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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks on the Johannesburg Stock Exchange (JSE) ended slightly higher yesterday. Overall on the JSE, the benchmark All-Share index closed 0.16% higher at 68.717 points, while the blue-chip Top 40 index ended 0.21% higher at 62.327 points. In other news, the possibility of a strike in the motor sector has increased significantly after a two-day Motor Industry Bargaining Council (Mibco) dispute resolution committee meeting with unions and employers failed to break the deadlock in negotiations over a new agreement. The sector employs about 306 000 workers nationally, with the motor retail, fuel and automotive component manufacturing sectors falling under the Mibco.

EUROPEAN MARKET COMMENTARY

European stocks on Thursday closed slightly higher as uncertainty returned following gains in the previous session. The pan-European Stoxx 600 closed slightly above the flatline. Travel and leisure stocks were the standout performers, gaining 1.9%, while oil and gas stocks fell 1.3%. The British pound came under pressure versus the dollar after the Bank of England hiked interest rates by 50 basis points, its largest single increase since 1995, as it tries to rein in runaway inflation that hit a new 40-year high of 9.4% in June. The move was largely anticipated by market participants.

US MARKET COMMENTARY

The Dow ticked down Thursday as traders awaited Friday’s July jobs report, which will give the latest snapshot on the labor market and the health of the economy. A slight uptick in weekly jobless claims, reported Thursday morning, weighed on investors watching for signs that labor market strength is dwindling. The July jobs report, scheduled to be released today, will show how employers hired last month. Economists estimate that the economy added 258,000 jobs in July, down from 372,000 in June, according to Dow Jones. The jobless rate is forecast to remain 3.6%.

ASIAN MARKET COMMENTARY

Shares in Asia-Pacific traded higher this morning as investors look ahead to the Reserve Bank of India’s interest rate decision and the U.S. jobs report. Markets appear unfazed by China’s military drills around Taiwan, though Japan’s Defense Minister Nobuo Kishi said Chinese missiles landed in Japan’s exclusive economic zone and called the military drills a “serious problem,” according to an NBC News report. Alibaba’s Hong Kong shares dropped around 1% after the company reported flat revenue growth, though fiscal first-quarter earnings beat expectations.

CURRENCY MARKET COMMENTARY

The rand firmed on Thursday, after comments by Federal Reserve officials and a Bank of England (BoE) policy decision among major global market drivers. At the close of the session, the rand was trading around R16.61 to the dollar, 0.83% stronger. Meanwhile, the dollar struggled to gain a footing earlier today after falling by its sharpest pace in two weeks, as investors remained on tenterhooks ahead of the widely anticipated U.S. jobs data and amid growing worries about a recession.

COMMODITIES MARKET COMMENTARY

Gold prices firmed this morning to hover near a one-month high, as a retreat in dollar and U.S. Treasury yields and growing recession fears boosted demand, keeping the safe-haven metal on track for its third straight weekly rise. Meanwhile, oil prices extended losses earlier today, after hitting their lowest since before Russia's February invasion of Ukraine in the previous session, as the market fretted over the impact of inflation on global economic growth and demand.

LOCAL COMPANIES

SASOL LIMITED (SOL) +0.8%

Sasol´s adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA) for the 2022 financial year is expected to increase by between 36% and 56% from R48,4 billion in the prior year, to between R66,0 billion and R75,6 billion. This is mostly due to a strong recovery in Brent crude oil and chemical prices, partly offset by realised oil hedging losses and lower Chemicals sales volumes. Shareholders are advised that, for the 2022 financial year:

– Earnings per share (EPS) are expected to be between R60,59 and R63,51 compared to the prior year earnings per share of R14,57 (representing an increase of more than 100%);

– Headline earnings per share (HEPS) are expected to be between R42,84 and R50,74 compared to the prior year headline earnings per share of R39,53 (representing an increase by between 8% and 28%); and

– Core HEPS (CHEPS*) are expected to be between R65,21 and R70,76 compared to the prior year CHEPS of R27,74.

GOLD FIELDS LIMITED (GFI) +1.7%

Gold Fields advises that headline earnings per share for the six months ended 30 June 2022 (H1 2022) are expected to range from US$0.56-0.60 per share (US$0.11-0.15 per share higher), which is 24% to 33% higher than the headline earnings of US$0.45 per share reported for the six months ended 30 June 2021 (H1 2021). The increase in headline earnings is driven by higher production and gold price, partially offset by higher costs. Basic earnings per share for H1 2021 are expected to range from US$0.55-0.59 per share (US$0.11- 0.15 per share higher), which is 25% to 34% higher than the basic earnings of US$0.44 per share reported for H1 2021. Normalised earnings per share for H1 2022 are expected to range from US$0.54-0.58 per share (US$0.05-0.09 per share higher), which is 10% to 18% higher than the normalised earnings of US$0.49 per share reported for H1 2021.

INTERNATIONAL COMPANIES

Nikola Corporation (NKLA) +27.8%

Nikola on Thursday reported revenue for the second quarter that beat Wall Street expectations as it delivered 48 of its electric heavy trucks. The company also reported a smaller-than-expected loss for the period. Revenue came in at $18.1 million, vs. $16.5 million expected. Adjusted loss per share was reported at 25 cents, versus vs. 27 cent per-share loss expected. Nikola announced an agreement to acquire Romeo Power on Monday. The company is in the process of ramping up production at its Arizona factory, and said it expects to be building trucks at a rate of five per shift by November. Nikola confirmed its earlier guidance for 2022. It still expects to deliver between 300 and 500 of its battery-electric Tre trucks by year-end, and to complete testing of prototypes of its upcoming hydrogen fuel-cell truck with two fleet clients including Anheuser-Busch.

Beyond Meat (BYND) -7.8%

Beyond Meat on Thursday lowered its revenue forecast for the year and announced it will trim its workforce by 4%, citing broader economic uncertainty and consumers trading down to cheaper proteins. The El Segundo, California-based company also reported a wider-than-expected loss and weak sales for the second quarter. Loss per share was reported at $1.53 vs. $1.18 expected. Revenue came in at $147 million vs. $149.2 million expected. The company attributed the decline to changes in foreign exchange rates, increased discounts and sales to liquidation channels. For 2022, Beyond now expects revenue of $470 million to $520 million, down from its prior forecast of $560 million to $620 million.

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Research Team
Media, Sasfin Wealth