Market Review: Investors Concerned About FED Hawkish Rate Decision

  • Market Overview

South Africa Market Review

JSE All Share - Last Month

South African markets closed in the red yesterday, as investors remained concerned about the US Federal Reserve’s ( Fed ) hawkish rate decision from Federal Open Market Committee’s May meeting. Real estate companies, Delta Property Fund (JO: DLTJ ), Emira Property Fund (JO: EMIJ ) and Attacq (JO: ATTJ ) shed 3.8%, 3.6% and 2.1%, respectively. Gold miners, Harmony Gold Mining, AngloGold Ashanti (JO: ANGJ ) and Gold Fields (JO: GFIJ ) declined 3.8%, 2.9% and 2.5%, respectively. Financial firms, Capitec Bank (JO: CPIJ ) Holdings, Absa (JO: ABGJ ) Group and FirstRand (JO: FSRJ ) dropped 3.1%, 2.9% and 2.8%, respectively. Retailers, Clicks (JO: CLSJ ) Group, Cashbuild (JO: CSBJ ) and Mr Price Group (JO: MRPJ ) fell 2.8%, 2.2% and 1.1%, respectively. Platinum miners, Northam (JO: NHMJ ) Platinum, Impala Platinum (JO: IMPJ ) Holdings and Royal Bafokeng Platinum (JO: RBPCBe ) eased 1.2%, 1.1% and 0.7%, respectively. The JSE All Share index declined 0.2% to close at 67,585.25.

UK Market Review

The UK market finished firmer yesterday, buoyed by robust corporate earnings. SSE (LON: SSE ) soared 5.7%, after the energy company reported a surge in its FY22 annual profit and stated that it invested significantly more than its profit to help reduce dependency on imported gas. Retail companies, Kingfisher (LON: KGF ) and Associated British Foods (LON: ABF ) gained 3.2% and 2.8%, respectively. Tobacco companies, Imperial Brands (LON: IMB ) and British American Tobacco (JO: SNHJ ) advanced 3.2% and 2.6%, respectively. On the flipside, water utility companies, Severn Trent (LON: SVT ) and United Utilities Group (LON: UU ) shed 2.5% and 2.0%, respectively. The FTSE 100 index advanced 0.5% to close at 7,522.75.

US Market Review

US markets ended higher yesterday, as investors assessed Fed’s early May meeting, which indicated that the central bank remains open to rethinking its aggressive plans to raise rates to ease soaring inflation. Nordstrom (NYSE: JWN ) jumped 14.0%, after the retail company raised its guidance for FY22 sales and profit. Wendy’s surged 9.8%, after its shareholder Trian Fund Management revealed that it was exploring an acquisition or other potential deal for the restaurant chain. Express Inc. soared 6.7%, after the clothing company posted a lesser than expected loss in its 1Q22 results and also provided better than expected guidance for FY22. The S&P 500 index rose 1.0% to settle at 3,978.73, while the DJIA index advanced 0.6% to close at 32,120.28. The NASDAQ index climbed 1.5% to end the trading session at 11,434.74.

Asia Market Review

Asian markets are trading mostly higher this morning, tracking overnight gains on Wall Street. In Japan, transport company Kawasaki Kisen Kaisha (TYO: 9107 ) has gained 3.8%. On the flipside, Mitsubishi Electric Corporation has declined 4.4%. In Hong Kong, pharmaceutical company, CSPC Pharmaceutical Group (HK: 1093 ) has plunged 5.5%. On the contrary, Alibaba (NYSE: BABA ) Health Information Technology has added 1.1%. In South Korea, steel manufacturing company, SeAH Steel Holdings Corporation has surged 8.0%. On the other hand, telecommunication devices company Hanchang Corporation has plummeted 8.1%. The Nikkei 225 index is trading 0.1% higher at 26,706.61. The Hang Seng index has eased 0.2% to trade at 20,131.21, while the Kospi index is trading 0.1% higher at 2,618.72.

Commodities

At 06:00 SAST today, Brent spot prices rose 0.2% to trade at $114.72/bl, extending previous sessions gains.

Yesterday, Brent spot prices rose 0.5% to settle at $114.45/bl, boosted by tighter supplies and as the US refiners drove processing activity to their highest level since before the coronavirus pandemic started. Meanwhile, the US Energy Information Administration (EIA) reported that US crude inventories fell by 1.02mn bls for the week ended 20 May.

Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 0% to $7.81/bushel.

At 06:00 SAST today, gold prices declined 0.2% to trade at $1,850.34/oz. Yesterday, gold declined 0.7% to close at $1,853.46/oz, as a stronger greenback dented the demand appeal for the safe haven yellow metal.

