Market Review, Corporate Updates, Commodities & Currencies - 26.07.21

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SOUTH AFRICA MARKET REVIEW

  • South African markets closed in the green on Friday, buoyed by gains in retail and mining sector stocks.
  • Retail stocks, Cie Financiere Richemont SA (JO: CFRJ ), Massmart Holdings (JO: MSMJ ) and Clicks (JO: CLSJ ) Group added 3.3%, 0.9% and 0.6%, respectively.
  • Mining stocks, Anglo American (JO: AMSJ ), BHP Group (JO: BHPJ ) and African Rainbow Minerals (JO: ARIJ ) rose 2.4%, 1.8% and 0.5%, respectively.
  • City Lodge (JO: CLHJ ) Hotels surged 6.8%, after the company announced that it had reached agreements worth R142.00mn to sell its hotels in Tanzania and Kenya.
  • On the flipside, logistics company, Imperial (JO: IPLJ ) Logistics shed 0.5%.
  • The JSE All Share index advanced 1.0% to close at 68,063.70.

UK MARKET REVIEW

  • The UK market finished firmer on Friday, buoyed by gains in mining sector stocks and following the release of robust domestic economic data.
  • Anglo American, Antofagasta (LON: ANTO ) and BHP Group (LON: BHPB ) advanced 1.9%, 1.4% and 1.3%, respectively.
  • NatWest Group (LON: NWG ) rose 2.5%, after the company announced its plans to sell its Ulster Bank assets to Permanent TSB.
  • Vodafone Group (LON: VOD ) added 2.4%, after the company reported better than expected 1Q22 service revenue growth.
  • Tobacco companies, Imperial Brands (LON: IMB ) and British American Tobacco (JO: SNHJ ) gained 1.6% and 1.2%, respectively.
  • On the flipside, airlines group, International Consolidated Airlines Group (LON: ICAG ) SA shed 1.1%. Insurance company, Aviva (LON: AV ) lost 0.5%. T
  • he FTSE 100 index advanced 0.9% to close at 7,027.58.

US MARKET REVIEW

  • US markets ended higher on Friday, following the release of robust corporate earnings.
  • Snap (NYSE: SNAP ) soared 23.8%, after the company reported a significant increase in its 2Q21 revenue, amid recovery in the advertisement market.
  • Schlumberger (NYSE: SLB ) gained 1.5%, after reporting better than expected 2Q21 revenues and profits, and after the company stated that it expects a continued boost in its international activity despite concerns about the resurgence of COVID-19 restrictions.
  • On the other hand, Honeywell International (NASDAQ: HON ) shed 1.5%, even after the company reported better than expected 2Q21 profit and sales and raised its FY21 EPS guidance.
  • The S&P 500 index rose 1.0% to settle at 4,411.79, while the DJIA index advanced 0.7% to close at 35,061.55.
  • The NASDAQ index climbed 1.0% to end the trading session at 14,836.99.

ASIA MARKET REVIEW

  • Asian markets are trading mostly lower this morning, as a continued surge in regional coronavirus infections dampened investors sentiment.
  • In Japan, electronics company, Panasonic (T: 6752 ) has advanced 0.6%.
  • However, vehicle manufacturer, Isuzu Motors (T: 7202 ) has shed 0.7%.
  • In Hong Kong, Tencent Holdings (HK: 0700 ) has plunged 5.9%, after China’s antitrust regulator ordered the company to give up its exclusive music licensing rights and placed a fine on it for anti-competitive behaviour.
  • Pharmaceuticals company, WuXi Biologics (HK: 2269 ) has dropped 3.9%, while optical products company, Sunny Optical Technology Group (HK: 2382 ) has added 1.7%.
  • In South Korea, technology company, LG Electronics (KS: 066570 ) has shed 0.9%. The Nikkei 225 index is trading 1.3% higher at 27,903.94.
  • The Hang Seng index is trading 2.9% lower at 26,537.82, while the Kospi index is trading 0.5% lower at 3,237.29.

COMMODITIES

  • At 06:00 SAST today, Brent spot prices fell 0.6% to trade at $73.26/bl, as investors raised concerns over the continued spread of coronavirus infections as well as the floods in China.
  • On Friday, Brent spot prices rose 0.6% to settle at $73.70/bl, strengthened by hopes of tighter oil supply. Meanwhile, Baker Hughes reported that the number of active US oil drilling rigs rose 7 to 387 for the week ended 23 July, its highest since April 2020.
  • On Friday, the Illinois North Central No.2 Yellow corn spot prices fell 2.7% to $6.22/bushel.
  • At 06:00 SAST today, gold prices advanced 0.2% to trade at $1,805.88/oz. On Friday, gold declined 0.3% to close at $1,802.15/oz, as a strengthening dollar, dented demand for the precious metal.
  • On Friday, copper rose 0.8% to close at $9,495.00/mt. Aluminium closed 1.0% higher at $2,492.22/mt.

