Market Review, Corporate Updates, Commodities & Currencies - 19-07-21

  • Market Overview

SOUTH AFRICA MARKET REVIEW

  • South African markets closed in the red on Friday, as concerns about damaged businesses and infrastructure caused by the civil unrest in the country, and its adverse effect on the economy dampened investor morale.
  • Mining sector stocks, Anglo American (JO: AMSJ ), Exxaro (JO: EXXJ ) Resources and African Rainbow Minerals (JO: ARIJ ) shed 4.4%, 4.0% and 2.9%, respectively.
  • Real estate stocks, Capital & Counties Properties and Dipula Income Fund (JO: DIBJ ) declined 3.0% and 1.1%, respectively.
  • Retail companies, Cie Financiere Richemont SA (JO: CFRJ ), Lewis Group (JO: LEWJ ) and Mr Price Group (JO: MRPJ ) dropped 2.2%, 1.3% and 1.2%, respectively.
  • On the flipside, insurance companies, Clientele and Discovery (JO: DSBPp ) surged 5.3% and 0.5%, respectively.
  • The JSE All Share index declined 1.5% to close at 66,529.53.

UK MARKET REVIEW

  • The UK market finished weaker on Friday, pulled down by losses in mining sector stocks and as warnings about rising COVID-19 cases dampened optimism about an economic rebound.
  • Rio Tinto (LON: RIO ) shed 3.4%, as its Pilbara operations in Western Australia were affected by storms and labor bottlenecks, thus causing a drop in iron ore shipments.
  • Peers, Anglo American (JO: AGLJ ) and Fresnillo (LON: FRES ) dropped 2.8% and 2.7%, respectively.
  • Burberry (LON: BRBY ) plunged 5.0%, despite a rise in its 1Q21 sales, driven mainly by demand for handbags and trench coats by younger customers.
  • On the flipside, travel and leisure stocks, InterContinental Hotels (LON: IHG ) and International Consolidated Airlines Group (LON: ICAG ) SA added 1.7% and 1.5%, respectively, on the back of news that US President, Joe Biden might ease off travel restrictions with Europe.
  • The FTSE 100 index declined 0.1% to close at 7,008.09.

US MARKET REVIEW

  • US markets ended lower on Friday, following the release of disappointing domestic consumer confidence data.
  • Charles Schwab (NYSE: SCHW ) shed 2.4%, after the company reported a less than expected 2Q21 profit.
  • Kansas City Southern(NYSE: KSU ) (NYSE: KSU ) shed 1.1%, amid reporting weaker than expected 2Q21 revenues as well as a net loss due to high merger costs.
  • Bristol-Myers Squibb (NYSE: BMY ) lost 0.2%, after it reported that a late-stage study of a treatment for head and neck cancer failed to meet its main goals.
  • On the flipside, pharmaceuticals companies, Pfizer (NYSE: PFE ) and Amgen (NASDAQ: AMGN ) added 0.7% and 0.5%, respectively.
  • The S&P 500 index fell 0.8% to settle at 4,327.16, while the DJIA index declined 0.9% to close at 34,687.85.
  • The NASDAQ index eased 0.8% to end the trading session at 14,427.24.

ASIA MARKET REVIEW

  • Asian markets are trading lower this morning, tracking Friday’s losses on Wall Street.
  • In Japan, electronics company, Taiyo Yuden (T: 6976 ) has shed 4.2%.
  • On the other hand, pharmaceuticals company, Chugai Pharmaceutical (T: 4519 ) has added 2.4%.
  • In Hong Kong, Meituan (HK: 3690 ) has dropped 3.3%.
  • Moreover, oil company, CNOOC (HK: 0883 ) has lost 1.9%.
  • However, engineering services company, Xinyi Solar Holdings (HK: 0968 ) has advanced 2.1%.
  • In South Korea, electronics company, LG Electronics (KS: 066570 ) has declined 1.6%, while peer, Shinil Electronics (KS: 002700 ) has surged 16.3%.
  • The Nikkei 225 index is trading 1.3% lower at 27,649.18.
  • The Hang Seng index is trading 1.6% weaker at 27,564.16, while the Kospi index is trading 0.9% lower at 3,246.13.

