Market Review, Corporate Updates, Commodities & Currencies - 30.06.22

  • Market Overview

South Africa Market Review

JSE All Share - Last Month

South African markets closed in the red yesterday, as fears of global recession deepened following hawkish stance from the central banks. Real estate companies, Capital & Counties Properties (JO: CCOJ ), Attacq (JO: ATTJ ) and Emira Property Fund (JO: EMIJ ) shed 3.9%, 3.2% and 1.2%, respectively. Peer, Delta Property Fund (JO: DLTJ ) surged 9.5%. Lenders, Nedbank Group (JO: NEDJ ), FirstRand (JO: FSRJ ) and Absa Group (JO: ABGJ ) declined 2.7%, 1.7% and 1.5%, respectively. Gold miners, AngloGold Ashanti (JO: ANGJ ), Harmony Gold Mining (JO: HARJ ) and Sibanye Stillwater (JO: SSWJ ) dropped 2.4%, 1.5% and 1.1%, respectively. Retailers, Cashbuild (JO: CSBJ ), Mr Price Group (JO: MRPJ ) and Clicks Group (JO: CLSJ ) fell 2.1%, 1.9% and 1.6%, respectively. Diversified miners, African Rainbow Minerals (JO: ARIJ ), Pan African Resources (JO: PANJ ) and Anglo American (JO: AMSJ ) eased 2.0%, 1.3% and 1.1%, respectively. The JSE All Share index declined 0.5% to close at 67,747.41.

UK Market Review

The UK market finished weaker yesterday, amid central banks hawkish stance and on concerns for global recession. Real estate companies, British Land Company (LON: BLND ), Land Securities Group (LON: LAND ) and Hammerson (LON: HMSO ) plunged 8.7%, 6.5% and 3.5%, respectively. Travel and leisure companies, International Consolidated Airlines Group (LON: ICAG ) S.A. and Whitbread (LON: WTB ) shed 4.4% and 3.9%, respectively. On the flipside, pharmaceutical companies, AstraZeneca (LON: AZN ) and GSK (LON: GSK ) gained 2.5% and 1.5%, respectively. B&M European Value Retail advanced 1.8%, despite a drop in its 1Q23 like-for-like revenue, as extremely high sales in the prior year during Covid lockdowns distorted comparatives. United Utilities (LON: UU ) and National Grid (LON: NG ) rose 2.0% and 0.8%, respectively, after British energy regulator, Ofgem offered a GBP20.90bn ($25.48bn) package to boost grid capacity. The FTSE 100 index declined 0.2% to close at 7,312.32.

US Market Review

US markets ended mostly lower yesterday, dragged down by weaker corporate earnings and hawkish stance from the Federal Reserve (Fed). Bed Bath & Beyond (NASDAQ: BBBY ) plummeted 23.6%, after it announced less-than-expected 1Q22 results and the dismissal of its CEO, Mark Tritton. Financial firms, American Express (NYSE: AXP ) and JPMorgan Chase (NYSE: JPM ) shed 1.9% and 0.5%, respectively. On the contrary, General Mills (NYSE: GIS ) surged 6.3%, after reporting better-than-expected revenue in its 4Q22 results. Technology companies, Microsoft Corporation (NASDAQ: MSFT ) and Apple (NASDAQ: AAPL ) added 1.5% and 1.3%, respectively. The S&P 500 index fell 0.1% to settle at 3,818.83, while the DJIA index advanced 0.3% to close at 31,029.31. The NASDAQ index marginally eased to end the trading session at 11,177.89.

Asia Market Review

Asian markets are trading mostly lower this morning, tracking overnight losses on Wall Street. On the data front, Chinese factory activity accelerated in June. Meanwhile, in Japan, industrial production dropped in May. On the equity front, in Japan, video game company, NEXON (TYO: 3659 ) Company has declined 4.6%. On the flipside, retail company, Keio Corporation (TYO: 9008 ) has added 1.8%. In Hong Kong, Geely Automobile Holdings (HK: 0175 ) has advanced 3.0%. On the contrary, CNOOC (HK: 0883 ) has eased 1.0%. In South Korea, TCC Steel Corporation (KS: 002710 ) has plunged 8.8%. The Nikkei 225 index is trading 1.4% lower at 26,434.67. The Hang Seng index has added 0.1% to trade at 22,022.01, while the Kospi index is trading 1.0% lower at 2,354.39.

