Taking Stock - Mining and financials weigh down on SA markets.

In todays taking stock, we discuss how Mining and financials are weighing down on SA markets.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks closed weaker, weighed down by mining and financial shares, with the Johannesburg all-share index closing 0.8% weaker (now at 66,576 index points) while the Top-40 index fell 0.86%. Market focus has shifted to Finance Minister Tito Mboweni's budget speech next Wednesday. Speculation that the budget could outline plans for fiscal consolidation has helped the rand, but any initiatives are likely to be limited and ultimately could disappoint investors.

 

EUROPEAN MARKET COMMENTARY

European stocks closed lower on Thursday as investors digested earnings from big names in the region, including Airbus, Barclays and Daimler, along with key US jobs data. The pan-European Stoxx 600 provisionally closed down by 0.8%, with oil and gas shares sliding 2.2% to lead the losses as most sectors and major bourses dipped into negative territory. Airbus restored its business targets after generating cash in the final quarter of 2020, but posted a full-year operating loss of 510 million euros ($614.5 million), with core operating profit falling 75% as a result of the pandemic. The plane maker’s stock fell 2.8%.

 

US MARKET COMMENTARY

Stocks on Wall Street closed lower on Thursday as investors shifted out of big technology names, while an unexpected rise in weekly US jobless claims pointed to a fragile recovery in the labor market. Shares of Apple Inc, Tesla Inc and Facebook Inc weighed the most on both the benchmark S&P 500 and the tech-heavy Nasdaq. Facebook shares dropped 1.5% to $269.39 as Wall Street assessed the wider ramifications of its move to block all news content in Australia. Strong earnings, progress in the vaccination rollout and hopes of a $1.9 trillion federal stimulus package helped US stock indexes again hit record highs at the start of the week.

 

ASIAN MARKET COMMENTARY

Stocks in Asia were lower this morning following overnight declines for the major indexes on Wall Street. Japan’s core consumer prices declined 0.6% in January as compared with a year earlier, according to data released today. That marked the sixth straight month of annual declines, according to Reuters. Australia’s retail sales rose 0.6% in January on a seasonally adjusted basis as compared with the previous month, according to preliminary retail trade figures released this morning. That was lower than expectations in a Reuters poll for a 2% increase.

 

CURRENCY MARKET COMMENTARY

The rand firmed on Thursday as the US dollar and Treasury yields eased, with the local unit recovering from losses in two previous sessions. At the day’s close, the rand was 0.30% firmer at R14.60 per dollar. It hit a one-year best this week in a broad rally of emerging market currencies partly driven by an upswing in commodity prices, but later fell as investors booked profits from the currency. The currency was trading around R14.63 this morning.

 

COMMODITIES MARKET COMMENTARY

Gold prices fell to their lowest in nearly three months this morning and headed for their worst week since end-November, as recent strength in US Treasury yields dented the non-yielding metal's appeal. Meanwhile, oil prices slid as much as 2% in early trade on Friday, adding to overnight declines, on worries that refineries shut by a big freeze in the US South will take some time to revive operations and dent crude demand.

LOCAL COMPANIES

Gold Fields (GFI) -3.6%

Gold Fields Limited announced normalised profit of US$878m for the year ended 31 December 2020 compared with normalised profit of US$343m for the year ended 31 December 2019. A final dividend number 93 of 320 SA cents per share (gross) is payable on 15 March 2021, giving a total dividend for the year ended 31 December 2020 of 480 SA cents per share (gross). In line with the Company’s dividend policy, the Board has approved and declared a final dividend number 93 of 320 SA cents per ordinary share (gross) in respect of the year ended 31 December 2020.

 

Sibanye Stillwater (SSW) -0.9%

Group revenue increased by 75% year-on-year to R127,392 million (US$7,740 million), with H2 2020 revenue of R72,374 million (US$4,439 million) on par with full year revenue of R72,925 million (US$5,043 million) for 2019. Group adjusted EBITDA for 2020 increased by 230% year-on-year to R49,385 million (US$3,000 million) compared to R14,956 million (US$1,034 million) for 2019. This resulted in profit attributable to owners of Sibanye-Stillwater, increasing 472-fold from R62 million (US$5 million) for 2019 to R29,312 million (US$1,781 million). Basic earnings per share (EPS) of 1,074 cents (US 65 cents/US 261 cents/ADR) and headline earnings per share (HEPS) of R1,068 cents (US 65 cents/US 260 cents/ADR) increased by 53,600% and 2,770% respectively year-on year. The Group deleveraging was successfully achieved during the year, with borrowings reducing by R5,354 million (US$444 million) to R18,383 million (US$1,251 million) and cash and cash equivalents increasing to R20,240 million (US$1,378 million). On a trailing 12-month basis, adjusted EBITDA increased by 230% to R49,385 million (US$3,000 million) resulting in a net cash: adjusted EBITDA ratio of 0.06x compared to net debt: adjusted EBITDA of 1.25x at the end of 2019.

INTERNATIONAL COMPANIES

Barclays (BARC) -4.4%

Barclays has reported a 30% drop in pre-tax profits as its provision for bad loans due to the pandemic hit £4.8bn. However, the drop to £3.1bn in 2020 was much less than forecast as a strong performance by its investment bank offset cash set aside to cope with losses caused by the economic fallout of COVID-19. Despite the profits hit, the banking giant said it would resume paying dividends after lenders halted pay-outs last year at the request of the Bank of England. This raises expectations other UK lenders will follow suit when they report full-year earnings in the next few days. Barclays also unveiled a £1.6bn bonus pool for staff and £1.4m in annual bonuses and incentive shares for chief executive Jes Staley. The bank's posted profit was well above the average estimate of £1.96bn from analysts' forecasts compiled by the bank. The results also revealed another £492m had been earmarked to cover expected borrower defaults due to the coronavirus crisis in the final three months of the year, although this was down nearly a fifth on the previous quarter.

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Media, Sasfin Wealth

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