GM Surpasses Quarterly Expectations, Raises Annual Outlook

LOCAL MARKET COMMENTARY

On the stock market, both the Top 40 and the broader All Share index saw gains, rising by 0.82% and 0.63% respectively, ending at 68,050 and 74,010 points, respectively. South Africa's central bank expressed caution about inflation's path, foreseeing challenges in reaching its target. However, the country's leading indicator showed improvement in February, rising by 1.7%. Capitec Bank announced a 16% increase in annual profit, fuelled by robust performance in the second half, particularly in net transaction and commission income, which grew by 30%. Conversely, Sasol shares experienced their steepest decline in over three months following reports of operational issues across its South African operations.

EUROPEAN MARKET COMMENTARY

European markets closed on a high note on Tuesday, with the U.K.'s FTSE 100 hitting a new intraday record high, driven by positive momentum from the previous session. The pan-European Stoxx 600 index closed 1.1% higher, with most sectors in the green except for mining. Investors were optimistic, focusing on robust euro zone business activity data and the potential for future interest rate cuts. Despite hitting a new intraday peak of 8067.73 points early in the day, the FTSE 100 slightly retreated after hawkish comments from the Bank of England's chief economist, Huw Pill. Nonetheless, it still ended the day at 8044.81 points, extending the record close from Monday.

US MARKET COMMENTARY

U.S. stocks closed higher on Tuesday buoyed by strong earnings reports from major companies, with investors closely watching the results of prominent tech giants including Tesla. Despite a cooling in U.S. business activity for April and easing inflation rates, investors remain cautiously optimistic. Attention now turns to the release of the March Personal Consumption Expenditures (PCE) index, the Federal Reserve's favoured inflation measure, scheduled for Friday. Tesla, which released its earnings after markets closed, saw its shares surge 6% in extended trading, despite missing analyst revenue estimates, as it unveiled new electric vehicle models.

ASIA MARKET COMMENTARY

Asian stocks experienced gains this morning, fuelled by positive economic data. Japan's service sector saw producer prices rise by 2.3% year on year in March, showing acceleration from the previous month and nearing an eight-year high. The Nikkei surged by 2% in response. South Korea's Kospi also climbed, boosted by a 3% increase in Samsung Electronics, while the Kosdaq saw a 1.35% rise. Hong Kong's Hang Seng index recorded a 0.96% increase, while China's CSI 300 opened slightly lower by 0.03%.

CURRENCY MARKET COMMENTARY

On Tuesday, the South African rand bounced back from its recent losses as global worries about escalating tensions in the Middle East eased. Meanwhile, the dollar remained weak this morning, recovering slightly from significant declines against the euro and sterling. However, the yen continued to struggle near multi-decade lows despite warnings from Japanese officials about potential intervention. The dollar's decline overnight was fuelled by strong European economic data contrasting with cooling business growth in the United States.

COMMODITY MARKET COMMENTARY

Gold prices stabilized on Tuesday following a decline to a two-week low, as concerns over escalating tensions in the Middle East eased. Investors awaited crucial economic data to gauge the timing of potential U.S. interest rate cuts. Meanwhile, oil prices increased in early trading today, building on previous gains, supported by unexpected data showing a decrease in U.S. crude stocks. With attention shifting away from Middle East tensions, the focus turned towards demand indicators.

Capitec Bank Holdings Limited (CPI) +7.79%

Operating profit before tax surged by 16% to R13.448 billion compared to the restated R11.643 billion in the previous year. Capitec witnessed a similar uptick in headline earnings per share, which rose by 16% to 9,171 cents per share from the restated 7,938 cents per share in the prior year. Earnings per share also saw a significant increase of 15% to 9,156 cents per share from the restated 7,933 cents per share in the prior year. Additionally, the company declared a total dividend per ordinary share of 4,875 cents per share, reflecting a notable 16% increase from the previous year's 4,200 cents per share. Moreover, the net asset value (total equity) experienced a healthy growth of 15%, reaching R43.531 billion compared to the restated R37.920 billion in the prior year. 

