Taking Stock - Anglo American Expects Production Increase.

In todays taking stock, we discuss how Anglo American Expects Production Increase Across All Minerals.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks ended higher on Friday, with the Top 40 index adding 0.23% and the benchmark All-Share index closing 0.22% higher (at 59,413 index points). Financials led the market higher as the financial index jumped 2.03%. Swiss power technology and automation group, ABB, has agreed to pay 1.56 billion rand ($104 million) to Eskom to settle an investigation into improper payments and compliance issues, the two companies said on Friday. ABB was investigated by South Africa’s Special Investigating Unit (SIU) in relation to over-payments for work it carried out for Eskom at the Kusile power plant, which will be among the largest coal-fired plants in the world when complete.

 

 

EUROPEAN MARKET COMMENTARY

European markets closed lower Friday as investors monitored stalling US fiscal stimulus talks and the rapidly approaching deadline for Brexit negotiations. British Prime Minister Boris Johnson said Thursday that there was now a “strong possibility” of the UK departing the EU orbit without a free trade agreement at the end of the month, with a deadline to extend talks falling on Sunday and the two sides remaining at odds on key issues. The pan-European Stoxx 600 closed down 0.7%, with telecoms shedding 2.9% to lead losses as almost all sectors and major bourses slid into negative territory.

 

 

US MARKET COMMENTARY

The S&P 500 fell on Friday, wrapping up a losing week, as the outlook for additional fiscal stimulus remained uncertain. Friday’s moves came as negotiations over a coronavirus relief deal dragged on. Lawmakers seek to pass a bill before the end of 2020, but disagreements over state and local stimulus, unemployment assistance and stimulus checks still exist. Democrats have also pushed back against the White House’s latest $916 billion aid offer. Tesla shares, meanwhile, fell 2.7% after a surprise downgrade by Jefferies.

 

 

ASIAN MARKET COMMENTARY

Stocks in Asia saw gains this morning, as investors in the region react to the approval of Pfizer’s COVID-19 vaccine. The Bank of Japan’s quarterly tankan survey showed business sentiment in Japan improving in the three months to December. The headline index for big manufacturers’ sentiment improved to minus 10 as compared with minus 27 in September. Meanwhile, South Korea has been dealing with a recent resurgence in coronavirus infections, with the country reporting its largest daily caseload ever on Sunday.

 

 

CURRENCY MARKET COMMENTARY

The rand was flat in early trade on Friday, but was set for a weekly gain of more than 1% as positive economic growth data lifted it to a 10-month peak earlier last week. At the close, the rand traded at R15.14 versus the dollar or 0.8% weaker. The rand touched its highest level since mid-February last week, boosted by encouraging third-quarter economic growth data and improvement in global risk appetite.

 

 

COMMODITIES MARKET COMMENTARY

Gold eased this morning as the roll out of coronavirus vaccines in the United States lifted risk sentiment, offsetting support from hopes for more US economic stimulus and a weaker dollar. Oil prices rose today, pushing Brent back above $50 a barrel, buoyed by hopes that a rollout of coronavirus vaccines will lift global fuel demand, while an extension of Brexit talks eased jitters on that front for now. The United States kicked off its vaccination campaign against COVID-19, buoying hopes that pandemic restrictions could end soon and lift demand at the world’s largest oil consumer.

LOCAL COMPANIES

Tongaat (TON) -11.9%

Shares in the South African sugar producer reported a 37% jump in interim revenue, as a weaker rand and robust SA sugar sales boosted the group’s return to profit. The group generated R8.2Bn in revenue compared to R6Bn in the previous year, while its operating profit rose 95% and earnings surged 127% to R2.5Bn from R1.1Bn. CEO Gavin Hudson: “We are rebuilding trust in Tongaat Hulett and that is testament to a great team and incredible hard work over the last two years”. The group made significant progress to lower its debt, with transactions totalling R6.4Bn concluded to date, of which R5.76Bn was applied towards the group’s debt reduction target of R8.1Bn by end-September 2021. 

 

Anglo American (AGL) -2.8%

The diversified mining giant announced on Friday during an investor update, it expects production across all minerals to increase by 14% in 2021, while unit costs will most likely decline by 3%. CEO Mark Cutifani: “Looking further out, our diversified portfolio of world-class competitive operations, development projects and undeveloped resources provide us with many further high quality and high returning growth option”. The miner said capital expenditure (capex) is estimated to be between $5.7Bn and $6.2Bn next year, reflecting deferred 2020 spending and new investments. The group expects to grow its copper-equivalent production by 20% to 25% over the next three to five years. This will include the output from Quellaveco, which will produce its first copper in 2022.

INTERNATIONAL COMPANIES

Lululemon Athletica (LULU) -6.7%

The athletic apparel retailer known for their high-end yoga wear, posted 22% higher sales compared to the previous year, which topped analysts’ expectations as strong demand for workout gear boosted store and online sales. The group generated $1.12Bn versus the $1.02Bn consensus forecast, while earning $1.16 per share on an adjusted basis, well ahead of the 88 cents pencilled by Wall Street. Same-store sales, which track sales made online and at stores open for at least 12 months, were up 19%. CEO Calvin McDonald: “We have planned the fourth quarter based on multiple performance scenarios and believe we are well positioned for the holiday season”.

 

AstraZeneca (AZN) +0.7%

The British pharmaceutical group announced on Saturday it will acquire Boston based rare-disease specialist Alexion Pharmaceuticals for $39Bn. The proposed cash-and-stock acquisition will add treatments for uncommon blood and immunological disorders to the group’s stable. The deal will be the largest in the firm’s history since it was founded in 1999. CEO Pascal Soriot: “It’s a tremendous opportunity for us to accelerate our development of immunological therapies”. The pharma group’s offer values Alexion at $175 a share, a 45% premium to the closing price on Friday.

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