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MARKET COMMENTARY

LOCAL MARKET COMMENTARY

Local stocks edged lower during yesterday’s session, as both the Top 40 and All Share indices closed around 0.1% lower at 73,952 and 80,037 points, respectively. Local investors are awaiting the South African Reserve Bank’s latest interest rate decision, which is due on Thursday. Most economists polled by Reuters expect a 50-basis point hike, as loadshedding continues to dominate headlines and affect the local economy. In sector news, Alternative Energy added 5.68%, making it the day’s top performer. On the flipside, Industrial Metals and Mining shed 2.12%.

 EUROPEAN MARKET COMMENTARY

 In Europe, markets also traded lower as investors worked through economic data and corporate releases. The pan-European Stoxx 600 index traded 0.2% lower as gas stocks and health care stocks led the losses. PMI readings in the region suggested that the euro zone enjoyed modest growth in December, which lifted hopes that the 20-member bloc could avoid a recession. The S&P Global euro zone composite PMI came in at 50.2 in January, which was up from 49.3 in December. Economists expected a reading of 49.8.

 US MARKET COMMENTARY

 The Dow Jones closed higher yesterday, while other major markets in the region closed in the red. On the company front, earnings came in mixed yesterday with 3M offering disappointing guidance and Union Pacific falling short of analysts’ expectations. Microsoft delivered better-than-expected second quarter results after the bell, which initially saw the stock soar. However, the share price retreated after the company gave a softer outlook for its third-quarter. Tesla is expected to release its results later today.

ASIA MARKET COMMENTARY

Stocks in Asia were mixed earlier this morning, as markets in the region took the lead from its US counterparts. On the data front, New Zealand’s fourth-quarter inflation reading rose 1.4% compared to the previous quarter, while inflation in Australia reached a new 32-year high. Markets in China and Hong Kong remain closed for a lunar holiday, which could result in thinner trading in other global markets.

COMMODITY MARKET COMMENTARY

Gold prices were steady this morning, but continued to hold around a nine-month peak as investors and traders expect the US Federal Reserve to slow its interest rate hikes. Meanwhile, oil prices traded higher earlier today as hopes of a demand recovery in China during the second half of the year continued to offer support. Traders will also wait for official data from the US Energy Information Administration, which will be released later today.

LOCAL COMPANIES

ARCELORMITTAL SOUTH AFRICA LIMITED (ACL) -11.6%

Globally, steel prices have declined at a faster rate than raw materials. This has led to negative price-cost effects with spreads under significant pressure. The Company could not escape the impact of the year’s energy crunch, as seen in the extreme increase of imported coal prices (up 117% year-on-year). Domestically, market conditions proved to be especially challenging as customers aggressively destocked. This was particularly notable in the last quarter of the year, where market activity dissipated dramatically in certain sectors. Shareholders are advised that the Company expects earnings per share to decline from R5,94 profit per share for the comparative period to a profit within a range of R2,20 and R2,50 per share for the period (representing a decrease of between 58% and 63%) and headline earnings per share to decline from R6,15 headline profit per share for the comparative period to a headline profit per share within a range of R2,15 and R2,45 per share for the period (representing a decrease of between 60% and 65%).

SASOL LIMITED (SOL) +4.7%

Sasol has committed to reduce its absolute Greenhouse Gas (GHG) emissions from South African operations by at least 30% by 2030, off a 2017 baseline. They are pleased to announce the signing of three power purchase agreements (PPA) for the supply of renewable power to our South African operations, which are subject to meeting certain conditions precedent. Sasol South Africa Limited (SSA) and Msenge Emoyeni Wind Farm (Pty) Ltd (Msenge) have signed a long-term PPA for the supply of 69MW of wind powered renewable power to their Sasolburg operations. This is key in achieving the first production of green hydrogen generated from renewable energy sources at Sasolburg and progressing their ambition to lead the development of a green hydrogen economy in Southern Africa. The renewable capacity is anticipated to be operational within the first quarter of CY24.

CLICKS GROUP LIMITED (CLS) -1.0%

The group’s retail sales increased by 12.2% in the first 20 weeks of the 2023 financial year compared to the corresponding 20 weeks in the previous financial year. Sales in comparable stores increased by 8.9% excluding vaccinations, with selling price inflation averaging 6.8% (2022: 3.3%) for the period. UPD’s total managed turnover, combining wholesale turnover and turnover managed on behalf of bulk distribution clients, increased by 9.9%. Wholesale turnover in UPD declined by 0.6% owing to lower demand. Turnover managed for bulk distribution clients grew 27.2%, benefiting from new contracts and growth in existing clients. Group turnover for the period increased by 7.8% to R15.6 billion (2.9% including vaccinations).

INTERNATIONAL COMPANIES

Microsoft (MSFT) -0.2%

The company’s executives warned analysts yesterday of a continuation of a weak pace of business which played a role in the group’s second-quarter results. “In our commercial business we expect business trends that we saw at the end of December to continue into Q3,” Amy Hood, Microsoft’s chief financial officer, said. The group saw less growth in its Microsoft 365 software subscriptions and other business-orientated Windows products. Microsoft now expects the slowdown to continue through to their third-quarter results.

Walmart (WMT) +0.3%

Walmart announced yesterday that the group was raising its minimum wage to $14 per hour, for store employees. This roughly represents a 17% jump in income and will start in March of this year. It is expected that around 340,000 employees will get a raise. Walmart, which is the largest private employer in the US,  has raised wages while other major retailers have warned of a tougher year ahead. This follows weaker retail sales trends and growing fears of a recession.

Verizon (VZ) +2.0%

For the fourth quarter of 2022, the company recorded total operating revenue of $35.3 billion, an increase of 3.5 percent. $1.56 in EPS, compared with $1.11 in the fourth-quarter 2021. Adjusted EPS, excluding special items, of $1.19, compared with $1.33 in the 2021 fourth quarter. Net income of $6.7 billion, an increase of 41.4 percent from the fourth quarter in 2021, and adjusted EBITDA of $11.7 billion, down 0.2 percent year over year. In addition to that, the company announced full year results for 2022, of which total operating revenue was at $136.8 billion, up 2.4 percent year over year. Full-year 2022 earnings per share (EPS) of $5.06 were recorded, compared with $5.32 in 2021. For the year adjusted EPS, excluding special items, are at $5.18, compared with 2021 adjusted EPS of $5.50. Finally, total wireless service revenue came to $18.8 billion, a 5.9 percent increase year over year.

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Research Team
Media, Sasfin Wealth