Anglo American Plc (AGL) -1.82%

In Q1 2024, notable achievements were evident across various sectors of the company's operations. Copper production saw a significant 11% increase, attributable to heightened throughput at Quellaveco, alongside continued strong performance at Collahuasi and El Soldado, despite planned lower grades. Steelmaking coal production surged by 7%, primarily driven by operations at Aquila and Capcoal, although challenges persisted at the Dawson open-cut mine and Moranbah due to strata conditions. Iron ore production remained stable, with Minas-Rio showing a 4% increase while Kumba adjusted production to address logistics constraints. However, rough diamond production declined by 23%, reflecting strategic adjustments to align with market inventory levels, leading to revised full-year production guidance. Furthermore, Platinum Group Metals (PGMs) operations saw a 7% decrease in production, largely due to lower volumes from Kroondal and reduced output at Amandelbult. Nickel production remained relatively unchanged during the period.

Kumba Iron Ore Limited (KIO) -3.01%

In Q1 2024, Kumba maintained its strong safety record with over seven years of fatality-free production at Sishen and one year at Kolomela, achieving an improved Total Recordable Injury Frequency Rate (TRIFR) of 0.48. However, total production decreased by 2% to 9.3 million tonnes (Mt), aligned with Kumba’s strategic shift towards a lower production profile. Sales also declined by 10% to 8.5Mt due to port performance challenges, with 0.4Mt of shipments rolling over into the second quarter. The finished stock, totaling 8.5Mt, included stockpiles at mines and the Saldanha Bay Port. Despite these challenges, the average realized Free on Board (FOB) export iron ore price stood at US$89 per wet metric tonne (wmt), equivalent to US$91 per dry metric tonne (dmt), compared to the average benchmark price of US$103/wmt (equivalent to US$105/dmt).

General Motors Company (GM) +4.37%

General Motors exceeded Wall Street expectations in its quarterly results, driving shares up by 5%. The Michigan-based automaker raised its annual forecast, citing stable pricing and demand for its gas-engine vehicles. Net income for the first quarter surged by 24.4% to $3 billion, accompanied by a 7.6% increase in revenue to $43 billion. Adjusted earnings per share of $2.62 surpassed the average Wall Street estimate of $2.15, according to LSEG data, while revenue exceeded the target of $41.9 billion for the March quarter. General Motors now anticipates an adjusted pre-tax profit between $12.5 billion and $14.5 billion for the year, up from its previous range of $12 billion to $14 billion.

PepsiCo Inc. (PEP) -2.97%

PepsiCo exceeded Wall Street expectations for first-quarter revenue and profit, driven by strong demand for its sodas and snacks like Cheetos and Doritos in international markets, offsetting a slowdown in the United States. Despite a 5% increase in average prices, the company experienced a 2% decline in organic volume, an improvement from the 4% drop seen in the previous quarter. While PepsiCo maintained its fiscal 2024 forecasts, its shares fell by 1.5%. Sales at its North America beverage unit increased by 1%, while organic volume fell by 5%. First-quarter net revenue rose by 2.3% to $18.25 billion, surpassing LSEG estimates of $18.07 billion, and the company's core profit of $1.61 per share exceeded expectations of $1.52.

Tesla Inc. (TSLA) +1.85%

Tesla's shares gained traction on Tuesday ahead of its first-quarter results, predicted to reveal its lowest gross profit margin in over six years due to price cuts and sluggish demand. The stock surged 2.9% to $146.19 in anticipation of the report, slated for release after market close. Tesla's recent decline in sales growth, evidenced by an 8.5% drop in deliveries and rising inventories, is anticipated to heavily impact the upcoming results. Analysts project a decline in annual deliveries for the first time in 2024, following years of robust double-digit growth. Despite ongoing efforts to stimulate demand through price reductions, Tesla's stock has plummeted by approximately 43% this year, ranking among the S&P 500's poorest performers. Wall Street foresees Tesla's automotive gross margin, excluding regulatory credits, to dip to 15.2%, the lowest since Q4 2017, according to Visible Alpha. Analysts estimate March-quarter revenue to decrease by 5.05% to $22.15 billion, as per LSEG data.

Click here to view the full report.