Taking Stock - Today, attention will turn to the SARB’s.

In todays taking stock, we discuss how attention will turn to the SARB’s today for the first monetary policy meeting of 2021.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks on the JSE reversed some of the prior day's gain following Asian markets, which were down on tensions of rising cases of coronavirus and as President-elect Joe Biden's aid package sparked worries of higher taxes. The All-Share index ended the week down 0.52% and is now at 63,550 index points, while the Top 40 index closed down 0.49%. Finally, attention will turn to the South African Reserve Bank's (SARB) first monetary policy meeting of 2021. Most analysts polled by Reuters predict the bank will keep its main lending rate on hold at 3.5%, but a small minority have pencilled in a rate cut.

 

 

EUROPEAN MARKET COMMENTARY

European markets closed in negative territory on Friday as concern over new lockdown measures, political uncertainty and a re-emergence of Covid-19 cases in China, dented the positive sentiment generated by US President-elect Joe Biden’s $1.9 trillion stimulus plan. The pan-European Stoxx 600 ended the session down by 1% and logged a weekly loss of 0.8%. Basic resources shed 3.1% on Friday to lead losses as all sectors traded in negative territory except health care, which gained 0.7%. Meanwhile, the whole Dutch government collectively resigned on Friday after a scandal involving the mismanagement of childcare funds.

 

 

US MARKET COMMENTARY

US stocks fell on Friday to close out a tough week as traders weighed President-elect Joe Biden’s $1.9 trillion stimulus plan along with the latest earnings from some of the biggest US banks. Biden’s proposal, called the American Rescue Plan, includes increasing the additional federal unemployment payments to $400 per week and extending them through September, direct payments to many Americans of $1,400, and extending the federal moratoriums on evictions and foreclosures through September. The plan also calls for $350 billion in aid to state and local governments, $70 billion for Covid testing and vaccination programs.

 

 

ASIAN MARKET COMMENTARY

Shares in Asia traded mixed this morning as investors in the region reacted to Chinese economic data releases, including the country’s GDP print for the fourth quarter. China reported its GDP rose 2.3% last year as the world fought to contain the coronavirus pandemic. That compared against economists’ expectations for GDP expansion by just over 2%. Retail sales in the country declined, contracting 3.9% for the year.

 

 

CURRENCY MARKET COMMENTARY

The rand weakened against the US dollar on Friday, in line with other emerging market currencies, as currency markets turned risk-averse to the benefit of the greenback. At the close, the rand traded at R15.24 versus the dollar, 0.91% weaker than its previous close. The rand had a volatile week, falling one day and firming the next, mainly taking its cue from global factors. Comments by President Cyril Ramaphosa on Monday that the country had secured more COVID-19 vaccines lifted the market's mood temporarily, but details as to when the vaccines would arrive and who would supply them are still scarce.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices dropped to their lowest in almost 2 months today, as a stronger US dollar made bullion expensive for other currency holders, despite expectations of a large Covid-19 relief package in the United States. Oil prices fell this morning, extending losses that last week ended a rally driven by production cuts and strong Chinese demand, with the market’s recovery outlook being called into question as coronavirus infections rise.

LOCAL COMPANIES

Truworths (TRU) -0.1%

The group said on Friday its profit for the half year ended December 27 will likely fall by between 4% and 9% as its operations across the UK and South Africa were hit by weak spending as people stayed indoors. The South Africa-listed clothing, shoes, jewellery and homeware retailer said its overall headline earnings per share – the main profit measure in the country – for the 26-week period ended December 27 will be between 332 and 350 cents as against 364.9 cents reported in the corresponding period last year. Group retail sales for the period decreased by 8.5% to R9.7 billion compared with R10.6 billion reported same period a year ago, it said.

 

Anheuser-Busch InBev (ANH) -1.4%

South African Breweries, part of Anheuser-Busch InBev, has cancelled a further R2.5 billion of investment earmarked for 2021 following a third local ban on alcohol sales in the country, it said on Friday. SAB’s cancelled investments in South Africa in relation to the ban now total R5 billion. In August, the maker of Carling Black Label and Castle Lager beer cancelled R2.5 billion of planned expenditure following a second alcohol ban. South Africa has banned alcohol sales as part of efforts to free up space in hospitals burdened with alcohol-related injuries for Covid-19 patients. As a result, more than 165 000 people in South Africa have lost their jobs and about 30% of local breweries have been forced to shut their doors permanently. The cancelled investments relate to upgrades to operating facilities, product innovation, operating systems as well as the installation of new equipment at selected plants, the brewer said. SAB is currently in court challenging the government’s decision to re-impose the ban.

INTERNATIONAL COMPANIES

American Petroleum Institute

The American Petroleum Institute, the nation's largest and most powerful oil lobby, is losing one of its biggest members over a disagreement about addressing the climate crisis. France's Total announced Friday it is quitting the API because of the lobby's stances on regulation and carbon pricing as well as its support for politicians who oppose the Paris climate agreement. The move makes Total the first major oil company to leave the API because of the climate crisis. The exit underscores the divide in the oil industry over how to respond to climate change. Top European oil companies including Total and BP have made more aggressive promises to slash carbon emissions and invest in clean energy than ExxonMobil (XOM), Chevron and other US firms. The move also comes amid a broader reckoning in Corporate America over political contributions following the insurrection at the US Capitol. Total has helped lead the industry response to the climate crisis. Last year, Total announced a goal to get to net-zero emissions by 2050. Importantly, that goal included the so-called scope 3 emissions from the products it sells, namely gasoline, jet fuel and diesel.

 

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