COMMODITIES

  • At 06:00 SAST today, Brent spot prices fell 1.8% to trade at $72.46/bl, after OPEC+ agreed to increase oil supply in the market from August to ease down the soaring prices, as the global economy moves towards recovery from the COVID-19 pandemic. OPEC+ has agreed to reinstate its production cut to 5.80mn bls per day (bpd), from a 10.00mn bpd cut earlier, amid fall in demand and prices. It will increase the supply by 2.00mn bpd or 0.40mn bpd a month with an aim to fully remove the restriction on supply by September 2022.
  • On Friday, Brent spot prices fell 0.6% to settle at $73.79/bl, amid hopes of an increase in the oil output. Meanwhile, Baker Hughes reported that the number of active US oil drilling rigs rose by 2 to 380 for the week ended 16 July, recording its highest since April 2020. However, the US oil production is expected to fall to 11.10mn bpd in 2021 compared with 11.30mn bpd in 2020.
  • On Friday, the Illinois North Central No.2 Yellow corn spot prices fell 1.2% to $6.34/bushel.
  • At 06:00 SAST today, gold prices marginally advanced to trade at $1,812.26/oz, as a fall in the US treasury yields and worries about an economic rebound with the continued spread of coronavirus infections adding to the demand for the precious metal. On Friday, gold declined 1.0% to close at $1,812.05/oz.
  • On Friday, copper declined 0.6% to close at $9,391.25/mt. Aluminium closed 1.3% lower at $2,467.65/mt.

CURRENCIES

  • On Friday, the South African rand strengthened against the US dollar. In the US, the consumer sentiment index declined sharply and unexpectedly to a five-month low in July, as concerns over rising inflation depressed hopes of a domestic economic rebound. However, retail sales in the US unexpectedly surged in June, boosted by strong demand for goods despite a shift in spending to services.
  • The yield on benchmark government bonds fell on Friday. The yield on 2026 bond fell to 7.51%. Further, the yield on 2023 bond declined to 5.19%, while that for the longer-dated 2030 issue fell to 8.91%.
  • At 06:00 SAST, the US dollar is trading 0.2% higher against the South African rand at R14.4564, while the euro is trading 0.1% higher at R17.0623. At 06:00 SAST, the British pound has gained 0.1% against the South African rand to trade at R19.8793.
  • On Friday, the euro declined against most of the major currencies. The eurozone consumer price index ( CPI ) rose in-line with market expectations on a monthly basis in June. Further, the trading bloc’s trade surplus narrowed in May, due to a decline in exports.
  • At 06:00 SAST, the euro marginally slipped against the US dollar to trade at $1.1803, while it has gained 0.1% against the British pound to trade at GBP0.8583.

ECONOMIC UPDATES

  • Spain had posted a trade surplus of EUR0.14bn in May, following a trade deficit of EUR1.30bn in the previous month.
  • The trade surplus in Italy narrowed to EUR5,642.00mn in May, from a trade surplus of EUR5,871.00mn in the previous month.
  • In June, on a MoM basis, the final CPI in the eurozone registered a rise of 0.3%, in line with market expectations of a rise of 0.3%. The preliminary figures had also indicated a rise of 0.3%. The CPI had registered a rise of 0.3% in the previous month.
  • In May, the non-seasonally adjusted trade surplus in the eurozone dropped to EUR7.50bn. Eurozone had reported a trade surplus of EUR10.90bn in the prior month.
  • The eurozone had registered the seasonally adjusted trade surplus of EUR9.40 bn in May, from a trade surplus of EUR13.40 bn in the previous month.
  • In June, advance retail sales advanced 0.6% in the US on a monthly basis, compared with market expectations of a drop of 0.4%. In the prior month, advance retail sales had recorded a revised drop of 1.7%.
  • In May, on a monthly basis, business inventories registered a rise of 0.5% in the US, higher than market expectations of an advance of 0.4%. In the prior month, business inventories had advanced by a revised 0.1%.
  • In July, the flash Reuters/ Michigan consumer sentiment index in the US dropped unexpectedly to 80.80. In the previous month, the Reuters/Michigan consumer sentiment index had recorded a reading of 85.50.
  • The seasonally adjusted housing starts in Canada recorded a drop to 282.10K in June. Markets were anticipating housing starts to drop to a level of 270.00K, compared with a revised reading of 286.30K in the prior month,