Commodities

At 06:00 SAST today, Brent spot prices rose 0.2% to trade at $118.22/bl, reversing previous sessions losses.

Yesterday, Brent spot prices fell 1.0% to settle at $117.94/bl, as worries about a slowdown in the economic rebound offset ongoing concerns about tight crude supplies. Meanwhile, the US Energy Information Administration (EIA) reported that the US crude inventories fell by 2.76mn bls for the week ended 24 June 2022.

Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 3.6% to $8.0275/bushel.

At 06:00 SAST today, gold prices advanced 0.1% to trade at $1,819.69/oz. Yesterday, gold declined 0.1% to close at $1,817.73/oz, as a stronger dollar dented demand for the safe haven yellow metal.

Yesterday, copper rose 0.5% to close at $8,399.25/mt. Aluminium closed 0.7% lower at $2,450.00/mt.

Currencies

Yesterday, the South African rand weakened against the US dollar. In South Africa, consumer sentiment tumbled to its lowest level in more than three decades during 2Q22, as a result of a major deterioration in the country’s economic outlook. In the US, economy contracted slightly more than expected in 1Q22, as the trade deficit widened to a record high and a resurgence in COVID-19 infections curtailed spending on services like recreation. Moreover, consumer spending expanded in 1Q22 at a softest pace, indicating that the economy is on weaker footing than previously thought.

The yield on benchmark government bonds fell yesterday. The yield on 2026 bond fell to 8.76%. Further, the yield on the longer-dated 2030 issue fell to 10.40%.

At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R16.2588, while the euro is trading 0.2% higher at R16.9938. At 06:00 SAST, the British pound has gained 0.3% against the South African rand to trade at R19.726.

Yesterday, the euro declined against most of the major currencies. In Germany, consumer inflation deteriorated against expectations in June, as the government took measures to reduce the burden of soaring energy prices on households and to reduce fuel consumption, after gas prices surged across Europe following the war in Ukraine. In the eurozone, consumer confidence index slumped in June, indicating soaring inflation weighing on households' willingness to spend.

At 06:00 SAST, the euro advanced 0.1% against the US dollar to trade at $1.0451, while it has marginally weakened against the British pound to trade at GBP0.8614.

Economic Updates

The consumer confidence index recorded a drop to -25.00 in South Africa, in 2Q 2022, compared with a level of -13.00 in the prior quarter.

In the UK, the business barometer dropped to 28.0% in June. In the prior month, the business barometer had registered a level of 38.0%.

On a YoY basis, retail sales in Spain registered a rise of 1.4% in May, higher than market expectations of an advance of 1.3%. Retail sales had registered a rise of 1.5% in the previous month.

In Spain, the flash consumer price index ( CPI ) climbed 1.8% on a monthly basis in June, more than market expectations for a rise of 0.6%. In the prior month, the CPI had climbed 0.8%.

On a monthly basis, the preliminary CPI recorded a rise of 0.1% in Germany, in June, less than market expectations for an advance of 0.3%. In the prior month, the CPI had advanced 0.9%.

The services sentiment indicator in the eurozone registered an unexpected rise to a level of 14.80 in June, compared with a reading of 14.00 in the previous month.

The final consumer confidence index remained steady at -23.60 in June, in the eurozone, unchanged from the previous -23.60 in the previous month. The preliminary figures had also recorded a flat reading of -23.60. Market expectations were for the consumer confidence index to remain unchanged at -23.60.

The economic sentiment indicator in the eurozone eased to 104.00 in June, less than market expectations for a fall to a level of 103.00. The economic sentiment indicator had registered a level of 105.00 in the previous month.

