, buoyed by gains in technology sector stocks and following the release of robust economic data.
• Salesforce.com (NYSE: CRM ), Microsoft (NASDAQ: MSFT ) and Intel (NASDAQ: INTC ) advanced 2.6%, 1.1% and 0.6%, respectively.
• Banking sector stocks, Wells Fargo (NYSE: WFC ), Goldman Sachs Group (NYSE: GS ) and JPMorgan Chase (NYSE: JPM ) added 2.3%, 1.7% and 1.3%, respectively.
• Insurance companies, American Express (NYSE: AXP ) and Travelers (NYSE: TRV ) rose 0.9% and 0.7%, respectively.
• Coca-Cola (NYSE: KO ) added 0.7%.
• Fast food company, McDonald’s climbed 0.7%. On the flipside, pharmaceuticals company, Pfizer (NYSE: PFE ) shed 0.3%.
• The S&P 500 index rose 0.6% to settle at 4,429.10, while the DJIA index advanced 0.8% to close at 35,064.25.
• The NASDAQ index climbed 0.8% to end the trading session at 14,895.12.

ASIA MARKET REVIEW

• Asian markets are trading mostly lower this morning, as investors await the release of the US jobs report.
• In Japan, optical products company, Nikon Corporation (T: 7731 ) has surged 8.4%.
• On the contrary, electronics company, Panasonic (T: 6752 ) has shed 0.2%.
• In Hong Kong, pharmaceuticals company, WuXi Biologics (HK: 2269 ) has dropped 2.9%.
• On the other hand, market heavyweight, Tencent (HK: 0700 ) has advanced 2.1%.
• In South Korea, technology company, Samsung Electronics (KS: 005930 ) has shed 0.9%. On the brighter side, pharmaceuticals company, Reyon Pharmaceuticals (KS: 102460 ) has surged 15.1%.
• The Nikkei 225 index is trading 0.3% higher at 27,824.44.
• The Hang Seng index is trading marginally lower at 26,200.96, while the Kospi index is trading 0.3% lower at 3,266.96.

COMMODITIES

• At 06:00 SAST today, Brent spot prices marginally rose to trade at $71.30/bl, extending the previous session’s gains, despite travel restrictions in many countries in order to curb the spread of coronavirus infections.
• Yesterday, Brent spot prices rose 1.4% to settle at $71.28/bl, after Israeli jets crashed into rocket launch sites in Lebanon, in response to two rockets fired towards Israel from Lebanese territory, in increased cross-border hostility amid heightened friction with Iran. This came after an attack on a tanker off the coast of Oman, which was blamed on Iran. The increasing tensions came as nuclear talks between Iran and Western powers that would ease sanctions on Tehran's oil exports appears to have delayed.
• Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 2.1% to $6.16/bushel.
• At 06:00 SAST today, gold prices declined 0.2% to trade at $1,800.53/oz. Yesterday, gold declined 0.4% to close at $1,804.41/oz. However, losses were capped after the US Federal Reserve’s ( Fed ) decision for an unchanged monetary policy.
• Yesterday, copper rose 0.3% to close at $9,471.51/mt. Aluminium closed 0.9% higher at $2,585.25/mt.

CURRENCIES

• Yesterday, the South African rand weakened against the US dollar. In the US, initial jobless claims fell less than expected for the week ended 31 July, with companies holding on to workers, amid labour force bottlenecks. Meanwhile, Fed’s Board Governor, Christopher Waller stated that digital dollar is not the solution for any problem faced by the economy currently. He pointed out that the private banking system and the Fed are currently undertaking projects that allow payments to be made immediately after they are initiated.
• The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 5.00%. Further, the yield on 2023 bond advanced to 8.86%, while that for the longer-dated 2030 issue rose to 7.34%.
• At 06:00 SAST, the US dollar is trading 0.2% higher against the South African rand at R14.5337, while the euro is trading 0.1% higher at R17.1809. At 06:00 SAST, the British pound has gained 0.1% against the South African rand to trade at R20.2316.
• Yesterday, the euro declined against most of the major currencies. The BoE kept its interest rates unchanged but has warned of an above the target inflation in the near term. The central bank’s monetary policy report added that the rise in the consumer price index was due to the rising prices for goods and energy. The BoE Governor, Andrew Bailey stated that unemployment is not expected to rise, as Finance Minister, Rishi Sunak’s job-protecting furlough scheme is phased out at the end of September. He added that the bank would not increase its rates as the economy is still fragile and the price rise is persistent. Meanwhile, on the data front, German factory orders increased more than double in June, amid increased domestic demand for large manufacturing products.
• At 06:00 SAST, the euro slipped 0.1% against the US dollar to trade at $1.182, while it has marginally weakened against the British pound to trade at GBP0.8493.

