Eli Lilly outpaces expectations with upbeat 2026 outlook as obesity franchise powers ahead

South African Market Summary

The JSE All Share rose 0.25% to 120,813.77, with the Top 40 up 0.31% to 112,787.34, as domestic data signalled stabilising business conditions. The S&P Global PMI improved to 50.0 in January, indicating steady output and demand after December’s contraction, though services and exports remained weak. The one-year AGOA extension offers only temporary trade relief amid diplomatic strain. Afreximbank’s proposed US$8 billion financing package for South Africa supports long-term industrial expansion, reinforcing external funding channels as policymakers pursue deeper integration into continental trade and development frameworks.

European Market Summary

European equities closed at a record high, with the STOXX 600 edging up 0.03% to 618.12 as telecom and consumer shares offset healthcare and software weakness. Euro area inflation slowed to 1.7% in January, while core inflation eased to 2.2%, supporting expectations that the ECB will remain on hold. UK rate expectations were similarly steady, with the Bank of England widely anticipated to keep its policy rate at 3.75%. Cooling price pressures across Europe suggest a prolonged pause in monetary tightening as policymakers assess labour-market softness and growth risks.

US Market Summary

US equities declined as technology stocks led losses amid concerns over AI-driven valuations. AMD plunged 17% on weak guidance, while Alphabet slipped before rebounding after outlining higher AI investment. Trading volumes surged well above average, reflecting repositioning ahead of delayed labour data following the government shutdown. Softer-than-expected ADP employment figures and comments from Fed Governor Lisa Cook reinforced expectations of a patient policy stance, with rates seen as only mildly restrictive. Markets remain focused on earnings quality and macro resilience as AI spending accelerates.

Asian Market Summary

Asian equities weakened as investors rotated out of technology amid concerns over rising AI capital expenditure. The Hang Seng Tech Index fell more than 1%, extending its pullback from October highs. Corporate activity included Maas Group’s planned A$1.7 billion construction divestment to Heidelberg Materials, signalling a pivot toward digital infrastructure. Geopolitical attention centred on US–China relations, with Taiwan tensions highlighted following high-level dialogue between Presidents Trump and Xi. Regional sentiment remains sensitive to tech sector valuations and cross-strait security risks.

Currency Market Summary

The rand strengthened after PMI data indicated stabilising domestic business conditions. The US dollar held firm near recent highs as markets awaited ECB and Bank of England policy decisions, both expected to result in unchanged rates. The euro traded steadily near $1.18, with attention focused on forward guidance from policymakers. Currency markets remain influenced by relative rate expectations and macro data momentum, with investors balancing improving European inflation trends against ongoing US policy uncertainty.

Commodity Market Summary

Oil prices eased after confirmation that US–Iran talks will proceed, reducing immediate supply disruption risks in the Gulf. Despite earlier volatility, the prospect of negotiations tempered geopolitical risk premiums linked to flows through the Strait of Hormuz. Inventory data offered support, with US crude and distillate stocks falling, though gasoline supplies rose. Gold climbed over 1% on safe-haven demand amid geopolitical uncertainty, while silver and palladium also advanced. Commodity markets remain driven by diplomatic developments and shifting supply-demand balances.

Vodacom Group Limited (VOD) -0.72%

Vodacom reported a resilient third-quarter performance, with group revenue rising 11.0% to R43.9 billion and service revenue up 12.7%, or 13.6% on a normalised basis, tracking ahead of medium-term targets. South African service revenue grew 1.4%, supported by expansion beyond traditional mobile offerings. Egypt remained a standout contributor, with service revenue surging 39.0% and financial services up 59.4%. The international portfolio also strengthened, delivering 12.6% service revenue growth. Group financial services revenue increased 24.7% to R4.5 billion, while mobile money platforms processed US$500.7 billion in transactions over the past year, underscoring fintech scale.

Sappi Limited (SAP) +3.63%

Sappi reported weaker first-quarter results, with revenue declining 6% year on year to US$1.29 billion and Adjusted EBITDA falling 56% to US$90 million as softer selling prices, operational disruptions and currency headwinds weighed on performance. The group recorded a net loss of US$37 million versus a prior-year profit, while headline and basic EPS swung to a 6 US cent loss. Net debt increased 39% to US$1.95 billion, reflecting lower earnings and ongoing investment pressures. Net asset value per share eased 5% to 385 US cents, underscoring balance-sheet strain amid challenging global pulp and paper market conditions.

Sea Harvest Group Limited (SHG) +4.89%

Sea Harvest expects a sharp earnings recovery for FY2025, with group headline earnings per share projected at 216–222 cents, more than triple the prior year’s restated base. The improvement reflects stronger hake catch rates and pricing, operational efficiencies in pelagic fishing, higher milk flows in dairy and disciplined cost control. Continuing operations underpin the rebound, while discontinued operations include Ladismith Cheese, now classified as held for sale. Basic EPS is forecast at 79–86 cents, with impairments in Australia, aquaculture and Cape Harvest Foods partly offsetting trading gains across the core fishing portfolio.

Rainbow Chicken (RBO) +9.22%

Rainbow Chicken expects a substantial interim earnings recovery for the six months to 28 December 2025, with EPS forecast between 69.46 and 76.57 cents, representing growth of roughly 95% to 115% versus the prior period. HEPS is projected in a similar range of 69.46 to 76.59 cents, also nearly doubling year on year. The improvement reflects stronger agricultural performance, operational efficiency gains, firm consumer demand and materially lower feed input costs following softer commodity prices. Results remain unaudited, with full interim financials scheduled for release in March 2026.

Alphabet Inc. (GOOGL) -1.96%

Alphabet signalled an aggressive acceleration in AI-related capital expenditure, guiding to US$175–185 billion this year, potentially nearly double prior spending and well above market expectations. Investment will focus on servers, data centres and networking to ease persistent compute constraints, particularly in cloud. Fourth-quarter cloud revenue rose 48% to US$17.7 billion, its fastest growth in over four years, while group revenue and earnings beat forecasts. Momentum around Gemini models, growing enterprise adoption and improved AI-driven ad monetisation are helping justify the outlay, though investor scrutiny over returns on elevated AI spending remains intense.

Eli Lilly and Company (LLY) +10.33%

Eli Lilly projected robust 2026 growth, guiding to revenue of US$80–83 billion and earnings of US$33.50–35.00 per share, both above market expectations, as demand for its obesity and diabetes portfolio accelerates. Fourth-quarter results also beat forecasts, with revenue of US$19.3 billion and strong sales from Mounjaro and Zepbound. Management highlighted continued volume-driven momentum despite pricing pressure, supported by upcoming launches including oral obesity therapy orforglipron. Lilly’s outlook contrasts sharply with challenges at Novo Nordisk, underscoring Lilly’s strengthening competitive position in the rapidly expanding global weight-management market.

Sony Group Corporation (6758) -4.56%

Sony reported a 22% year-on-year increase in third-quarter operating profit to ¥515 billion, exceeding market expectations, and raised its full-year operating profit forecast by 8% to ¥1.54 trillion. The upgrade was driven primarily by strength in the music segment, underscoring the growing contribution of recurring, content-led earnings within the group’s diversified portfolio. Despite the earnings beat, investor focus remains on long-term growth drivers, particularly in hardware, where rising memory chip costs linked to AI-driven demand are pressuring margins across the electronics industry.

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