Taking Stock - Restaurants will be allowed to open again.

In todays taking stock, we discuss how restaurant and Leisure stocks rallied after President Cyril Ramaphosa announced on Sunday that restaurants will be allowed to open again.

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MARKET COMMENTARY

 

SOUTH AFRICAN MARKET COMMENTARY

Local markets closed higher yesterday, despite unrest around the country. The JSE Top 40 index posted a 1.43% gain, while the All-Share index recorded an 1.37% uptick to 67,293. South Africa deployed soldiers on Monday to quell violence that erupted following the jailing of former President Jacob Zuma, after days of riots left at least six people dead. Hotel and casino owner Sun International topped the gainers, jumping 8.11%, while peer Tsogo Sun Hotels rose 3.28% and owner of fast-food chains Famous Brands gained 5.79% after President Cyril Ramaphosa announced on Sunday that restaurants will be allowed to open again.

 

 

EUROPEAN MARKET COMMENTARY

European stocks climbed to a record high on Monday as traders looked ahead to second-quarter earnings from major US banks this week. The pan-European Stoxx 600 index provisionally closed up 0.7% to hit an all-time high. Financial services and utilities shares posted the biggest gains, up 1.5% and 1.4% respectively. Travel was the only sector in the red, falling 1.3%. UK Health Minister Sajid Javid confirmed Monday afternoon that July 19 would mark the final stage of the roadmap out of lockdown in England. The move comes despite concerns over a continuing surge in coronavirus cases caused by the more infectious delta variant.

 

 

US MARKET COMMENTARY

US stocks registered more all-time highs as investors await second-quarter earnings starting this week to gauge whether corporate profits can support equity valuations. Treasury yields edged slightly higher as the US sold debt. Financials and communication services shares led the S&P 500 to another record, while Tesla, Nvidia and Google parent Alphabet pushed the tech-heavy Nasdaq 100 into uncharted territory. Both indexes set their previous closing marks on Friday. The Stoxx Europe 600 gained for a second day and Asian equity indexes closed in the green.

 

 

ASIAN MARKET COMMENTARY.

The rally in global stocks extended into Asia on Tuesday as optimism about the upcoming earnings season outweighs worries over the fast-spreading Delta virus variant that is forcing leaders to reimpose containment measures. Hope that central banks will maintain their ultra-loose monetary policies, or taper them very gradually, is also providing support to traders as economies recover from the ravages of last year's pandemic-induced collapse. Hong Kong led the gains in Asia, rising more than one percent, while Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei and Jakarta also enjoyed big gains.

 

 

CURRENCY MARKET COMMENTARY

The rand fell on Monday, weighed down by spreading, though sporadic, violence that has followed the jailing of the country's former president Jacob Zuma on contempt of court charges. At the end Monday’s session, the rand was trading around R14.40 to the dollar, 1.4% softer. The unrest had initially mainly been concentrated in Zuma's home province of KwaZulu-Natal (KZN), where he started serving his 15-month sentence for contempt of court on Wednesday night. Over the weekend, protests spread to Johannesburg.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices steadied this morning after hitting a one-week low in the previous session, as the dollar weakened slightly ahead of US inflation data that could offer clues about the likely timing of policy tightening by the Federal Reserve. Oil rose earlier today, recovering from the previous day's drop, as expectations of further declines in US crude inventories outweighed fears that spreading COVID-19 variants could derail a global economic recovery.

LOCAL COMPANIES

Standard Bank (SBK) -1.1%

The central bank of Mozambique has fined Africa‘s biggest lender, Standard Bank, $4.6 million for engaging in fraudulent activities, Bank of Mozambique said on Monday. The central bank also fined two of Standard Bank’s employees around $223,000 and $101,000 each, and barred the bank from engaging in some exchange-related activities for a year, it said in a statement. Standard Bank, which is based in South Africa, did not immediately respond to a request for comment. The central bank said following on-site inspections “infringement proceedings were brought against that bank (Standard Bank) and two of its managers … for serious breaches of a prudential and exchange rate nature.” It alleged the bank and the two employees were involved in fraudulent manipulation of the exchange rate, implementing an illegal payments network based outside the country, and carrying out irregular operations of financial derivatives, among other offences.

 

Pick n Pay (PIK) -0.1%

New Pick n Pay CEO Pieter Boone, who started in the role at the end of April, will be awarded a total of one million shares as a sign-on bonus. The group says it awarded the “restricted share plan (RSP) shares as part of his sign-on remuneration package, and to further align his interests with shareholders”. Boone was awarded 500 000 shares in June, which vest in June 2024, and will get a further 500 000 shares in June 2023. The second tranche will vest in 2026. At current prices, these shares are worth over R52 million. The remuneration committee says “the shares are in addition to the group’s annual programme of incentivisation”. Pick n Pay says its “long-term share incentive schemes have been effective to date in aligning the interests of executive directors with those of shareholders”. Boone was appointed as CEO-designate in January, following what the group describes as a “comprehensive local and international search”. It says the “remuneration committee has set Pieter Boone’s base salary at R10.8 million for the FY22 financial year and is confident that this is an appropriate market-related salary and a fair reflection of the extensive skill and experience that Pieter brings to the board and to the group”. Former CEO Richard Brasher’s base salary for the past year was also R10.8 million.

INTERNATIONAL COMPANIES

McDonald’s (MCD) –0.0%

McDonald’s franchises are offering higher hourly wages, paid time off and tuition payments in an attempt to win over workers, according to a report by the Wall Street Journal, as fast-food chains and restaurants struggle to hire staff. The food chain’s storefront owners are also offering backup child care, according to the report. The benefit has become popular among companies during the pandemic as employers and Americans emerging from the pandemic seek to adapt. Restaurants were among the hardest-hit businesses during Covid shutdowns, letting go of many of their workers as sales stalled. Now that industries around the country have resumed full operations, restaurants are struggling to keep up with demand. Other major restaurant chains — including Papa John’s, Chipotle and P. F. Chang’s — have similarly boosted incentives for new workers including sign-on bonuses and expanded access to caregiver benefits. McDonald’s franchisees agreed last month to help boost training, workplace flexibility, pay and benefits for workers across markets, according to the Journal. In May, McDonald’s announced a roughly 10% pay increase for some of its workers as it was rushing to hire workers and meet demand. The company expects its average hourly wage to be $15 by 2024.

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