Taking Stock - Markets fall as global COVID-19 cases rise.

In todays taking stock, we look at how markets fall as global COVID-19 cases rise.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

 

The Johannesburg Stock Exchange treaded a cautious path as well with the main indices slightly down in a broad-based slump in share prices of companies across sectors. The benchmark all-share index was down 0.24%, ending the week lower (now at 56,615 index points). The blue-chip top 40 companies index closed down 0.12%. The banks were once again the biggest losers with the index down almost 3%. The index, which represents the top six banks of the country, has lost over 6.5% in last seven trading sessions. Bonds were a touch firmer. The yield on the benchmark 2030 government issue was down 3 basis points to 8.82%.

 

 

EUROPEAN MARKET COMMENTARY

 

European stocks closed higher on Friday as investors looked past spiralling coronavirus cases and a US Treasury decision to spike pandemic relief programs. The pan-European Stoxx 600 closed up by almost 0.5%, with oil and gas stocks climbing 1.5% to lead gains as almost all sectors and major bourses entered positive territory. direct Brexit talks have been suspended after a member of the EU team tested positive for COVID-19 on Thursday, but chief negotiators and their respective teams have continued discussions remotely in the hope of thrashing out a deal within the next 10 days.

 

 

US MARKET COMMENTARY

 

US stocks fell on Friday as rising new coronavirus cases, coupled with questions around central-bank funding for key emergency programs, cast doubt on a swift economic recovery. Boeing and Salesforce were the worst-performing stocks in the Dow, falling 2.9% and 2.5%, respectively. Technology and industrials dropped 1.1% and 0.9%, respectively, to lead the S&P 500 lower. JP Morgan economists wrote in a note that coronavirus-related restrictions will “likely deliver negative growth” in the first quarter of 2021. They also downgraded their first-quarter GDP outlook to a contraction of 1%.

 

 

ASIAN MARKET COMMENTARY.

 

Asian shares climbed this morning, with a broad regional index touching a record high on hopes for imminent coronavirus vaccines, but worries over the impact of economic lockdowns and uncertainty over US stimulus capped gains. Japanese markets were closed for a holiday, but Nikkei futures added 0.19%. The regional index also got a boost from Australian shares which gained 0.51% as the country eased some COVID-19 restrictions. Most of the country has seen no new community infections or deaths in several weeks.

 

 

CURRENCY MARKET COMMENTARY

 

The rand weakened slightly on Friday, as investors were cautious ahead of credit rating reviews expected later in the day. At the close, the rand was 0.5% weaker at R15.41 per dollar. Global ratings agencies Fitch and Moody’s both downgraded South Africa’s sovereign credit rating further into junk on Friday evening, citing a combination of SA’s weakening fiscal position, rising government debt and the economic shock triggered by the COVID-19 pandemic. S&P chose to keep SA’s sovereign credit rating unchanged, while all three agencies already had SA’s debt at below investment grade ahead of Friday’s announcements.

 

 

COMMODITIES MARKET COMMENTARY

 

Gold prices ticked higher this morning, supported by a weaker dollar and hopes of further US stimulus aimed at cushioning the economic blow from the COVID-19 pandemic. Oil prices extended their gains this morning as traders were optimistic about a recovery in crude demand thanks to successful coronavirus vaccine trials, but price gains were contained by renewed lockdowns in several countries. Sentiment was also bolstered by hopes that the group known as OPEC+, will keep crude output in check.

LOCAL COMPANIES

Sasol (SOL) -3.7%

The embattled petrochemical giant announced earlier in the week, its US- based chemicals business, Lake Charles Chemical Project (LCCP) is “now 100 percent complete” with total capital expenditure forecast to be within $12.8 billion (R197.09 billion)”. On Friday shareholders approved the proposed agreement to form a joint venture with chemical company, LyondellBasell Industries.  The group will acquire a 50% interest from Sasol in LCCP for $2Bn (R33.38Bn) and operate the newly formed JV. Sasol is battling high debt amid lower oil and chemicals prices, and embarked on a three-pronged strategy this year which included disposal of assets, cash conservation efforts and a rights issue.

 

Tiger Brands (TBS) -1.8%

The largest of the JSE-listed food producers, Tiger Brands, the owner of brands like Tastic, Jungle Oats and Oros, says it is focusing on its long-term growth strategy after reporting a “disappointing” set of results. CEO Noel Doyle: “The coming year will be critical for convincing the market that Tiger Brands has long-term growth potential”. The group managed to grow revenue by 4% to R29.8Bn, however profits fell from R3.8Bn to R1Bn and headline earnings per share dropped 23% to 1,196 cents. The strain on consumer spending, coupled with higher input cost and COVID-19 related costs were the key drivers behind the decrease, the group also announced it will be cutting 400 staff members to reduce costs.

 

INTERNATIONAL COMPANIES

Apple (AAPL) -1.1%

The tech giant announced the attorneys general for 33 states and the District of Columbia have reached a $113 million settlement with the group over allegations that the iPhone maker slowed the performance in older generations of the phone to conceal a design defect in the battery. California Attorney General Xavier Becerra: "Apple withheld information about their batteries that slowed down iPhone performance, all while passing it off as an update”. The group confirmed in December 2017 that newer versions of iOS were indeed intentionally reducing, and the latest settlement resolves the complaints around the iPhone 6 and 7 generation phones.

 

Foot Locker (FL) -5.0%

The specialty athletic retailer posted estimate beating third quarter results boosted by back-to-school shopping, even as it kicked in later as usual due to the global pandemic. The group said customers continue to spend on athletic and casual shoes, leading to same-store sales growth of 7.7%. Overall revenue increased 9% to $2.11Bn, beating the $1.94Bn analysts pencilled in, while earning $128 million, or $1.21 per share, compared with the prior year’s $122 million profit, or $1.13 per share, well ahead of the 62 cents consensus mark. CEO Richard Johnson: “We delivered a strong top- and bottom-line performance in the third quarter, underscoring the strength of our in-store and online product assortments and the resilience of the Foot Locker Inc. brands”. As the world suffers from a second wave of the virus, more than 10% of retailer’s global brick-and-mortar stores are temporarily closed as a result of government-mandated restrictions.

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Media, Sasfin Wealth

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