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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

On the stock market, the Top-40 index fell 3.4% while the broader All-Share index dropped 3.13% (to 65,391 index points). While losses were broad-based, resources weighed the most as the local J210 index shed 4.7%. Financials and industrials followed closely by ticking lower 3.04% and 2.46% respectively. On an individual share basis, Karooooo lost 10.62% to make it the worst All-Share performer. On the other side of the index, Bytes Technology Group added 11.70% to make it the best performer on the day.

EUROPEAN MARKET COMMENTARY

European markets closed slightly higher on Friday, bringing an end to a volatile week as global stocks reacted to policy tightening from major central banks. The pan-European Stoxx 600 ended around 0.1% higher, with tech stocks up 1.4% to lead gains as most sectors traded in positive territory. Oil and gas stocks tumbled over 4%. In terms of individual share price movement, ABN Amro surged more than 5.6% after Bloomberg reported that France’s BNP Paribas is interested in acquiring the Dutch bank. Meanwhile, data on Friday confirmed euro zone inflation at a record high of 8.1% year-on-year in May.

US MARKET COMMENTARY

The S&P 500 and the Nasdaq Composite bounced on Friday as Wall Street attempted to find its footing following a brutal week of selling. But all the major averages ended the week in the negative, with the S&P 500 posting its worst week since 2020. Several key pieces of economic data fell short of forecasts last week, ranging from May retail sales to housing starts. Additionally, the Federal Reserve raised its benchmark interest rate by the most since 1994. Comments from the Federal Reserve Chairman Jerome Powell on Friday echoed the central bank’s commitment to tamping down inflation.

ASIAN MARKET COMMENTARY

Shares in Asia-Pacific were mixed in morning trade today, as investors monitored market reaction to the release of China’s latest benchmark lending rates. In South Korea, the Kospi led losses among the region’s major markets as it dropped 2.22%, with shares of industry heavyweight Samsung Electronics declining more than 2%. Meanwhile, China’s one-year and five-year loan prime rates were both left unchanged on Monday. That matched the forecast in a Reuters poll, where a vast majority of respondents had predicted no change to both the one-year or the five-year LPRs.

CURRENCY MARKET COMMENTARY

The rand weakened on Friday as fears of recession spread around the world following decisions by several central banks to raise interest rates to tame inflation. At the close of the day, the rand was 0.12% softer versus the dollar as it traded around the R16.03 mark. Meanwhile, the Japanese yen remained under pressure this morning, weakening toward a 24-year low after the Bank of Japan on Friday bucked the trend in a week of massive central bank tightening to renew its commitment to ultra-easy policy.

COMMODITIES MARKET COMMENTARY

Gold extended losses earlier today as an elevated dollar weighed on bullion demand, with a U.S. market holiday expected to lead to thin trading during the day. However, oil prices wobbled this morning as investors refocused on tight supplies, though sentiment was still fragile after 6% slump in the previous session amid concerns about slowing global economic growth and fuel demand.

LOCAL COMPANIES

MARSHALL MONTEAGLE PLC (MMP) -9.6%

Earnings per share of US$12.80 cents for the Reporting Period, compared to the restated earnings per share of US$1.00 cent for the Previous Comparable Period; and headline earnings per share of US$7.90 cents for the Reporting Period, compared to a restated headline loss per share of US$ (2.50) cents for the Previous Comparable Period. The reason for the expected increases are improvements in all areas of the business combined with an increase in the length of the trading period from 12 to 18 months. There has been a substantial increase in the value of investment properties, and volatility in equity markets has enabled the Group to earn higher profits from the active management of investment portfolios. The trading businesses have diversified into new product categories and industrial raw-materials servicing a broader international customer base.

NOVUS HOLDINGS LIMITED (NVS) +0.4%

Packaging revenue grew by 9,5% with ITB Flexible Packaging Solutions (“ITB”) delivering a solid performance. Novus Labels unfortunately failed to recover post COVID-19 and was consciously cut back to focus only on strategic products. Gross profit margin increased by 5,4% to 24,4% due to changes in the product mix and increased operational efficiencies resulting from the rationalisation across the Print segment in the prior year. Operating expenses reduced by 3,4% with once off costs inclusive of R35,7 million relating to the relocation of printing assets, following the merger of the two Novus Print facilities located in Gauteng. Indirect staff costs decreased by 14,5% over the prior year including retrenchment costs for the Print segment rationalisation and the current year benefiting from the more streamlined structure. Other once off items included in the Group’s results included the following: An impairment of plant and machinery amounting to R69,1 million and goodwill amounting to R16,7 million in the Packaging segment mainly due to the Group’s strategic decision to exit a key label customer contract. The decision to exit was informed by the division’s inability to generate optimal returns as a result of constricted margins and the significant working capital invested in servicing this contract. The Group terminated lease agreements earlier than its original term for certain plant and machinery and a rental property lease expired in the year. This resulted in a gain on derecognition of the lease liabilities and right of use assets amounting to R44 million. Profit on disposal of property, plant and equipment and non-current assets held for sale amounting to R9 million.

INTERNATIONAL COMPANIES

Apple (AAPL) +1.2%

Workers at an Apple store in Maryland have voted to unionise, forming the tech giant's first retail union in the United States. The employees of the shop in Towson passed the measure 65-33, with about a dozen abstentions. After the result came in, the group tweeted: "Now we celebrate… tomorrow we keep organising." It is the third Apple store to launch a union drive this year, but the first to successfully hold a vote. The new Apple Core union - short for the Coalition of Organized Retail Employees - penned an open letter to Apple in May, saying its bid was "about us as workers gaining access to rights that we do not currently have", but that it did not want to "go against or create conflict with our management".

Twitter (TWTR) +1.1%

Multi-billionaire Elon Musk has in a meeting with Twitter employees hinted at potential job cuts if his $44bn takeover bid for the social media company is successful. He also addressed topics like remote working, freedom of speech and potential extra-terrestrial life. Mr Musk was talking to staff for the first time since launching his bid for the firm in April. He has said he may quit the deal if he is not given data about fake accounts. On a wide-ranging video call with Twitter employees on Thursday, Mr Musk said layoffs at Twitter would depend on the company's financial situation.

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About the Author

Research Team
Media, Sasfin Wealth