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MARKET COMMENTARY

LOCAL MARKET COMMENTARY

The Johannesburg Stock Exchange saw gains on Friday, with the Top 40 index and the All Share index rising approximately 1.2%, closing the day at 72,180 and 78,464 points, respectively, fuelled by a strong performance in the resources sector. Meanwhile, the Bureau for Economic Research at Stellenbosch University anticipates a potential increase in the first-quarter unemployment rate, citing challenges in job placement for school-leavers and new labour market entrants. Data from the Quarterly Labour Force Survey, to be released on Tuesday, is expected to show a slight uptick in unemployment to 32.3% from the previous quarter's 32.1%.

EUROPEAN MARKET COMMENTARY

European markets ended the week on a high note, closing higher on Friday with positive momentum continuing. The U.K. economy showed signs of recovery, emerging from a recession as first-quarter gross domestic product data revealed a 0.6% increase compared to the previous three months, surpassing the 0.4% estimate. The pan-European Stoxx 600 index rose by 0.8%, driven by gains in mining stocks and utilities, which were up 1.3% and 1.5% respectively.

US MARKET COMMENTARY

U.S. stocks saw marginal gains on Friday, marking another weekly advance, as investors analysed comments from Federal Reserve officials and awaited crucial inflation data scheduled for release next week. With April's consumer price index report due on Wednesday, investors are eager for insights into the Federal Reserve's future monetary policy. Despite recent reports of higher-than-expected inflation, traders hope that the Fed will maintain its stance on rate hikes. The upcoming CPI print will be closely watched to determine the stability of equities following a robust first-quarter earnings season and to gauge the direction of Fed policy moving forward.

ASIA MARKET COMMENTARY

Asia-Pacific markets declined this morning as investors reacted to China's April inflation data, which surpassed expectations with a 0.3% year-on-year increase in the consumer price index, beating Reuters estimates. However, the producer price index fell more than anticipated, dropping 2.5% year-on-year against an estimated 2.3% decline. This week's focus will be on Japan's first-quarter gross domestic product, projected to contract by an annualized 1.5%, potentially affecting the Bank of Japan's interest rate plans.

CURRENCY MARKET COMMENTARY

On Friday, South Africa's rand remained largely unchanged as investors awaited U.S. inflation data, which could provide insights into future interest rate movements in the largest global economy. Similarly, major currencies maintained stability this morning, with the dollar holding steady against other currencies as market participants anticipated the U.S. inflation data to gauge the likelihood of interest rate cuts later this year.

COMMODITY MARKET COMMENTARY

This morning, the gold price continued its upward trend, nearing $2,360 in early Asian trading, driven by escalating geopolitical tensions in the Middle East, prompting investors to seek safe-haven assets like precious metals. Conversely, oil prices saw further declines this morning, reflecting indications of subdued fuel demand and remarks from U.S. Federal Reserve officials that diminished expectations of interest rate cuts. These comments raised concerns about slowing economic growth, potentially affecting fuel demand in the largest global economy.

LOCAL COMMENTARY

Trematon Capital Investments Limited (TMT) +0.00%

The Trematon group anticipates several financial metrics for the period ending February 29, 2024. Basic earnings per share are expected to range from 3.5 cents to 3.8 cents, compared to 1.4 cents in the previous comparable interim period. Headline earnings per share for the same period are projected to be between 3.5 cents and 3.8 cents, significantly lower than the 11.2 cents reported in the previous interim period. Net asset value (NAV) per share is estimated to range from 336 cents to 340 cents, representing a slight increase from the previous interim period. However, the adjusted net asset value (INAV) per share is expected to decrease to between 405 cents and 410 cents, primarily due to a capital distribution of 32 cents per share paid to shareholders in December 2023.

INTERNATIONAL COMMENTARY

Sun Life Financial Inc. (SLF) -6.70%

Sun Life Financial, Canada's second-largest life insurer, reported lower-than-expected core profits for the first time in 12 quarters, attributed to challenges in the U.S. market and the sale of Sun Life UK. CEO Kevin Strain cited these factors along with the end of the public health emergency in the U.S. as impacting quarterly results. While underlying net income in Asia saw a 26% increase, the U.S. experienced a 20% decline, and the wealth and asset management unit reported a 1% decrease. Overall, underlying net income fell by 2.2% to C$875 million, translating to C$1.50 per share, below analysts' expectations of C$1.65 per share. Earnings from group health and protection businesses dropped 8% to C$280 million, with a 4% decline in underlying net income from individual protection due to the sale of Sun Life UK.

SoftBank Group Corporation (9984) +1.82%

SoftBank Group, a Japanese technology investor, is anticipated to report a return to losses in its upcoming earnings announcement on Monday, despite its core asset Arm Holdings and other technology stocks performing well during the quarter. Analysts and investors are keenly awaiting insights into potential new growth investments, considering SoftBank's substantial liquidity and its ability to monetize its significant stake in Arm. The company is expected to post a net loss of 72 billion yen ($462.70 million) for the January-March period, contrasting with the 985 billion yen net profit in the previous quarter. While SoftBank's management expresses readiness for new investments, they emphasize a cautious approach. However, analysts suggest a significant acquisition similar to the $32 billion Arm purchase in 2016 could be on the horizon. Despite this, some analysts caution that the current high valuation of Arm may not be sustainable, with one estimating a fair value at $57 per share compared to its recent trading levels around $100 per share. Disappointment over Arm's annual revenue forecast, revealed during its quarterly earnings, led to a drop in its shares by up to 8.5% the following day, underscoring the potential risk of a significant rerating.

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About the Author

Research Team
Media, Sasfin Wealth

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