Market Review: Markets Mixed, Chinese Economic Outlook Dampens Investor Morale

  • Market Overview

South Africa Market Review

JSE All Share - Last Month

South African markets closed in the red yesterday, as a weaker Chinese economic outlook dampened investor morale. Real estate companies, Delta Property Fund (JO: DLTJ ), Attacq (JO: ATTJ ) and Fortress REIT plunged 10.2%, 2.3% and 1.6%, respectively. Retail companies, Massmart Holdings (JO: MSMJ ), Mr Price Group (JO: MRPJ ) and Cashbuild (JO: CSBJ ) shed 4.6%, 2.2% and 2.1%, respectively. Platinum miners, Northam (JO: NHMJ ) Platinum, Impala Platinum (JO: IMPJ ) Holdings and Royal Bafokeng Platinum (JO: RBPCBe ) declined 2.0%, 1.4% and 0.7%, respectively. Financial firms, Capitec Bank (JO: CPIJ ) Holdings, FirstRand (JO: FSRJ ) and Absa (JO: ABGJ ) Group eased 1.2%, 1.1% and 0.8%, respectively. On the flipside, diversified miners, Merafe Resources and Pan African Resources (JO: PANJ ) advanced 2.5% and 1.7%, respectively. The JSE All Share index declined 1.0% to close at 67,690.72.

UK Market Review

The UK market finished weaker yesterday, amid softer domestic economic data releases. Media companies, WPP (LON: WPP ) and ITV (LON: ITV ) plummeted 9.3% and 4.9%, respectively. Investment trust companies, Scottish Mortgage Investment Trust (LON: SMT ) and Hargreaves Lansdown (LON: HRGV ) plunged 6.5% and 5.0%, respectively. Hikma Pharmaceuticals (LON: HIK ) declined 3.9%, after it announced the resignation of its Chief Executive Officer, Siggi Olafsson. On the flipside, bankers, HSBC Holdings (LON: HSBA ), Barclays (LON: BARC ) and Standard Chartered (LON: STAN ) gained 3.6%, 3.2% and 2.3%, respectively. Miners, Fresnillo (LON: FRES ) and Glencore (LON: GLEN ) added 2.3% and 1.3%, respectively. Telecommunications companies, Vodafone Group (LON: VOD ) and BT Group (LON: BT ) advanced 2.2% and 1.6%, respectively. The FTSE 100 index declined 0.4% to close at 7,484.35.

US Market Review

US markets ended mostly lower yesterday, dragged down by broad based losses in technology sector stocks. Snap Inc (NYSE: SNAP ) plummeted 43.1%, after the social media company announced that it would likely miss 2Q22 estimates as the economy has “deteriorated further and faster than anticipated”. Peers, Pinterest (NYSE: PINS ) and Meta Platforms (NASDAQ: FB ) slumped 23.6% and 7.6%, respectively. On the contrary, Best Buy (NYSE: BBY ) Company added 1.2%, after the consumer-electronics retail company reported better than expected 1Q23 revenues but lowered its earnings guidance for FY23. The S&P 500 index fell 0.8% to settle at 3,941.48, while the DJIA index advanced 0.2% to close at 31,928.62. The NASDAQ index eased 2.3% to end the trading session at 11,264.45.

Asia Market Review

Asian markets are trading higher this morning, despite overnight losses on Wall Street. In Japan, automobile company, Mitsubishi Motors (TYO: 7211 ) Corporation has plunged 5.1%. On the other hand, Kansai Electric Power Company has added 2.4%. In Hong Kong, technology company, Lenovo Group has eased 2.2%. E-commerce company, JD.com has declined 1.5%, after a US Securities and Exchange Commission official said that time is running out in negotiations between the US and Chinese authorities regarding audit inspections. In South Korea, Central Insight has soared 18.3%. The Nikkei 225 index is trading 0.1% higher at 26,779.44. The Hang Seng index has advanced 0.5% to trade at 20,219.54, while the Kospi index is trading 0.8% higher at 2,626.96.

Commodities

At 06:00 SAST today, Brent spot prices rose 0.9% to trade at $114.96/bl, buoyed by tighter supply and amid hopes for an increase in demand with the start of the US summer driving season.

Yesterday, Brent spot prices fell 0.1% to settle at $113.89/bl, after the US Energy Secretary, Jennifer Granholm stated that US President, Joe Biden had not ruled out using export restrictions to ease soaring domestic fuel prices. Meanwhile, the American Petroleum Institute (API) reported that crude oil inventories rose by 0.57mn bls for the week ended 20 May.

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

At 06:00 SAST today, gold prices declined 0.3% to trade at $1,860.03/oz. Yesterday, gold gained 0.7% to close at $1,866.45/oz, as a weaker dollar and geo-political tensions between Russia and Ukraine boosted demand for the safe haven yellow metal.

Yesterday, copper declined 1.4% to close at $9,459.00/mt. Aluminium closed 2.0% lower at $2,874.90/mt.

Currencies

Yesterday, the South African rand strengthened against the US dollar. In the US, business activity slowed down moderately in May, dampened by higher prices and a drop in demand for services, while renewed supply constraints due to COVID-19 lockdowns in China and the ongoing conflict in Ukraine hampered production at factories. Factory activity in the US central Atlantic region declined in May for the first time since September as demand dropped.