ECONOMIC UPDATES

• In South Africa, electricity production climbed 3.2% in June on an annual basis. In the previous month, the electricity production had advanced by a revised 12.2%.
• In June, on a YoY basis, electricity consumption registered a rise of 2.1% in South Africa. The electricity consumption had climbed 12.3% in the prior month.
• In July, the construction PMI in the UK fell to a level of 58.70, more than market expectations for a drop to 64.00. In the previous month, the construction PMI had recorded a reading of 66.30.
• The BoE kept its interest rate unchanged at 0.1%.
• The BoE Governor, Andrew Bailey stated that unemployment is not expected to rise, as Finance Minister, Rishi Sunak’s job-protecting furlough scheme is phased out at the end of September. He added that the bank would not increase its rates as the economy is still fragile and the price rise is persistent.
• Industrial production in France advanced 0.5% on a monthly basis in June, compared with a revised drop of 0.4% in the previous month. Market expectations were for industrial production to climb 0.6%.
• On a MoM basis, manufacturing production climbed 0.9% in France, in June. In the prior month, manufacturing production had recorded a revised drop of 0.6%.
• In June, on a monthly basis, the seasonally adjusted factory orders in Germany registered a rise of 4.1%, higher than market expectations of a rise of 1.9%. In the prior month, factory orders had fallen by a revised 3.2%.
• The seasonally adjusted number of initial jobless claims in the US fell to a level of 385.00 K in the week ended 31 July 2021, less than market expectations for a fall to a level of 384.00 K. Number of initial jobless claims had registered a revised level of 399.00 K in the previous week.
• The US has reported a trade deficit of $75.70bnin June, compared with a trade deficit of $71.00bnin the prior month. Markets were anticipating a trade deficit of $73.90bn.
• The Fed’s Board Governor, Christopher Waller stated that digital dollar is not the solution for any problem faced by the economy currently. He pointed out that the private banking system and the Fed are currently undertaking projects that allow payments to be made immediately after they are initiated.
• The international merchandise trade surplus in Canada stood at CAD3.23bn in June, following an international merchandise trade deficit of CAD1.58bn in the previous month. Market anticipations were for the nation to register an international merchandise trade deficit of CAD0.80bn.
• In June, on a YoY basis, household spending in Japan recorded a drop of 5.1%, compared with an advance of 11.6% in the prior month. Markets were expecting household spending to advance 0.1%.

CORPORATE UPDATES

SOUTH AFRICA

• Aspen (JO: APNJ ) Pharmacare Holdings Limited: The pharmaceutical company announced that Mr Sean Capazorio has been appointed to become the Group Chief Financial Officer (CFO) and consequently, will be appointed to become an Executive Director of the Board, with effect from 1 January 2022.
• Woolworths (ASX: WOW ) Holdings Limited: The retail company, in its FY21 trading statement, indicated that its EPS is expected to be between 427.80c and 439.40c, compared with 58.20c posted in the corresponding previous year. Its HEPS is expected to be between 365.40c and 377.40c, compared with 119.80c recorded in the corresponding previous period.
• Sappi Limited (JO: SAPJ ): The pulp and paper company, in its 3Q21 results, stated that its revenue increased to $1.39bn, from $0.91bn posted in the corresponding period of the previous year. Its diluted EPS stood at $3.00 compared with a loss per share of $13.00, in the same period of the prior year.
• Sibanye Stillwater (JO: SSWJ ) Limited: The gold mining company, in its 1H21 trading statement, revealed that it expects its earnings per share (EPS) and headline earnings per share (HEPS) to increase by over 138.0% compared with the prior corresponding period. Meanwhile, the company stated that 4E PGM production from the SA PGM operations was 41.0% higher than for the comparative period in 2020. Mined underground 4E PGM production increased by 43.0% year-on-year, to 817,369 4Eoz, with 4E PGM production from surface 34.0% higher at 76,796 4Eoz and third-party purchase of concentrate treated at the Marikana smelting and refining operations, increasing by 29.0% to 34,827 4Eoz. Mined 2E PGM production from the US PGM operations of 298,301 2Eoz was steady year-on-year due to a 21-day safety related work stoppage in June 2021, which reduced production by approximately 20,000 2Eoz. Recycling increased marginally to 402,872 3Eoz. Production at the SA gold operations increased by 29.0% to 16,138 kg compared with 1H20.
• JSE Limited (JO: JSEJ ): The stock exchange company, in its 1H21 results, revealed that its revenue declined 6.1% from the same period of the preceding year to R1.23bn. Its diluted EPS stood at 416.50c, compared with 566.20c recorded in the corresponding period of the previous year.
• Mpact Limited (JO: MPTJ ): The paper and packaging company, in its 1H21 results, reported that its revenue advanced 16.3% from the same period of the preceding year to R5.89bn. Its diluted EPS stood at 119.00c, compared with 9.00c recorded in the corresponding period of the previous year.
• Arrowhead Properties Ltd (JO: AHBJ ): The real estate investment trust company, in its update regarding the civil unrest, revealed that damage reported to five of its properties has been fully assessed. A phased approach has been adopted at Montclair Mall, which sustained structural damage, with stores being reopened when it becomes practical to do so. Approximately 71.0% of the gross lettable area that was affected by the unrest, is occupied by national tenants. Fortunately, damage to the affected properties was not as extensive as initially thought with the approximate cost of repairs being R15.00mn, equating to 0.16% of the Group’s property by value. Loss of rental attributable to the unrest has been estimated to be R3.00mn or 0.22% of gross rental. The Group is comprehensively insured and damage to the relevant properties and loss of rental have been insured.
• Surge in Covid-19 cases pushes oil price lower: Oil prices declined towards $70 a barrel as more countries imposed new movement restrictions to counter a surge in Covid-19 cases, though Middle East tensions offered support.