Taking Stock - Toyota SA to resume production.

In todays taking stock, we look at how despite uncertainty Toyota SA to resume production at its Durban plant.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

The Top-40 Index dropped 2.7% yesterday to 58,795 points and the broader All-Share index fell 2.6% to 64,805 points. Precious metals miners like Sibanye Stillwater, Impala Platinum and Northam Platinum were among the biggest losers on the blue-chip index, down 6.5%, 4.7% and 4.5% respectively. Most firms on the blue-chip index were down on Monday, however, with finance companies especially still suffering from the blow to the rand and economy from last week's unrest.

 

 

EUROPEAN MARKET COMMENTARY

European stocks plunged on Monday as investors reacted skittishly to rising cases of Covid-19 around the world, fuelled by the highly-transmissible delta variant. The pan-European Stoxx 600 closed down 2.3%, with banks, energy and travel shares leading the losses. Carnival was the worst performer in the travel sector, sliding 8.3%. A surge in Covid-19 cases across the continent caused by the highly transmissible delta variant continues to weigh, with several major European countries forced to reimplement social restrictions, while the UK lifted most remaining restrictions on Monday despite reporting a high number of daily cases.

 

 

US MARKET COMMENTARY

US stocks fell aggressively Monday on concern a rebound in Covid cases would slow global economic growth. The selling picked up as the session went on, and the Dow Jones Industrial Average had its worst day since last October. Airlines got hit as investors reassessed whether travel among consumers would live up to high expectations, with shares of Delta and American sinking about 4% each. United lost 5%. Key stocks linked to global economic growth also fell.

 

 

ASIAN MARKET COMMENTARY

Asian equities extended losses this morning following another rough day for global markets as the fast-spreading Covid Delta variant fuels concerns over the expected economic recovery. Even countries with elevated vaccination rates have seen a big increase in new cases, though observers point out that hospitalisations and deaths are being kept down thanks to the jabs. Bubbling geopolitical tensions were also an influence after the United States accused Beijing of carrying out a massive hack of Microsoft and charged four Chinese nationals, while rallying allies in a rare joint condemnation of "malicious" cyber activity.

 

 

CURRENCY MARKET COMMENTARY

The rand dropped on Monday, as concerns about the rapid global spread of the Delta coronavirus variant drove investors to seek comfort in the US dollar and precious metal prices fell. At the close, the rand was trading around R14.58 to the dollar, 0.82% weaker. The rand is highly susceptible to swings in sentiment on global markets and prices of metals like gold and platinum which are major South African exports. The dollar and other safe-haven assets climbed, after US officials said the more contagious Delta variant first detected in India was now the dominant coronavirus strain worldwide.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices were flat this morning, as a slide in US Treasury yields offset a firmer dollar amid investor concerns over a relentless surge of the Delta coronavirus variant that could threaten the outlook for global economic recovery. Brent oil was steady today after tumbling to an eight-week low amid a broader market rout stoked by a Covid-19 resurgence, which has raised concerns about the short-term outlook for energy demand. Oil has run into stiff headwinds in July after rising in seven of the past eight months as the global economy rebounded from the pandemic.

LOCAL COMPANIES

Woolworths (WHL) +0.5%

A pandemic-led boom in online shopping in South Africa has seen Woolworths report a 118% increase in online food sales in the 52-week period to 27 June 2021. “Online sales grew by 117.9% over the current year, contributing 2.3% to our South African food sales. This was further supported by the expanded click-and-collect offering and the roll-out of our on-demand delivery service, Woolies Dash,” the retailer said in a trading statement on Monday. Online sales in the Woolworths Fashion, Beauty and Home business also grew spectacularly – up by 114.4% year on year – as consumers shunned physical stores in favour of online shopping. However, this segment was negatively impacted by the constrained economic environment, the decline in demand for formalwear and initiatives to streamline private label offerings and rationalise unproductive space. The retailer published a trading statement for the period and provided investors with an update on the impact of the anarchy that took place in KwaZulu-Natal and some parts of Gauteng last week. It said the violence had a “significant impact on our operations in these areas, particularly in KZN, as well as on our employees, customers and the broader community”. “All of our stores in KZN as well as a number of stores in Gauteng last week had to temporarily close, prioritising the safety of our employees and our customers. Our online delivery services and certain suppliers in those areas are also significantly affected, given the significant damage to their assets. Eleven Woolworths stores have been looted and severely damaged, with nine of the eleven stores in KZN and two in Gauteng.” Group sales for the 52 weeks ended 27 June increased by 9.7% compared to the 52 weeks ended 28 June 2020 and by 5.9% in constant-currency terms. In Woolworths’ Australian operations, David Jones reported online sales growth of 24.4%, contributing 17.3% to total sales. Country Road saw online sales increase by 30.7%, contributing a whopping 29.7% to total sales. Physical store space in both businesses was reduced during the period.

INTERNATIONAL COMPANIES

IBM (IBM) -0.7%

IBM shares rose as much as 4% in extended trading on Monday after the enterprise technology and services provider reported second-quarter earnings that came in stronger than analysts had expected. Revenue grew 3% year over year in the quarter, according to a statement, the fastest growth in three years, as the company laps a quarter that saw meaningful impact from the coronavirus. In the previous quarter revenue had grown 0.9%. The company reiterated its expectation that revenue will grow, rather than decline, in the full year. “The overall spend environment continues to improve,” CEO Arvind Krishna said on a conference call with analysts. “With the economy reopening in many parts of the world, many markets and industries are getting back on track. We see this in North America and in select industries.” IBM’s Global Technology Services segment, containing managed services, outsourcing and support, delivered $6.34 billion in revenue. That was up slightly and above the $6.23 billion consensus among analysts polled by FactSet. IBM continue to expect to spin out the Managed Infrastructure Services component of Global Technology Services, under the name Kyndryl, by the end of the year. The Cloud & Cognitive Software business, which includes Red Hat, contributed $6.10 billion in revenue, up 6% and more than the FactSet consensus of $5.93 billion.

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