The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 8.24%. Further, the yield for the longer-dated 2030 issue rose to 9.71%.

At 06:00 SAST, the US dollar is trading 0.3% higher against the South African rand at R15.695, while the euro is trading marginally higher at R16.8063. At 06:00 SAST, the British pound has gained 0.2% against the South African rand to trade at R19.658.

Yesterday, the euro declined against most of the major currencies. In Germany, service sector rebounded, thus boosting business activity growth again in May, even though there were signs that rising prices, market uncertainty and supply problems are starting to put pressure on demand. In the eurozone, growth in business activity slowed in May, but was still relatively strong despite a cost of living crisis putting a dent in consumer spending power and a shortage of raw materials holding back expansion in manufacturing.

At 06:00 SAST, the euro slipped 0.3% against the US dollar to trade at $1.0708, while it has weakened 0.2% against the British pound to trade at GBP0.8549.

Economic Updates

In March, leading indicator climbed to 128.00 in South Africa. In the prior month, leading indicator had recorded a reading of 127.20.

The flash manufacturing PMI eased to 54.60 in the UK, in May, higher than market expectations of a fall to a level of 55.10. In the prior month, the manufacturing PMI had registered a reading of 55.80.

In May, the preliminary services PMI eased to 51.80 in the UK, compared with a level of 58.90 in the prior month. Markets were anticipating the services PMI to drop to 57.30.

The flash manufacturing PMI in France eased to 54.50 in May, compared with a level of 55.70 in the previous month. Markets were anticipating manufacturing PMI to fall to 55.10.

The flash services PMI eased to 58.40 in France, in May, higher than market expectations of a fall to a level of 58.60. In the prior month, services PMI had recorded a reading of 58.90.

In May, the industrial business climate index in France remained unchanged at a level of 106.00. The industrial business climate index had recorded a similar level of 106.00 in the prior month.

The flash manufacturing PMI climbed unexpectedly to a level of 54.70 in May, in Germany, compared with a reading of 54.60 in the prior month.

In May, the flash services PMI fell to a level of 56.30 in Germany, more than market expectations for a drop to a level of 57.20. In the prior month, services PMI had recorded a reading of 57.60.

The preliminary manufacturing PMI recorded a drop to 54.40 in May, in the eurozone, compared with a reading of 55.50 in the previous month. Markets were anticipating the manufacturing PMI to ease to 54.90.

In May, the preliminary services PMI recorded a drop to 56.30 in the eurozone, compared with a reading of 57.70 in the prior month. Market expectations were for services PMI to fall to a level of 57.50.

The Redbook index climbed 11.4% on a YoY basis in the US, in the week ended 21 May 2022. In the prior week, the Redbook index had advanced 12.7%.

The preliminary Markit manufacturing PMI eased to 57.50 in the US, in May, compared with a reading of 59.20 in the prior month. Markets were anticipating the Markit manufacturing PMI to ease to 57.90.

The preliminary Markit services PMI registered a drop to 53.50 in May, in the US. In the prior month, Markit services PMI had registered a level of 55.60.

New home sales in the US eased 16.6% in April on a monthly basis, higher than market expectations of a fall of 3.4%. New home sales had registered a revised drop of 10.5% in the prior month.

In the US, the Richmond Fed manufacturing index fell unexpectedly to -9.00 in May, compared with a level of 14.00 in the previous month.

The Reserve Bank of New Zealand raised its interest rate by 50 basis points to 2.0%, in line with market expectations.

Corporate Updates

South Africa

Barloworld (LON: BWOB ) Limited: The industrial brand management company, in its 1H22 results, stated that its revenue advanced 13.6% from the same period of the preceding year to R18.40bn. Its diluted loss per share stood at 32.50c, compared with an EPS of 365.30c recorded in the corresponding period of the previous year.

Coronation Fund Managers Limited: The fund management company, in its 1H22 results, stated that its revenue decreased to R1.93bn from R2.17bn posted in the corresponding period of the previous year. Its diluted EPS fell 22.2% from the same period of the prior year to 199.10c.

Datatec (JO: DTCJ ) Limited: The technology company, in its FY22 results, revealed that its revenue rose 12.8% from the preceding year to $4.64bn. Its diluted EPS stood at 16.20c, compared with 1.30c recorded in the previous year.

Brimstone Investment Corporation Limited (JO: BRTJ ): The financial services company announced an update regarding the acquisition by Sea Harvest Group Limited, an approximate 54.0% held subsidiary of Brimstone, of the Western Australia based fishing businesses of MG Kailis Proprietary Limited. In this regard, shareholders are advised that the transaction is now unconditional and was completed with an effective date of 23 May 2022.

Delta Property Fund: The real estate company, in its FY22 results, indicated that its revenue fell to R1.39bn from R1.45bn posted in the previous year. Its loss per share decreased 68.1% from the prior year to 20.30c.

Thungela ordered to repair damage from toxic coal spill in river: Thungela Resources (JO: TGAJ ) is working to remedy the impact of a toxic spill in February from an old coal mine in Mpumalanga province, CEO July Ndlovu said.

Glencore to plead guilty in graft probes and prepares to pay up to $1.50bn: Glencore units agreed to plead guilty to charges including bribery and price manipulation as part of a sweeping settlement with authorities in the US, UK and Brazil to settle long-running corruption probes that have hung over the commodities giant for years13/09/2005

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