The industrial confidence index advanced unexpectedly to 7.40 in June, in the eurozone. The industrial confidence index had registered a revised level of 6.50 in the prior month.

The number of mortgage applications in the US advanced 0.7% on a weekly basis, in the week ended 24 June 2022. In the previous week, the number of mortgage applications had registered a rise of 4.2%.

On a quarterly basis, in the US, the final gross domestic product price index ( GDP ) advanced 83.0% in 1Q22, more than market expectations for an advance of 8.1%. In the prior quarter, the GDP price index had climbed 7.1%. The preliminary figures had recorded a rise of 8.0%.

On a quarterly basis, the final personal consumption registered a rise of 2.7% in the US, in 1Q22. In the previous quarter, personal consumption had recorded a rise of 2.5%. The preliminary figures had also recorded a rise of 2.7%.

In the US, the final core personal consumption expenditure rose 4.9% in 1Q22 on a quarterly basis, lower than market expectations of a rise of 5.1%. The preliminary figures had indicated an advance of 5.2%. In the prior quarter, core personal consumption expenditure had registered a revised rise of 5.2%.

In Japan, the flash industrial production slid 7.2% on a monthly basis, in May. In the previous month, industrial production had recorded a drop of 1.5%.

The NBS manufacturing PMI recorded a rise to 50.20 in June, in China, compared with a reading of 49.60 in the previous month. Market expectations were for the NBS manufacturing PMI to climb to 50.50.

Corporate Updates

South Africa

Capitec Bank Holdings Limited (JO: CPIJ ): The retail banking company announced the resignation of André du Plessis as Chief Financial Officer (CFO), Financial Director (FD) and Co-Founder of the group with immediate effect. Moreover, Grant Hardy will take over as CFO and FD of the company with effect from 01 July 2022. Grant has also been appointed as a member of the Risk & Capital Management Committee in replacement of André.

Hyprop Investments Limited (JO: HYPJ ): The real estate investment company, in its pre-close operational update, stated that the disposal of Delta City Mall in Podgorica, Montenegro was successfully implemented in May 2022 and the net proceeds were used to settle EUR70.00mn of the group’s Euro-denominated equity debt. Retail vacancies improved over the period and the trading of our entertainment tenants has shown a marked improvement. It has continued to create spaces for people to connect by owning and managing dominant retail centres in mixed-use precincts in key economic nodes in South Africa (SA), Eastern Europe (EE) and sub-Saharan Africa (SSA).

JSE Limited: The stock exchange company, in its 1H22 trading update, indicated that it expects its EPS to be between 521.05c and 554.66c, 24% to 32% higher as compared with 420.20c reported in the corresponding period of the previous year. It expects its HEPS to be between 520.92c and 554.53c, 24% to 32% higher as compared with 420.10c posted in the same period of the prior year.

Emira Property Fund Limited (JO: EMIJ ): The real estate investment company, in its pre-close operational update, announced that the SA operating environment remained challenging with continuing pressure on local property fundamentals. Despite this, the portfolio had performed ahead of expectations, with total vacancies across the portfolio reducing to 5.5% (by GLA) at the end of May 2022. This was driven by the continued focus on tenant retention, where 82% (by revenue) of maturing leases were retained for the 11 months ended 31 May 2022. Retaining tenants and attracting new ones continued to come at a cost, with the weighted average total reversions for the same period at an overall -12.8%.

Trustco Group Holdings Limited (JO: TTOJ ): The insurance company, in its 1H22 results, announced that it expects its EPS to be between 34.83c and 38.19c, as compared with a loss per share of 16.84c reported in corresponding period of the prior year. It expects its HEPS to be between 0.01c and 3.37c, as compared with a headline loss per share of 16.82c reported in the same period of the prior year.

Oil prices continue rising as supply remains tight: Oil prices gained for a fourth straight session with tight supply worries offsetting concerns about a weaker global economy.

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