Yesterday, copper declined 1.0% to close at $9,367.00/mt. Aluminium closed 1.0% lower at $2,846.50/mt.

Currencies

Yesterday, the South African rand weakened against the US dollar. In the US, mortgage applications declined for the week ended 20 May, as increased prices and higher rates continued to weigh on affordability. Meanwhile, US factory orders for durable goods rose in April, indicating that the economy is still growing at a steady pace in the early spring.

The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 8.24%. Further, the longer-dated 2030 issue rose to 9.75%.

At 06:00 SAST, the US dollar is trading marginally lower against the South African rand at R15.7383, while the euro is trading 0.1% higher at R16.8342. At 06:00 SAST, the British pound has gained 0.1% against the South African rand to trade at R19.8077.

Yesterday, the euro declined against most of the major currencies. In Germany, the economy grew slightly in 1Q22 as higher investments were offset by the dual impacts of war in Ukraine and COVID-19 that was expected to weigh more heavily in the three months to June. German consumer confidence is expected to improve marginally in June, even though it remained at a historical low dampened by high inflation and the geo-political tensions between Russia and Ukraine.

At 06:00 SAST, the euro advanced 0.1% against the US dollar to trade at $1.0697, while it has gained 0.1% against the British pound to trade at GBP0.85.

Economic Updates

On an annual basis, the producer price index (PPI) recorded a rise of 45.0% in April, in Spain. In the prior month, the producer price index had registered a rise of 46.6%.

Consumer confidence registered an unexpected drop to 86.00 in France, in May. Consumer confidence had registered a revised reading of 87.00 in the previous month.

The consumer confidence index in Germany recorded a rise to -26.00 in June, compared with a revised reading of -26.60 in the previous month. Market expectations were for the consumer confidence index to climb to a level of -26.00.

In 1Q22, the seasonally adjusted final gross domestic product ( GDP ) registered a rise of 0.2% on a quarterly basis in Germany, compared with a drop of 0.3% in the previous quarter. Markets were expecting the GDP to climb 0.2%. The preliminary figures had also recorded a rise of 0.2%.

In the week ended 20 May 2022, on a weekly basis, the number of mortgage applications registered a drop of 1.2% in the US. In the prior week, the number of mortgage applications had fallen 11.0%.

On a monthly basis, the flash durable goods orders (ex transportation) registered a rise of 0.3% in April, in the US, compared with a rise of 1.1% in the prior month. Markets were expecting durable goods orders (ex transportation) to remain unchanged 0.0%.

In April, the preliminary durable goods orders in the US advanced 0.4% on a monthly basis, lower than market expectations of a rise of 0.5%. Durable goods orders had registered a rise of 0.6% in the previous month.

In April, on a monthly basis, the flash non-defense capital goods shipments (ex aircraft) rose 0.8% in the US. The non-defense capital goods shipments (ex aircraft) had climbed 0.2% in the previous month.

Corporate Updates

South Africa

Tiger Brands Limited (JO: TBSJ ): The packaged goods company, in its 1H22 results, reported that its revenue advanced 1.9% from the same period of the preceding year to R16.76bn. Its diluted EPS stood at 722.90c, compared with 827.20c recorded in the corresponding period of the previous year.

Grindrod Shipping (JO: GSHJ ) Holdings Limited: The shipping company, in its 1Q22 results, stated that its revenue increased to $110.29mn from $68.43mn posted in the corresponding period of the previous year. Its diluted EPS stood at $1.52.

Reunert Limited: The fiber optic cable manufacturing company, in its 1H22 results, indicated that its revenue increased to R5.11bn, compared with R4.61bn posted in the corresponding period of the previous year. Its diluted EPS rose 1.0% from the same period of the prior year to 195.00c.

RFG Holdings Limited: The food producing company, in its 1H22 results, indicated that its revenue rose to R3.43bn from R2.84bn posted in the corresponding period of the previous year. Its diluted EPS increased 49.9% from the same period of the prior year to 60.70c.

Mediclinic International (LON: MDCM ) Plc: The company, in its FY22 results, revealed that its revenue rose 7.9% from the preceding year to GBP3.23bn. Its diluted EPS stood at 20.50p, compared with 9.20p recorded in the previous year.

Glencore (LON: GLEN ) prepares to pay $1.50 bn in fines to settle claims including bribery: Glencore said it expected to pay up to $1.50 bn to settle accusations of bribery and market manipulation, as authorities in the US, Britain and Brazil announced that three of the company's subsidiaries were pleading guilty to crimes.

MTN (JO: MTNJ ) remains the most valuable brand in Africa: MTN has retained top spot in the rankings of the most valuable African brands according the annual Brand Finance Africa report, as the mobile operator diversifies into fintech and mobile money to maintain its competitive edge.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100