CORPORATE UPDATES

SOUTH AFRICA

  • Compagnie Financiere Richemont SA (JO: CFROJ ): The luxury goods company, in its 1Q21 trading statement, revealed that the group sales were up by 129.0% compared with that in the previous year. The company announced that Cyrille Vigneron, President & Chief Executive Officer (CEO) of Cartier, and Nicolas Bos, President & CEO of Van Cleef & Arpels, will step down from the Senior Executive Committee and will not seek re-election to the Board of Directors at the Group’s Annual General Meeting on 8 September 2021. Also, Philippe Fortunato, CEO of Fashion and Accessories, Emmanuel Perrin, Head of Specialist Watchmakers Distribution and Frank Vivier, Chief Transformation Officer will step down from the Senior Executive Committee.
  • Delta Property Fund Ltd (JO: DLTJ ): The real estate investment trust company, in its voluntary update on the impact of the civil unrest in the country, revealed that the civil unrest, widespread looting, and vandalism, particularly in the eThekwini CBD, has impacted five of Delta’s assets, namely Delta Towers, Liberty Towers, 88 Field Street, Pine Parkade and Treasury House. Damage primarily was related to broken shopfronts on the ground floor level of these assets with the corporate offices not impacted. The company is engaging with insurance providers to ensure its retail tenants can reopen as soon as possible.
  • The Foschini Group (JO: TFGJ ): The retail company, in its voluntary update on the impact of the civil unrest, revealed that approximately 190 South African stores have been looted and damaged to varying degrees. Furthermore, all KZN stores are currently not trading due to safety concerns. A distribution centre operated by one of its logistics service providers as well as the manufacturing premises of one of its local suppliers has also been damaged by fire during the unrest, the impacts of which are not material to its supply chain. Trade continues as normal in the rest of the Group’s South African and African regions supported by strong supply chains. This includes the Group’s own manufacturing capacity which remains largely unaffected.
  • Fortress REIT Limited: The real estate investment trust company, in its update regarding property damage caused by the civil unrest revealed that, Cornubia Ridge Logistics Park had extensive fire damage to 50.1% of newly developed co-owned, logistics building at the park. Biyela Shopping Centre was looted and has suffered a degree of structural damage due to a fire. Evaton Mall was extensively looted over the past few days. However, damage restricted mostly to non-structural elements, including shopfronts. Palm Springs Shopping Centre was looted and suffered several small fires in individual shops, all of which were contained and extinguished.
  • Massmart Holdings (JO: MSMJ ) Limited: The retail company, in its update regarding the ongoing civil unrest revealed that, protesters gained access to and made off with merchandise in 18 Cambridge stores, 10 Game stores, 8 Builders stores, 3 Cash & Carry and 2 Makro stores. Two of its distribution centres have also been directly impacted. Altogether, four facilities have suffered significant damage due to arson. This has resulted in the temporary closure of a number of vulnerable stores and facilities over the last few days. The company has successfully activated business continuity replenishment plans that involve shifting replenishment capability to distribution centres into which it has built in backup capacity, the company is therefore confident in its ability to service the stock needs of stores. The full extent of the damage is still being assessed.
  • AECI Limited: The chemicals company, in its 1H21 trading statement and voluntary update on the impact of unrest, revealed that the EPS is expected to be between 515.00c and 540.00c. The violence, looting and general lawlessness being experienced in the country is a matter of extreme concern and some of its employees and their families, in KwaZulu-Natal and parts of Gauteng, have been directly affected by the unrest. All of the company’s businesses remain operational at this time and are collaborating closely with the customers and suppliers to safeguard the supply chain.
  • Unrest casts shadow on AECI earnings rise: Diversified explosives and chemicals group AECI, which has experienced a significant rebound in earnings in the first half of 2021, has cautioned that it cannot yet quantify the effect that civil unrest in the country would have on its business.

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