Taking Stock -positive news on coronavirus vaccines.

In todays taking stock, we look how European stocks posted their best monthly gain on record in November, fueled by positive news on coronavirus vaccines.

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MARKET COMMENTARY

SOUTH AFRICA

The local benchmark All-Share index closed down 1.26%, while the blue-chip Top 40 index ended the day 1.22% lower. The banking sector weakened 3.86% with Standard Bank down 4.83% to R121.14 and Nedbank 5.54% lower at R122.50. Credit rating agencies Fitch and Moody's lowered South Africa's sovereign ratings deeper into junk territory on November 20th, while S&P Global affirmed its rating, which was already two notches below investment grade. Bonds also weakened, with the yield on the benchmark 2030 paper adding 3 basis points to 8.99%.

 

 

EUROPE

European stocks closed out November to post their best monthly gain on record, fuelled by positive news on coronavirus vaccines. The pan-European Stoxx 600 ended the day down by 0.6%, but was still up over 14% on the month, enjoying its best month since records began in 1986. Airline stocks in the region were up more than 45% month-to-date. Meanwhile, talks between the UK and the European Union are heading into a “very significant” week, with time running out for the two sides to iron out lingering disagreements over their post-Brexit trading relationship.

 

 

US

US stocks fell on Monday as traders booked some profits given the historically strong gains logged in November. Travelers and Chevron were among the worst-performing Dow stocks, falling 3.6% and 4.5%, respectively. Energy led the way lower in the S&P 500, losing 5.4% for its worst day since June 24. Yesterday, Moderna said that new trial data showed its COVID-19 vaccine candidate was more than 94% effective. The company added it plans to ask the Food and Drug Administration for emergency clearance. Moderna shares rallied 20.2%.

 

 

ASIA

Shares in Asia were higher this morning as investors react to the release of a private survey of China’s manufacturing activity. The Caixin/Markit manufacturing Purchasing Managers’ Index for November came in at 54.9 — its highest reading in a decade. PMI readings above 50 signify expansion, while those below that level represent contraction. The Reserve Bank of Australia is set to announce its interest rate decision today. Shares in Australia also rose, as the S&P/ASX 200 jumped 1.34%.

 

 

CURRENCIES

The rand weakened around 1% on Monday, recording a third straight session of losses, as investors continued to take profits from last week's rally, while mixed domestic economic data also kept the currency on the back foot. At the close, the rand was 1.4% weaker at R15.47 per dollar. South Africa recorded a trade surplus of R36.13 billion ($2.36 billion) in October after a revised R33.36 billion surplus in September. The budget deficit was wider, at R49.73 billion for the month. The currency has defied credit downgrades, which have pushed South Africa's rating deeper into junk, rallying to pre-COVID-19 levels as optimism over progress on a coronavirus vaccine has increased risk appetite globally. But in the past few sessions the fragile domestic economy has come back into focus.

 

 

COMMODITIES

Gold edged up this morning as investors weighed optimism over prospects for a COVID-19 vaccine against a surge in infections and possible restrictive measures to combat the pandemic that risk derailing a swift global economic recovery. Oil prices slipped today amid concerns over mounting supply after leading producers delayed talks on 2021 output policy that could extend production cuts as the coronavirus pandemic continues to sap fuel demand. OPEC+ delayed talks output policy for next year until Thursday, as key players were still in disagreement on how much oil they should pump amid weak demand.

LOCAL COMPANIES

Standard Bank (SBK) -4.8%

South Africa’s largest lender by assets released a 12-month trading update, warning shareholders it has identified “pockets of pressure in its personal & business banking, particularly within personal unsecured lending”, as more clients struggle to service their debt after the repayment holidays came to an end. The bank advised HEPS for the 12 months until end-October is expected to be more than 20% lower compared to the 1766.7 cents previously. “While we are buoyed by the positive vaccine-related developments, we recognise that the rollout thereof is likely to take some time”, the group said in a statement, rising concern over the second wave of infections across the globe.

 

Barloworld (BAW) -2.6%

The diversified industrial group swung to a pre-tax loss of R1.56Bn from a R3.06Bn profit in the previous year, as the global pandemic and subsequent trade restrictions, lockdowns and travel restrictions impacted its operations. Group revenue declined 17% to R49.68Bn from R60.21Bn in the prior year, and the Board opted not to declare a final dividend due to the ongoing uncertainty. “Notwithstanding the results achieved in the midst of unprecedented challenges, we expect to begin realizing cost efficiencies and operational synergies in the short term from the group-wide implemented austerity measures”, the group said.

INTERNATIONAL COMPANIES

Zoom (ZM) +1.4%

The videoconferencing technology group released expectation beating third-quarter earnings after the bell on Wall Street, however its share price slipped in after-hours trading as investors seemed disappointed at the rate of revenue growth. The group reported EPS of 99 cents compared to the 76 cents pencilled in by analysts, as the group generated $777.2 million in revenue, well ahead of the $694.0 million forecasted. CEO Eric Yuan: "We aspire to provide the most innovative, secure, reliable, and high-quality communications platform to help people connect, collaborate, build and learn on Zoom”. The tech group is projecting Q4 revenue between $806 million and $811 million, topping the $730 million analysts modelled in.

 

Nikola (NKLA) -26.9%

Shares in the US electric truck start-up tumbled more than 25% on Monday, after General Motors (GM) announced it will walk away from an equity stake in the EV group. In September, GM said it would take a $2Bn or 11% stake in the start-up and supply them battery and fuel-cell technologies. GM opted to sign a nonbinding memorandum of understanding to supply the group with its Hydrotec fuel cell system and will be dropping plans to build the battery-powered Badger pickup truck of the EV maker. CEO Mark Russell: “Heavy trucks remain our core business and we are 100 percent focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market.”

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