US Inflation Data Came in More Than Expected Highest Levels Since 1982

  • Market Overview
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SOUTH AFRICA MARKET REVIEW

  • South African markets closed in the red on Friday, as the US inflation data that came in more than expected to the highest levels since 1982 and the rising cases of Omicron variant of Covid-19 dented investor sentiment.
  • Platinum miners, Impala Platinum (JO: IMPJ ) Holdings, Anglo American Platinum (JO: AMSJ ) and Royal Bafokeng Platinum (JO: RBPCBe ) shed 3.6%, 2.8% and 2.0%, respectively.
  • Retailers, Massmart Holdings (JO: MSMJ ), Mr Price Group (JO: MRPJ ) and Lewis Group (JO: LEWJ ) dropped 3.6%, 3.2% and 2.6%, respectively.
  • Gold mining companies, Harmony Gold Mining Company, Gold Fields (JO: GFIJ ) and AngloGold Ashanti (JO: ANGJ ) declined 3.5%, 2.8% and 1.8%, respectively.
  • Property companies, Delta Property Fund (JO: DLTJ ), Hyprop Investments (JO: HYPJ ) and Capital & Counties Properties (JO: CCOJ ) eased 3.5%, 1.9% and 1.5%, respectively.
  • The JSE All Share index declined 0.7% to close at 71,686.33.

UK MARKET REVIEW

  • The UK market finished weaker on Friday, as investor sentiment was dampened by a weaker than expected increase in the gross domestic product (GDP) close to its pre-pandemic levels.
  • Retail companies, Kingfisher (LON: KGF ), JD Sports Fashion (LON: JD ) and Next (LON: NXT ) dropped 2.5%, 2.2% and 2.1%, respectively.
  • Miners, Antofagasta (LON: ANTO ), Anglo American and Fresnillo (LON: FRES ) declined 2.3%, 1.9% and 1.5%, respectively. Pharmaceutical company, AstraZeneca (LON: AZN ) eased 2.0%.
  • Peer, GlaxoSmithKline (LON: GSK ) gained 0.9%.
  • On the flipside, Associated British Foods (LON: ABF ) added 0.5%, after the company reported an increase in its like-for-like sales in 4Q21 with an improved trading in its Primark fast fashion business.
  • The FTSE 100 index declined 0.4% to close at 7,291.78.

US MARKET REVIEW

  • US markets ended higher on Friday, as the US Inflation data recorded its highest annual surge in 39 years in November.
  • Oracle Corporation (NYSE: ORCL ) soared 15.6%, after the company reported better than expected fiscal 2Q22 results.
  • Broadcom (NASDAQ: AVGO ) jumped 8.3%, after the software company announced its plan to return shareholder cash following better than expected earnings in 4Q21.
  • On the contrary, financial companies, Goldman Sachs (NYSE: GS ) and JPMorgan Chase (NYSE: JPM ) declined 1.4% and 0.4%, respectively.
  • The S&P 500 index rose 1.0% to settle at 4,712.02, while the DJIA index advanced 0.6% to close at 35,970.99.
  • The NASDAQ index climbed 0.7% to end the trading session at 15,630.60.

ASIA MARKET REVIEW

  • Asian markets are trading higher this morning, tracking Friday’s gains on Wall Street.
  • In Japan, transport company, Kawasaki Kisen Kaisha (T: 9107 ) has advanced 3.5%.
  • On the contrary, steel manufacturing company, Japan Steel Works (T: 5631 ) has shed 2.2%.
  • In Hong Kong, glass products company, Xinyi Glass Holdings has added 3.8%.
  • On the flipside, Longfor Group Holdings has dropped 1.9%.
  • In South Korea, electronics company, LG Electronics (KS: 066570 ) has surged 5.6%.
  • On the other hand, SsangYong Motor (KS: 003620 ) has plunged 19.2%.
  • The Nikkei 225 index is trading 0.8% higher at 28,679.35.
  • The Hang Seng index has advanced 1.0% to trade at 24,243.96, while the Kospi index is trading 0.3% higher at 3,019.47.

COMMODITIES

  • At 06:00 SAST today, Brent spot prices rose 1.1% to trade at $75.57/bl, extending previous sessions gains.
  • On Friday, Brent spot prices rose 1.5% to settle at $74.74/bl, as concerns over the global fuel demand and economic growth due to the Omicron variant of Covid-19 was limited. The US Department of Energy announced that it will sell 18.00mn bls of crude oil from its strategic petroleum reserve (SPR) on 17 December, as planned to reduce gasoline prices. Baker Hughes reported that the oil and rigs count rose 7 to 576 for the week ended 10 December, to its highest since April 2020.
  • On Friday, the Illinois North Central No.2 Yellow corn spot prices fell 0.3% to $5.76/bushel.
  • At 06:00 SAST today, gold prices advanced 0.2% to trade at $1,786.07/oz. On Friday, gold gained 0.4% to close at $1,782.84/oz, as a weaker US dollar and increase in inflation gave a boost to the demand for the safe haven yellow metal.
  • On Friday, copper declined 0.4% to close at $9,506.90/mt. Aluminium closed 0.4% lower at $2,616.21/mt.

