Taking Stock - Pandemic hits oil demand.

In todays taking stock, we discuss how the Royal Dutch Shell sees huge loss as pandemic hits oil demand.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks firmed yesterday, led by consumer facing stocks and banking and financial stocks as investors looked to eased lockdown restrictions to help the retail, restaurant and hospitality sectors. Leading the gainers, hotel and casino owner Sun International shot up 11.90% and general retailers rose 3.89%, while the financial index increased 2.99%. Energy and chemicals company Sasol jumped 4.64%, while mobile network operator MTN Group, which has operations in Nigeria, rose 4.50%, benefiting from higher oil prices. The Johannesburg All-Share index closed the session 1.23% firmer (now at 63,786 index points) while the Top-40 index rose 1.15%.

 

 

EUROPEAN MARKET COMMENTARY

European stocks closed mixed on Thursday as investors remained focused on earnings reports and developments on the coronavirus pandemic. The pan-European Stoxx 600 finished up 0.5% but with different indexes pointing in different directions. Banks added 2.7% following the Bank of England’s comments on negative interest rates, while utilities fell 0.5%. The Bank of England on Thursday left monetary policy unchanged following its first meeting of 2021, with its main lending rate held at 0.1% and target stock of asset purchases kept at £895 billion ($1.2 trillion).

 

 

US MARKET COMMENTARY

US stocks jumped on Thursday, extending the rally into a fourth straight day as investors assessed a new batch of corporate earnings and solid economic data. A better-than-expected jobless claims report helped boost sentiment. First-time claims for unemployment insurance totalled 779,000 for the week ended Jan. 30, below the 830,000 estimates from economists surveyed by Dow Jones. On the stimulus front, Democrats are moving forward with President Joe Biden’s $1.9 trillion Covid-19 relief proposal. Republicans have countered with a more modest $618 billion package, which includes new stimulus checks of $1,000 per person.

 

 

ASIAN MARKET COMMENTARY

Shares in Asia rose in early trade today following overnight gains stateside that saw the S&P 500 hitting a record closing high. Shares of China’s Kuaishou Technology soared in their Hong Kong debut, rocketing nearly 200% from their issue price of 115 Hong Kong dollars (about $14.83) per share. The stock later pared those initial gains, but was still up more than 150% by the afternoon.

 

 

CURRENCY MARKET COMMENTARY

The rand weakened on Thursday, backtracking for the first time this week, as data pointing to an improvement in the US economic outlook lifted the dollar. At the close, the rand was 0.14% weaker at R14.97 against the dollar. In previous sessions, the rand was supported by the global search for yield by investors unsure of the direction of lending rates in developed economies. The currency gained more than 1.5% in the first three days of the week. But on Thursday, a stronger dollar weighed on the rand. The local currency was trading around R15.02 to the dollar this morning.

 

 

COMMODITIES MARKET COMMENTARY

Gold edged up on Friday, recovering from its lowest level in more than two months, but is still on course to post its worst week in ten due to a firmer dollar. Oil prices climbed on Friday to their highest levels in a year, extending a run of strong gains this week, boosted by the continued commitment of producers to hold back crude supply and positive signs of economic growth in the United States.

LOCAL COMPANIES

KAP Industrial Holdings (KAP) +1.6%

KAP Industrial’s Unitrans Passenger subsidiary faces a showdown with unions over the plan to shut the luxury coach operator down. Up to 700 jobs are on the line from the planned closure of popular inter-city bus service Greyhound, unions warned on Wednesday. However, National Union of Metalworkers of SA (Numsa) secretary general Irvin Jim has threatened to interdict Greyhound’s owners Unitrans Passenger to stop closure, saying the union was only informed of the Section 189 retrenchment process on Tuesday. Another union, the Democratised Transport Logistics and Allied Workers Union (Detawu), has said “it will do everything in its power” to also oppose the shutdown. “Unitrans Passenger employs more than 3000 employees [within] its various divisions. About 693 employees will be affected by the contemplated closure of Greyhound, Magic Bus and Megabus Midrand,” Jim said in Numsa’s reaction statement. “Should Unitrans close, this would be a serious blow to workers and their families…. We cannot afford as a country to lose any more jobs, as this will simply worsen conditions for the working class and the poor,” he added. In statements posted online and on its social media channels on Wednesday, Greyhound said its services will run until February 14, 2021, noting that passengers with tickets booked for services after this date would be refunded in full.

INTERNATIONAL COMPANIES

Royal Dutch Shell (RDSA) -2.0%

Oil giant Royal Dutch Shell sank to a net loss of $21.7bn (£16bn) last year after the coronavirus pandemic caused demand to slump. The announcement comes after two of its rivals, BP and Exxon, posted similar big losses. Looking ahead, Shell said "significant uncertainty" would continue to have a negative impact on demand for oil and gas products. As a result, it said it might need to take measures to cut production. In September last year, Shell announced that up to 9,000 jobs would go worldwide as the company responded to the effects of the pandemic. Last month, it said it was cutting 330 jobs from its operations in the North Sea. Even before the virus struck, the oil industry was already having to rethink its future plans as part of the transition away from fossil fuels. The Covid impact means companies such as Shell are accelerating that transition.

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Research Team

Media, Sasfin Wealth

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