CURRENCIES

  • On Friday, the South African rand weakened against the US dollar. The International Monetary Fund resident representative for South Africa, Max Alier, suggested that South Africa should aim to reprioritise its expenditure to offset the cost of relief measures for businesses and individuals affected by the civil unrest and accelerate reforms to raise inclusive economic growth, by structural reforms that attract private investment, raise economic growth and create jobs. Meanwhile, in the US, business activity rose in July, amid supply bottlenecks indicating subsiding economic activity.
  • The yield on benchmark government bonds fell on Friday. The yield on 2026 bond fell to 7.33%. Further, the yield on 2023 bond declined to 4.99%, while that for the longer-dated 2030 issue fell to 8.93%.
  • At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R14.8608, while the euro is trading marginally higher at R17.4934. At 06:00 SAST, the British pound has marginally gained against the South African rand to trade at R20.4242.
  • On Friday, the euro declined against most of the major currencies. Eurozone manufacturing PMI rose more than expected in July. Further, German manufacturing data rose to a three month high amid strong demand and easing of pandemic restrictions. Also, the service sector expanded in July, showing inflationary pressures.
  • At 06:00 SAST, the euro marginally slipped against the US dollar to trade at $1.1771, while it has gained 0.1% against the British pound to trade at GBP0.8565.

ECONOMIC UPDATES

  • On a monthly basis, retail sales in the UK rose 0.5% in June, compared with a revised fall of 1.3% in the prior month. Market expectations were for retail sales to rise 0.4%.
  • The preliminary manufacturing PMI recorded a drop to 60.40 in July, in the UK, higher than market expectations of a fall to 62.50. In the prior month, the manufacturing PMI had registered a level of 63.90.
  • The flash services PMI in the UK eased to 57.80 in July, compared with a reading of 62.40 in the previous month. Market anticipations were for the services PMI to ease to a level of 62.00.
  • In July, the preliminary manufacturing PMI eased to 58.10 in France, higher than market expectations of a drop to a level of 58.40. In the prior month, manufacturing PMI had recorded a level of 59.00.
  • In France, the flash services PMI dropped unexpectedly to 57.00 in July. In the previous month, services PMI had registered a level of 57.80.
  • The preliminary manufacturing PMI recorded an unexpected rise to 65.60 in Germany, in July. In the previous month, manufacturing PMI had registered a reading of 65.10.
  • The preliminary services PMI climbed to 62.20 in July, in Germany. Market expectations were for services PMI to rise to 59.10, compared with a reading of 57.50 in the prior month,
  • The preliminary manufacturing PMI recorded a drop to 62.60 in July, in the eurozone, lower than market expectations of a fall to 62.50. In the previous month, the manufacturing PMI had registered a reading of 63.40.
  • In July, the flash services PMI recorded a rise to 60.40 in the eurozone, compared with a reading of 58.30 in the previous month. Market anticipations were for services PMI to advance to a level of 59.50.
  • The preliminary Markit manufacturing PMI in the US registered an unexpected rise to a level of 63.10 in July.
  • The preliminary Markit services PMI in the US dropped unexpectedly to a level of 59.80 in July. In the prior month, Markit services PMI had registered a level of 64.60.
  • Retail sales in Canada recorded a drop of 2.1% on a MoM basis in May, less than market expectations for a drop of 3.0%. In the prior month, retail sales had recorded a revised drop of 5.6%.
  • The preliminary manufacturing PMI recorded a drop to 52.20 in Japan, in July. Manufacturing PMI had registered a reading of 52.40 in the prior month.
  • The Jibun Bank Flash Services PMI index dropped to a seasonally adjusted 46.40 in Japan from the previous month’s final of 47.20.

CORPORATE UPDATES

SOUTH AFRICA

  • Vodacom Group Ltd (JO: VODJ ): The mobile operator company, in its 1Q21 trading update, reported that its revenue advanced 9.0% from the same period of the preceding year to R24.78bn. The group service revenue advanced 2.2%, from the corresponding previous year to R19.17bn. Further, South Africa service revenue was up 5.2% to R14.10bn, reflecting sustained demand for connectivity services and strong growth in new services.
  • Distell Group Holdings Limited (JO: DGHJ ): The brewing company, in its FY21 trading statement, revealed that the revenue is expected to rise 26.3%, compared with that in the previous year. Its EPS is expected to be between 838.10c and 866.50c, compared with 142.20c recorded in the corresponding previous year. The government prohibition on the sale and distribution of alcohol in the current adjusted Level 4 lockdown, negatively impacted operating profit by R30.00mn. In its update regarding the impact of civil unrest, the company revealed that one of its distribution centres (DC) in KwaZulu-Natal was damaged and its operations were disrupted. Initial assessments placed the damage at approximately R100.00mn.
  • Telkom (JO: TKGJ ) SA SOC Limited: The telecommunications company announced that Mr. Sipho Maseko will step down as the Group Chief Executive Officer (CEO) and Executive Director of the company and its subsidiaries on 30 June 2022.
  • ArcelorMittal South Africa Limited (JO: ACLJ ): The steel company, in its 1H21 trading statement, indicated that its HEPS is expected to be between R2.01 and R2.45, as compared with a headline loss per share of R2.39 in the corresponding previous year. Its EPS is expected to be between R1.82 and R2.22, compared with a loss per share of R2.11, in the corresponding previous year.
  • City Lodge Hotels Limited: The lodging company announced the disposal of shares beneficially owned by the company in Kenya to Ukarimu Limited, which is beneficially owned by Actis Africa Real Estate 3. The company and Property Lodging Investments Proprietary Limited will dispose of their entire shareholding in Fairview Hotel Limited, constituting 100.0% of the entire issued share capital of Fairview to Ukarimu for a consideration of R140.97mn. Also, the company announced the disposal of shares beneficially owned by the company in Tanzania to Faraja Limited, which is also beneficially owned by Actis, for a consideration of R1.00mn.
  • Oil prices dip but sentiment remains bullish: Oil fell further below $74 a barrel but was on track to end the week largely unchanged after rebounding from a sharp drop, underpinned by expectations that supply will remain tight as demand recovers.

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