Taking Stock - Global tech companies rally on.

In todays taking stock, we discuss how global tech companies rally on anticipation for strong earnings next week.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks recorded small gains, with concerns over the country’s coronavirus vaccine rollout plans counteracting buoyant offshore sentiment. The All-share index gained 0.1% (now at 64,175 index points) while the Top 40 index closed up 0.19%. The gold mining index was up 1.92% and the platinum index up 2.75% at market close. The South African Reserve Bank kept the repo rate at 3.5% in a close decision. Three out of five members of the monetary policy committee wanted to hold the rate while two preferred a rate cut that could have dented the appeal of investing in rand assets.

 

 

EUROPEAN MARKET COMMENTARY

European stocks closed mixed on Thursday as traders monitored the European Central Bank’s latest meeting and the beginning of Joe Biden’s presidency. The pan-European Stoxx 600 ended the session flat, with sectors and major bourses pointing in opposite directions. Tech stocks were the biggest gainers, up 1.6%, while oil and gas shares lost 1.3%. The European Central Bank kept interest rates unchanged Thursday but said it stands ready to act as coronavirus infection rates rise across the euro zone, leading to renewed lockdown measures.

 

 

US MARKET COMMENTARY

The Nasdaq Composite rose to another record on Thursday as investors bet on strong earnings from big tech companies next week. Optimism is rising that major technology companies will impress Wall Street when they hand in earnings reports. Apple and Facebook have risen 7.7% and 8.6%, respectively, this week ahead of their quarterly results, while Microsoft has gained 5.8%. Biden released details of his covid plan on his first full day in office, including 10 executive orders and his intent to use the Defense Production Act to ramp up protective equipment production.

 

 

ASIAN MARKET COMMENTARY

Stocks in Asia edged lower this morning, following yet another record session overnight for major indices on Wall Street. Shares of CNOOC in Hong Kong dropped around 2% after index provider MSCI announced that it will delete the firm from the MSCI ACWI and MSCI China All Shares indices. The US Department of Commerce under former US President Donald Trump announced last week that it had added CNOOC to a list which essentially restricts those firms from receiving specific goods made in the US.

 

 

CURRENCY MARKET COMMENTARY

The rand initially firmed on Thursday, supported by the central bank’s decision to leave interest rates unchanged and expectations that the new US administration will unveil a massive stimulus package. At the close, the rand traded at R14.94 versus the dollar, 0.26% weaker on the day. The dollar was headed for its worst week of the year on Friday, as investors cheered in the Joe Biden administration by buying riskier currencies and refreshed bets that a pandemic recovery could push the greenback lower still.

 

 

COMMODITIES MARKET COMMENTARY

Gold eased this morning as US Treasury yields edged higher, although prices were set to post their best week in five helped by a weaker dollar and further stimulus bets. Higher yields increase the opportunity cost of holding non-yielding bullion. Focus also remained on the $1.9 trillion stimulus relief proposed by US President Joe Biden to revive the world’s largest economy from the effects of the pandemic. Oil prices declined today, with international benchmark Brent crude down around 0.82%.

LOCAL COMPANIES

Massmart (MSM) -0.3%

Trading for the 4th quarter of 2020 saw many of the previously imposed Covid-19 related trading restrictions lifted, which allowed trading to resume in most categories. Liquor trading, however, continued to be impacted by limitations on trading hours as well as reinstated trading restrictions as announced by the Government in mid-December. Foot traffic and sales remained muted in December, albeit with stronger sales performance in home improvement and DIY categories. Total 4th quarter sales of R25.6 billion represented a decrease of 4.1% over the same period last year, with comparable store sales decreasing by 3.6%. This represented a slight improvement in the trajectory of H2 sales, which ended with a decrease of 5.9% over the same period last year, with comparable store sales decreasing by 5.6%. For the 52-week period, total sales amounted to R86.5 billion, representing a decrease of 7.7% over the same period last year, while comparable store sales decreased by 7.5%. Sales in our South African stores decreased by 7.9% (comparable stores decreased by 7.6%) while sales from our stores in the Rest of Africa decreased by 5.4% (comparable stores decreased by 6.6%).

 

Naspers (NPN) 0%

Hopes that relations between China and the US might become less hostile once Donald Trump had exited the White House were dashed on the evening of President Joe Biden’s inauguration when reports emerged of a lawsuit launched by a group of Californians against Tencent. The plaintiffs allege that Tencent’s WeChat mobile app has censored and surveilled them and shared their data with Chinese authorities. The Washington Post reports that the lawsuit, which seeks class-action status, claims Tencent’s practices violate the plaintiffs’ free-speech and private rights and enriches Tencent at the expense of California WeChat users. “The case is another sign of the mounting scrutiny of WeChat, a popular communication tool in China that is also used by millions of Mandarin speakers around the globe,” said the Washington Post.

 

INTERNATIONAL COMPANIES

ALPHABET (GOOGL) +0.2%

Google has threatened to remove its search engine from Australia over the nation's attempt to make the tech giant share royalties with news publishers. Australia is introducing a landmark law to make Google, Facebook and potentially other tech companies pay media outlets for their news content. But the US tech giants have fought back, arguing the laws are onerous and would damage local access to services. Australian PM Scott Morrison said lawmakers would not yield to "threats". The proposed news code would tie Google and Facebook to mediated negotiations with publishers over the value of news content, if no agreement could be reached first. Google Australia managing director Mel Silva told a Senate hearing on Friday that the laws were "unworkable". "If this version of the code were to become law, it would give us no real choice but to stop making Google Search available in Australia," she said.

 

 

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Research Team

Media, Sasfin Wealth

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