In todays taking stock, we discuss how Walmart unveils low-price insulin as more patients with diabetes struggle to pay for drug.
7 reading min
30 Jun 2021
SOUTH AFRICAN MARKET COMMENTARY
Johannesburg-listed stocks rose after economic data showed disposable income rose 2.3% year on year in the first quarter, which, together with low interest rates and subdued inflation, pushed household consumption spending higher. That had a positive impact on retailers, with Walmart majority-owned Massmart, Famous Brands, Truworths, Mr Price, TFG, Pick n Pay, Woolworths and pharmacy group Clicks up between 6.53% and 3.39%. Overall, the Johannesburg All-Share index rose 1.12% to 66,548 points, while the Top-40 index gained 1.13% to 60,495 points.
EUROPEAN MARKET COMMENTARY
European stocks rose on Tuesday as global investors monitored the spread of the delta Covid-19 variant and awaited key economic data out of the US. The pan-European Stoxx 600 closed higher by 0.4%, with chemicals shares climbing 0.9% to lead the gains. European Central Bank policymakers on Monday began a public discussion about when and how to wind down the massive emergency bond purchase program launched last year to support the euro zone economy through the pandemic. Euro zone economic sentiment rallied to a 21-year high in June as further reopening boosted optimism, according to the European Commission’s monthly sentiment survey.
US MARKET COMMENTARY
During the regular session Tuesday, US stocks were little changed in light trading although the S&P 500 did notch its 4th straight positive session and an all-time high. Homebuilder stocks rose Tuesday after S&P CoreLogic Case-Shiller published its National Home Price Index, which showed home prices rose more than 14% in April from the previous year and several major cities in the US had their highest annual price gains.
ASIAN MARKET COMMENTARY
Asian shares rose and a gauge of global equities hovered near record highs this morning after rising consumer confidence in economic recovery boosted the Nasdaq index to its highest-ever closing level. Chinese blue-chips added 0.1%, Australian shares were up 0.58% and set for a ninth straight month of gains, and Seoul’s Kospi rose 0.35%. Japan’s Nikkei edged up 0.06%. MSCI’s global share index was set for a fifth straight month of gains this morning.
CURRENCY MARKET COMMENTARY
The rand weakened on Tuesday as the safe-haven US dollar climbed to a one-week high over fears that new coronavirus outbreaks could undermine a global economic recovery. At the close of the session, the rand was trading around R14.36 to the dollar or 0.69% softer. Fears over the spread of the highly infectious Delta coronavirus variant have dented global sentiment at a time that markets are on edge because of a hawkish tilt from the US Federal Reserve.
COMMODITIES MARKET COMMENTARY
Oil prices today, extended the previous day’s small gains after an industry report showed US crude stockpiles fell last week, overriding trader and investor concerns about transportation curbs in some countries as Covid-19 cases surge. Gold prices held steady this morning as investors were cautious ahead of US jobs data due later this week, but prices were set to post their worst month since November 2016 on the US Federal Reserve's shift to a hawkish policy stance.
Murray & Roberts (MUR) +1.3%
JSE-listed multinational engineering and construction group Murray & Roberts (M&R) has successfully finalised a Gautrain business disruption insurance claim and received R285 million because of the low ridership levels on the Gautrain caused by the Covid-19 lockdown. M&R CEO Henry Laas said the proceeds from the claim were used to repay some of the high-interest debt in the Bombela Concession Company (BCC). “That is obviously going to reduce some of the interest exposure going forward. All in all things are looking okay but we need [Gautrain] ridership to improve,” he said during a virtual business presentation last week. M&R owns a 50% stake in the BCC, which holds the 15-year concession for operating and maintaining the Gautrain. Laas said this investment and the fair value adjustments M&R does on that investment “is very much linked to the ridership” on the Gautrain. “Pre-Covid-19 we were doing about 55 000 passengers a day. Currently we are doing about 13 000 passengers a day … So it’s in a difficult space and we need to get ridership levels to increase,” he said. “But under the current Covid-19 scenario, it’s very difficult for us to increase ridership levels.” M&R confirmed in July 2020 that Gautrain ridership levels had slumped to as low as 6 000 a day. Ed Jardim, the group’s investor and media executive said on Tuesday M&R will not be able to submit another business disruption claim for the continuing low ridership levels on the Gautrain. He added that the actual business disruption impact is larger than the value of the business disruption claim that had been settled. BCC carries the risk on actual revenue up to a certain level. From this level up to the guaranteed level, the revenue gap is covered by the Gautrain Management Agency’s (GMA) “patronage guarantee”. The GMA’s senior manager (for) reputation Tlago Ramalepa said the Gauteng Provincial Government makes provisions for all its annual financial obligations, but there is a cap in the concession agreement to the patronage guarantee, which is a limit to the amount the province has to pay in any month. Jardim said M&R is unable to disclose details of the Gautrain financial model, including the threshold at which the government subsidy or “patronage guarantee” kicks in and the upper ridership threshold at which the subsidy falls away. However, he confirmed that at the current low ridership levels “the patronage guarantee has been at its maximum already”. The latest GMA annual report reveals that the patronage guarantee payment by the agency increased to R1.971 billion in the year to end-March 2020 from R1.667 billion in the previous year. Jardim said that the work-from-home phenomenon by many employers has negatively impacted ridership numbers on the Gautrain. The Gauteng provincial government and BCC both took multi-million rand ‘hits’ last year because of low commuter patronage on the Gautrain caused by the Covid-19 lockdown. Laas disclosed during a presentation on M&R’s financial results for the year to end-June 2020 that Covid-19 had a R622 million impact on the group’s earnings before interest and tax. About a third of that R622 million related to M&R’s investment in the BCC, he said. The value of M&R’s investment in the BCC is negatively impacted when Gautrain ridership levels are below the threshold at which the government subsidy kicks in.
Walmart (WMT) -0.6%
Walmart said Tuesday it will offer a less expensive version of insulin that could better fit into the budgets of millions of Americans who don’t have health insurance or struggle to pay for the lifesaving diabetes drug. Starting this week, the retailer will sell an exclusive private-label version of analog insulin, ReliOn NovoLog, to adults and children who have a prescription. The drug will be available at its membership-based Sam’s Club in mid-July. The insulin will cost about $73 for a vial or about $86 for a package of prefilled insulin pens. The insulin is the latest addition to Walmart’s private brand of diabetes products, ReliOn. It already sells a low-price version of insulin for about $25 as part of the line, but that is an older formulation that some doctors and advocates say is not as effective at managing blood sugar swings as newer versions of insulin, called analogs.
Formula 1 landed a new sponsor Tuesday in a deal with Crypto.com, a platform that allows users to buy and sell cryptocurrencies. The terms of the agreement were not provided, but people familiar with the pact told CNBC it’s a five-year deal that totals more than $100 million. As part of the agreement, Crypto.com will get brand presence around F1 events, including the new Sprint qualifying format that will be used in some races to determine the starting positions of the cars. Crypto.com will also receive trackside slots at F1 races for the remainder of the season.
30 June 2021
4 reading min
Forex Daily Market - Money supply growth slowed to 2.02% y/y in April
In today's market update, money supply growth slowed to just 2.02% y/y in April, its slowest pace of growth in more than a decade, while private sector credit growth is currently sitting at a record low of -1.76%.
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