· CURRENCIES

  • On Friday, the South African rand weakened against the US dollar. In the US, consumer price inflation accelerated more than expected in November, its highest annual increase since 1982, with higher prices for food, gasoline and rents. Consumer sentiment improved at the start of December, driven by expectations for an increase in incomes in the upcoming year.
  • The yield on benchmark government bonds rose on Friday. The yield on 2026 bond rose to 7.85%. Further, the yield on 2023 bond advanced to 5.11% while that for the longer-dated 2030 issue rose to 9.47%.
  • At 06:00 SAST, the US dollar is trading 0.1% lower against the South African rand at R15.9571, while the euro is trading 0.4% lower at R18.0285. At 06:00 SAST, the British pound has declined 0.3% against the South African rand to trade at R21.1465.
  • On Friday, the euro advanced against most of the major currencies. In Germany, consumer inflation was unchanged in line with the expectations. In the UK, GDP increased less than expected in October, undermining expectations for a rate hike by the Bank of England (BoE).
  • At 06:00 SAST, the euro slipped 0.1% against the US dollar to trade at $1.1298, while it has marginally weakened against the British pound to trade at GBP0.8526.

ECONOMIC UPDATES

  • In October, on a MoM basis, industrial production in the UK dropped 0.6%. In the prior month, industrial production had registered a drop of 0.4%.
  • Construction output in the UK registered a drop of 1.8% in October on a monthly basis. In the prior month, construction output had recorded a rise of 1.3%.
  • Manufacturing production in the UK remained flat on a MoM basis, in October. Manufacturing production had recorded a revised drop of 0.1% in the previous month.
  • On a monthly basis, GDP in the UK climbed 0.1% in October, less than market expectations for an advance of 0.4%. In the previous month, GDP had risen 0.6%.
  • UK has reported a visible trade deficit of GBP13.93bn in October, from a visible trade deficit of GBP14.74bn in the previous month. Market anticipations were for a visible trade deficit of GBP14.06bn.
  • On a MoM basis, the Rightmove house price index dropped 0.7% in the UK, in December. In the previous month, the Rightmove house price index had dropped 0.6%.
  • In 3Q21, on a quarterly basis, the housing price index rose 2.1% in Spain. In the previous quarter, the housing price index had risen 2.4%.
  • In October, the seasonally adjusted industrial production in Italy recorded a drop of 0.6% on a MoM basis, compared with market expectations of a rise of 0.4%. In the prior month, industrial production had climbed 0.1%.
  • In Germany, the final CPI slid 0.2% in November, meeting market expectations of a fall of 0.2%. The preliminary figures had also indicated a drop of 0.2%. In the prior month, the CPI had recorded a rise of 0.5%.
  • On a monthly basis, the CPI in the US recorded a rise of 0.8% in November, more than market expectations for a rise of 0.7%. In the previous month, the CPI had registered a rise of 0.9%.
  • The flash Reuters/ Michigan consumer sentiment index rose to a level of 70.40 in the US, lower than market expectations of a rise to a level of 72.40. In the previous month, the Reuters/Michigan consumer sentiment index had registered a reading of 67.40.

CORPORATE UPDATES

SOUTH AFRICA

  • Anglo American PLC (JO: AGLJ ): The mining company announced an update to the investment community on its strong operational and financial performance during 2021 and its sector-leading growth. The company is set to deliver 35.0% growth over the next decade at an attractive 50.0% margin. It also increasing our near-term performance improvement target to $3.50bn and $4.50bn by 2023, as it accelerate the delivery of our P101 and technology programmes, while also bringing growth projects onstream. First and foremost is our Quellaveco project in Peru in mid-2022, where it has also increased early copper production plans to create additional value. Further it stated that 2021 production was up 7.0%, strong PGMs performance and higher rough diamond demand. 2021 unit costs up 10.0% above CPI inflation and some production slowdowns. Capex of $5.20bn, lower due to Covid delays and supply chain disruptions. Unit costs expected to increase by 4.0%. 2022 forecast capex of $6.20bn and $6.70bn, reflecting 2021 deferrals and Woodsmith addition.
  • Kumba Iron Ore (JO: KIOJ ) Limited: The mining company announced an update for FY21 that it expects its production to be 7.0%, as compared with that in the prior year. Production guidance for FY22 and FY23 has been revised to 39.00-41.00Mt.
  • AVI Limited (JO: AVIJ ): The consumer goods company announced that Mr Cressey, the Chief Financial Officer (CFO) and an executive director of the company, has tendered his resignation with effect from 31 December 2021. Owen will be taking up the role of Business Unit President, Sub-Saharan Africa, at Mondelez (NASDAQ: MDLZ ) International LLC in January 2022. Mr O’Meara has been appointed as the company’s CFO and an executive director, with effect from 1 January 2022, following the resignation of Mr Cressey.
  • Oceana Group Limited (JO: OCEJ ): The investment holding company, in its voluntary trading statement for FY21, stated that it expects its EPS to be between 5.0% and 12.0%, lower as compared with 650.90c reported in the previous year. It expects its HEPS to be between 597.00c and 553.00c, lower as compared with 628.40c reported in the prior year.
  • RMB Holdings (JO: RMHJ ) Limited: The investment holding company, in its 1H22 results, reported that its revenue advanced from the same period of the preceding year to R176.00mn. Its diluted EPS stood at 12.70c, compared with a loss per share of 3.20c recorded in the corresponding period of the previous year.
  • Anglo American forecasts better 2022, 35.0% growth over next decade: London - Anglo American forecast a stronger performance in 2022, banking on diamonds and iron ore, while planning to harness early copper from its Quellaveco project in Peru.

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  • PULE MOKHOTHU @PULE MOKHOTHU
    Nice breakdown for the week ahea
    Like 0