Nike Pulls Guidance, Delays Investor Day Amid CEO Transition

LOCAL MARKET COMMENTARY

On the Johannesburg Stock Exchange, both the Top 40 index and the All Share index remained mostly unchanged on Tuesday, closing up by approximately 0.1%, ending at 78,850 and 86,619 points, respectively. South African manufacturing activity improved in September due to stronger demand and a positive outlook from an interest rate cut. Capitec Bank, based in Stellenbosch, reported a 36% rise in earnings to R6.4 billion for the six months ending 31 August 2024 and declared a 36% higher interim dividend of 2,085 cents.

EUROPEAN MARKET COMMENTARY

European stocks fell on Tuesday, reversing earlier gains due to concerns over a potential attack by Iran on Israel. Euro zone inflation dropped to 1.8% in September, below forecasts and the lowest since mid-2021, raising the likelihood of another interest rate cut by the European Central Bank. However, manufacturing activity in the euro zone saw its sharpest decline of the year in September, with Germany's sector contracting at its fastest pace in a year.

US MARKET COMMENTARY

U.S. stocks fell on Tuesday, with the Nasdaq dropping over 1%, as investors grew cautious after Iran fired missiles at Israel. While markets recovered slightly from the day’s lows, concerns remained due to the Middle East conflict, along with upcoming U.S. jobless claims data and payroll reports. Economic uncertainty also rose due to a port strike on the East and Gulf coasts, which, though not as severe as pandemic disruptions, still impacts the economy and complicates decisions for Federal Reserve policymakers. Meanwhile, U.S. job openings rebounded in August, and manufacturing activity slightly missed expectations in September.

ASIA MARKET COMMENTARY

Asia-Pacific markets traded lower this morning following the inauguration of Japan's new Prime Minister, Shigeru Ishiba, who replaced Fumio Kishida. Analysts believe Ishiba's leadership may give the Bank of Japan more room to raise interest rates. In South Korea, consumer inflation rose 1.6% in September, lower than the 1.9% expected by economists. Additionally, South Korea's factory activity saw its sharpest decline in 15 months, with a purchasing managers' index of 48.3, signalling weakened overseas demand.

CURRENCY MARKET COMMENTARY

The South African rand weakened on Tuesday as the U.S. dollar strengthened after Federal Reserve Chair Jerome Powell downplayed the likelihood of significant interest rate cuts. This morning, the dollar maintained its strong position, boosted by safe-haven demand following Iran's missile attack on Israel, as investors grew concerned about the potential escalation of conflict in the Middle East.

COMMODITY MARKET COMMENTARY

Gold prices surged over 1% on Tuesday as investors sought safe-haven assets amid growing fears of a broader Middle East war following Iran's missile attack on Israel. Similarly, oil prices increased this morning, driven by concerns that the conflict could escalate and disrupt oil supplies from the critical producing region.

Capitec Bank Holdings Limited (CPI) +1.32%

The company's operating profit before tax grew by 41% to R8.309 billion, while headline earnings per share rose by 36% to 5 544 cents. Earnings per share also increased by 37% to 5 567 cents. Interim ordinary dividends went up 36% to 2 085 cents per share, and total equity saw a 17% rise to R45.958 billion. The directors declared an interim dividend of 2 085 cents per share for the six months ending 31 August 2024, which will be paid on 21 October 2024, with 116 099 843 ordinary shares in circulation.

PBT Group Limited (PBG) +5.00%

Spalding sold 1 008 000 PBT shares to TIP at 591 cents per share, totalling R5.957 million, through an off-market transaction on 30 September 2024. Following the transaction, Elizna Read (CEO) now holds 5.87% of PBT Group, combining direct and indirect shareholdings. Bianca Pieters (CFO) holds 1.48%, Pule Taukobong holds 2.36%, and Anastassia Sousa (Company Secretary) has 0.54%. Spalding now owns 26.4% of PBT shares, while TIP holds 1%.

General Motors Company (GM-) + 0.09%

General Motors (GM) reported a 2.2% decline in third-quarter sales to 659 601 vehicles, slightly better than expected. Industry forecasts had predicted a drop of over 3%, aligning GM's performance with the broader industry, which is expected to see a 2% decline. A 60% year-over-year increase in electric vehicle (EV) sales, totalling about 32 100 units, helped offset the decline, though EVs still represented just 4.9% of GM's total sales. GM now holds a 9.5% share of the U.S. EV market, up 3 percentage points from the first quarter. Through the third quarter, GM's 2024 sales are down 1% compared to the same period in 2023.

NIKE Inc. Class B (NKE) +0.83%

Nike announced on Tuesday that it is withdrawing its full-year guidance and postponing its investor day as it prepares for a new CEO. The company expects revenue for the current quarter to drop between 8% and 10%, worse than analysts’ expectations of a 6.9% decline. Following this update, Nike's shares fell about 5% in extended trading. For its fiscal first quarter, Nike exceeded earnings expectations at 70 cents per share (versus 52 cents expected), but revenue fell short at $11.59 billion. Net income dropped to $1.05 billion, and overall sales declined by 10% year-over-year as the company works on improving its product lineup and innovation strategy.

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