Taking Stock - UK Supreme Court rules that Uber drivers are 'workers.

In todays taking stock, we look at how the UK Supreme Court rules that Uber drivers are 'workers,' not independent contractors.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks closed higher on Friday, as the JSE All-Share index added 1.34% (now at 67,465 index points) while the Top 40 index posted a 1.47% gain. The uptick was mostly driven by resources and industrials, which added 2.10% and 1.33% respectively. Finance Minister Tito Mboweni will deliver the country’s 2021 budget on Thursday, with the country facing ever-increasing fiscal pressures in the wake of the coronavirus pandemic. South Africa’s economy enjoyed a strong final quarter of 2020 based on hard activity data thus far, and the IMF expects a modest rebound of 3% in real GDP in 2021 following last year’s 8% contraction.

 

EUROPEAN MARKET COMMENTARY

European markets closed higher Friday as investors reacted to a fresh batch of corporate earnings and economic data, as well as comments from US Treasury Secretary Janet Yellen calling for fiscal stimulus. The pan-European Stoxx 600 ended the session up 0.5%, with basic resources shares surging 2.8% to lead the gains as most sectors and major bourses closed in positive territory. UK Prime Minister Boris Johnson will chair a virtual meeting of leaders of the G-7 major economies on Friday, and is expected to outline an ambition to cut the time to develop new vaccines by two-thirds to 100 days.

 

US MARKET COMMENTARY

US stocks came under pressure Friday afternoon, reversing early gains. Though the major indexes traded higher for most of the morning, a combination of rising interest rates and profit taking in some of the market’s largest technology companies appeared to dampen optimism after noon. Cyclical stocks outperformed the broader market with the materials, energy and industrials sectors up 1.8%, 1.7% and 1.6%, respectively. Utilities and consumer staples stocks were among the biggest laggards.

 

ASIAN MARKET COMMENTARY

Stocks in Asia were mixed in early trade today as China left its benchmark lending rate unchanged over the weekend. China kept the one-year loan prime rate (LPR) unchanged at 3.85%, largely in line with expectations of traders and analysts in a Reuters snap poll. The five-year LPR was also kept steady at 4.65%. The LPR is a lending reference rate set monthly by 18 banks.

 

CURRENCY MARKET COMMENTARY

The rand was flat early on Friday in increasingly cautious trade ahead of the budget speech next week, which is expected to detail the progress of the country's economic recovery. At the close, the rand was 0.08% weaker at R14.71 per dollar. The rand's rally in the first two months of 2021 to a one-year high has largely been driven by offshore events, with expansive stimulus policies in the United States and other developed economies, as well as the roll-out of COVID-19 vaccines, driving global risk demand. The rand was trading around R14.72 to the dollar this morning.

 

COMMODITIES MARKET COMMENTARY

Gold prices edged higher this morning to recover from an over seven-month low touched in the previous session as the dollar weakened, although higher US Treasury yields capped bullion gains. President Joe Biden’s push for a $1.9 trillion COVID-19 relief bill took a step forward on Friday as a US House of Representatives committee unveiled the legislation Democrats hope to pass by late next week. Oil prices rose today as the slow return of US crude output that was cut by frigid conditions raised concerns about supply just as demand is coming back from the depths of the coronavirus pandemic.

LOCAL COMPANIES

ABSA (ABG) -1.9%

South African lender Absa Group said on Friday its full-year profit is expected decline further, a second profit warning in three months, hit by the Covid-19 pandemic. Absa said it expects normalised headline earnings per share (HEPS), the main profit measure in South Africa, to decrease by 50% to 55% for the year ended December 31, from the 1 926 cents in 2019. The company had in November warned of a 40% decline in annual HEPS.

 

Massmart (MSM) +1.2%

Massmart said on Friday it was planning further store closures and flagged a deeper full-year net loss of more than R1.7 billion ($116.8 million) after curbs related to the Covid-19 pandemic hammered sales. Chief Executive Officer Mitch Slape, a veteran of the retailer’s majority owner Walmart Inc, announced a turnaround plan last year to return Massmart to profitability by shutting underperforming stores and cutting costs. The retailer said on Friday it would close an additional 14 Masscash cash and carry stores, under the Browns & Weirs and Jumbo brands. In 2020 it had said it might close 11 underperforming Masscash stores, but later sold eight of them to Devland Cash and Carry. The potential sale of the remaining three is still under consideration. As of June 28, the Masscash division had 131 food retail and wholesale outlets under the Cambridge Food, Rhino cash and carry, Jumbo cash and carry and Shield brands. The Game and Makro department chain owner said it expected a net loss of between R1.711 billion and R1.776 billion in the year to December 27, compared to a net loss of R1.3 billion a year before. It said its headline loss however, the main profit measure in South Africa, would slightly narrow to between R901 million and R958 million from R1.2 billion.

INTERNATIONAL COMPANIES

UBER (UBER) -1.0%

Uber is reviewing how it treats thousands of drivers in the United Kingdom after the Supreme Court upheld a ruling that they should be classified as workers and not independent contractors. The unanimous decision could deliver a major blow to the company's business model in one of its most important markets, and opens the door for drivers to claim the minimum wage and paid time off, legal experts said. The court said Friday that the group of Uber drivers that brought the case to an employment tribunal were not independent contractors because their activities were "very tightly defined and controlled by Uber." The judge cited the company's control over fares and how it dictates the contractual terms on which drivers perform their services. While the practical effects of the ruling are not yet clear, the decision could change how Uber (UBER) does business in the United Kingdom. The next step is for an employment tribunal to decide how to compensate dozens of claimants.

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Media, Sasfin Wealth

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