Taking Stock - Glencore reinstates dividend.

In todays taking stock, we discuss how Glencore reinstates dividend ahead of Glasenberg exit.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local shares continued to build over their record highs on global economic recovery optimism, but a poor show by retailers and gold and platinum mining companies kept the gains subdued. The benchmark All-Share index closed up 0.15% (now at 67,227 index points) while the blue-chip Top-40 index closed up 0.16%. Shares in South African retailer SPAR fell by more than 7% after the group said its sales for the 18 weeks that ended January 29th were hit by an alcohol ban from the end of December. Shares in other retailers followed suit and recorded a fall. Platinum and gold mining companies also shed gains as the price of both the commodities weakened through the day.

 

 

EUROPEAN MARKET COMMENTARY

European markets closed mixed Tuesday, as a global risk rally fuelled by economic recovery hopes lost steam. The pan-European Stoxx 600 ended the session fractionally below the flatline, with sectors and major bourses pointing in opposite directions. Euro zone GDP fell by less than expected in the final quarter of 2020, with official estimates Tuesday indicating a 0.6% quarter-on-quarter contraction. Previous flash estimates had suggested a 0.7% fall. Employment across the common currency bloc grew 0.3% between October and December, according to Eurostat, despite many of its major economies reinstating nationwide lockdown measures.

 

 

US MARKET COMMENTARY

The S&P 500 and the Dow Jones Industrial Average hit all-time highs on Tuesday as cyclical sectors gained on the prospect of more fiscal aid to lift the US economy from a coronavirus-driven slump. Sectors poised to benefit the most from a reopening economy, including energy and financials, had the biggest gains. President Joe Biden has pitched a $1.9 trillion pandemic relief bill and is pressing Congress to pass it in the coming weeks in order to get $1,400 stimulus checks to Americans and bolster unemployment payments.

 

 

ASIAN MARKET COMMENTARY

Stocks in Asia were mixed in early trade today as investors monitored bond yields following a recent rise. Japan’s exports rose 6.4% in January as compared with a year earlier, according to trade statistics released Wednesday by the country’s Ministry of Finance. Markets in mainland China remain closed today for the Lunar New Year holidays.

 

 

CURRENCY MARKET COMMENTARY

The rand fell on Tuesday, pulling back from a one-year high touched earlier in the session, as Citigroup said it was booking profits from the currency. At the close, the rand was 1.45% weaker at R14.66 per dollar, as renewed investor risk appetite and an upswing in commodity prices shielded the currency from fears of fiscal deterioration. The local currency was last trading around R14.69 to the dollar this morning.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices fell this morning to their lowest in nearly two weeks as the dollar firmed and US Treasury yields rose, while platinum eased further after scaling a more than six-year high in the previous session. Oil prices fell in early trade this morning as the US dollar climbed, retreating after a two-day rally that was driven by an Arctic blast curbing output from oil and gas fields in Texas, the country's biggest oil-producing state.

LOCAL COMPANIES

Spar Group Limited (SPP) -7.4%

South African grocery retailer SPAR Group said on Tuesday group sales rose by 9.8% in the 18 weeks ended January 29 but the country’s ban on alcohol hit liquor sales, sending its shares down more than 5%. SPAR, which has more than 4 300 stores across Southern Africa, Ireland, Poland and Switzerland, said group sales rose to R42.99 billion ($2.98 billion) from R39.15 billion in the previous corresponding period. South African retailers had largely soft trading at Christmas and in “Black November”, an extension of Black Friday when retailers offer discounts, as shoppers spent less on groceries. Total sales in Southern Africa, SPAR’s largest market, which include grocery, liquor and building materials, rose by 3.4%, reflecting weaker consumer spending and lost liquor business, the retailer said. Its core SPAR grocery business in the region increased sales by 2.8%. Liquor sales fell by 17.9%, adversely impacted by the ban on the sale of alcohol in South Africa imposed late in December as part of Covid-19 lockdown restrictions. The retailer’s building materials and do-it-yourself “Build it” chain was the star performer, with sales up by 25.6%. Demand for construction products remained strong, driven by spending on home improvements as consumers stayed at home due to the pandemic. The group’s business in Ireland reported strong growth across all retail brands. A recently acquired retail business in Poland proved vulnerable to the lockdown curbs, disrupting growth plans, but still increased turnover by 38.1% in local currency and 48.8% in rand terms.

 

Glencore Plc (GLN) +4.5%

Glencore reinstated its dividend and flagged possible further payouts on the back of strong commodity prices as billionaire Chief Executive Ivan Glasenberg prepares to hand over the reins of the trading and mining giant. Having scrapped its dividend in August after a pandemic-driven first-half loss, Glencore recommended a distribution of $0.12 per share for 2021, representing a bigger than expected total payout of $1.6 billion. Shares in the company jumped 2.8% to 291 pence by 0950 GMT, making it the biggest gainer in an index of its peers in London. Though much smaller than the $2.6 billion announced last year before the dividend was cancelled, the payout exceeds consensus market expectations of $1.3 billion and echoed the bumper dividend at mining giant BHP Group. BHP on Tuesday declared a record interim dividend, citing strong iron ore demand from China. Glencore, one of the world’s biggest commodity traders, could top up the dividend or launch a share buyback after it cuts net debt below $13 billion and if commodity prices stay strong, finance chief Steve Kamlin said after the company reported 2020 results.

INTERNATIONAL COMPANIES

Sony Corporation (6758) -0.2%

Sony's PlayStation 5 has been hugely popular — and hard for consumers to get their hands on — since it was released last fall. But not everyone who managed to snag one has been satisfied. A class action lawsuit accuses Sony (SNE) of violating consumer fraud statutes and breaching warranty agreements because of an alleged defect with the PS5 DualSense wireless controllers, according to a complaint filed in the Southern District of New York on Friday. The filing comes soon after the law firm Chimicles Schwartz Kriner & Donaldson-Smith — which is among the firms listed as working on the suit — set up a web page soliciting reports of issues with the controllers. Gaming news site IGN first reported the firm's investigation and the lawsuit. The class action suit alleges that the DualSense controllers, which were released in November along with the new PS5 console, suffer from a defect known as "drift," wherein characters or other elements on screen move without the user manipulating the controller's joystick. This defect significantly interferes with gameplay and thus compromises the DualSense Controller's core functionality," the complaint says.

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