Taking Stock -The rand retreats from a more than 8-month high.

Daily insights and analysis on stocks.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks continued to climb further on optimism around a COVID-19 vaccine, which had sent shares soaring. The All Share index closed 0.45% higher (at 57,672 index points) while the benchmark Top 40 index rose 0.64%. Gold shares were among the gainers, rising 3.76% on the back of a recovery in the bullion price as investors bet on continued monetary support from central banks to revive a pandemic-hit global economy. Government bonds also weakened, with the yield on the benchmark due in 2030 up 12 basis points to 8.85%.

 

EUROPEAN MARKET COMMENTARY

European stocks closed higher Tuesday, extending gains from the previous session on hopes an effective coronavirus vaccine has been found. The pan-European Stoxx 600 nudged higher to close up around 0.1%. Tech stocks dropped 1.9% while banks surged 4.4% as signs of a rotation from growth to value emerged. In terms of individual share price action, Adidas offered a cautious outlook for sales and operating profit in the fourth quarter amid a resurgence of the coronavirus pandemic across Europe. However, the German sportswear brand said it expects growth in Chinese sales and reported third-quarter earnings slightly above expectations. Adidas shares traded nearly 6% lower by early afternoon.

 

US MARKET COMMENTARY

The Dow Jones Industrial Average rose on Tuesday, building on its sharp gains from the previous session as a market rotation out of names that thrived during the pandemic and into stocks linked to an economic recovery continued. However, the S&P 500 and Nasdaq Composite struggled amid a sharp decline in major tech names. Amazon shares fell 3.5% after falling 5% on Monday. Zoom Video dropped 9%, adding to its 17% decline from Monday. Alphabet and Microsoft lost 1.4% and 3.4%, respectively.

 

ASIAN MARKET COMMENTARY

Asian shares rose this morning as hopes for a successful coronavirus vaccine lifted expectations of a swift reopening of the global economy, which would help the region’s heavily trade-dependent markets. Australia’s benchmark ASX 200 climbed 1.05% with energy stocks and miners boosted by higher crude and commodity prices. The gains in Asia came despite the S&P 500 index slipping slightly and the Nasdaq closing sharply lower on Tuesday as vaccine optimism led investors away from market leaders and toward cyclical stocks associated with economic recovery.

 

CURRENCY MARKET COMMENTARY

The rand extended its retreat from a more than 8-month high against the dollar on Tuesday, after police issued a warrant for the arrest on corruption charges of Ace Magashule, a top official of the governing African National Congress party. The rand traded at R15.62 against the US dollar at the close, 1.61% weaker, as the South African currency fell despite world markets rising on positive news from drugmaker Pfizer on the search for a coronavirus vaccine. The local currency was trading around the R15.56 mark this morning.

 

COMMODITIES MARKET COMMENTARY

Gold prices edged higher today supported by hopes of more US stimulus measures as surging COVID-19 cases threaten to hamper economic recovery, although optimism over vaccine developments limited gains. The precious metal was last trading around the $1,880 mark. Oil prices rose about 2% this morning after an industry report showed that US crude inventories fell by more than expected as prices continued to be supported by news of successful trials of a vaccine for coronavirus. Both Brent and US oil prices are up more than 10 percent this week.

LOCAL COMPANIES

Omnia (OMN) +0.3%

The JSE-listed chemicals and fertilizer group advised shareholders it expects to report a 190% to 210% jump in HEPS for the six months end-September. The group said EPS is expected to increase by between 280% and 300%, from 39 cents in the previous period to between 146 cents and 154 cents. “The group is bearing the fruit of their turnaround strategy, moving from restructuring the organization to focusing on sales and distribution”, the CEO Seelan Gobalsamy said. The business recently reached an agreement to sell its Oro Agri business to European agricultural group, Rovensa for $146 million (R2.4Bn), using the proceeds to reduce its debt levels.

 

Telkom (TKG) -7.6%

The South African fixed-line telco operator announced on Tuesday that its fixed-line unit shredded more than half a million customers since the end of March, as clients are ditching landlines in favour of mobile phones. However, the group recorded a 54% surge in mobile data revenue for the interim period, supported by an 81% rise in mobile traffic. “We weathered the COVID-19 storm and completed the first half of the year with improved profitability, strong liquidity and a strengthened balance sheet”, the group said in a statement. The operator’s mobile customers rose 19% to 13.7 million with net additions of 2.2 million subscribers, making the group the fastest growing mobile operator in South Africa.

INTERNATIONAL COMPANIES

Beyond Meat (BYND) -16.9%

The plant-based meat substitute producer swung to a loss during the third quarter, missing analysts’ expectations for both earnings and sales. The group continues its collaborations with various food chains, as it announced the McPlant burger in partnership with McDonald’s and a plant-based sausage pizza in conjunction with Pizza Hut in the US. The group posted a 28 cent loss per share, while Wall Street was expecting a 5 cent profit. The food producer generated 2.7% higher revenue to $94.4 million, more than $37 million below consensus of $132.2 million.

 

Adidas (ADS) -5.7%

The German sportswear and apparel giant reported a 3% decline in currency-neutral sales to €5.96Bn ($7.05Bn), slightly ahead of expectations of €5.91Bn. The group saw a 12% drop in operating profit to €794 million, ahead of consensus forecasts of €723 million. Shares in the sportwear group fell after it warned of lower sales in the fourth quarter of the year as COVID-19 related lockdowns returns across Europe, this despite forecasting growth in China and strong demand for products designed by superstar, Beyonce. CEO Kasper Rorsted: “While at the beginning of the quarter we were on track for growth in Q4, a worsening of the pandemic in many regions of the world is again requiring our patience and support.” The group benefitted from its digital channels as e-commerce sales surged 51%, with nearly 70% of online sales in Europe and the US coming through its loyalty programme, which now has 150 million members.

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