LOCAL MARKET COMMENTARY
After a strong day on the Johannesburg Stock Exchange (JSE) yesterday, the All-Share index ended 1.08% higher at 80,128 points, while the Top-40 finished the day having added 1.14%. All major indices and bourses ended the day in the green. On the data front this week, the South African Reserve Bank will announce its decision on interest rates on Thursday. In sector news, Closed End Investments added 2.55% to lead gains. Looking at companies, the Foschini Group added 1.95% after they released their first trading update for the year.
EUROPEAN MARKET COMMENTARY
European markets closed higher yesterday with investors reassessing the economic outlook and looking ahead to Thursday’s interest rate announcements. The new trading week started off on an uncertain note with the pan-European Stoxx 600 closing up 0.5%. Insurance stocks slid 0.5% and tech stocks closed the session 2.2% higher. In company news, the German flavouring and fragrance producer Symrise saw its share price fall more than 7% after the company missed full-year earnings expectations.
US MARKET COMMENTARY
US stocks were up yesterday as investors look to a potential slowdown in interest rate hikes from the Federal Reserve bank when they announce their decision on Thursday. Economic data released last week showed a decline in wholesale prices and retail sales. Along with this, central bank officials have made comments making investors believe a smaller rate hike is on the way. Another factor weighing on investors this week will be earnings releases, some expected releases include Microsoft, IBM, Tesla, Visa and Mastercard. In company news, semiconductor stocks rose yesterday, with the VanEck Semiconductor ETF surging 4.7% for its best day since November.
ASIA MARKET COMMENTARY
Markets in the Asia-Pacific traded higher this morning as Lunar New Year holidays were observed yesterday in most of the region. Meanwhile, Japan’s Manufacturing Purchasing Managers’ Index will be released later in the day. Markets in China, Hong Kong, Taiwan, South Korea, Malaysia and Singapore are closed for a holiday.
COMMODITY MARKET COMMENTARY
Gold prices remained steady today, with little change as Investors' focus remains firmly set on the U.S. fourth quarter GDP growth estimates out on Thursday. Meanwhile, oil prices rose slightly in early Asian trade today with the market looking ahead to Thursdays Federal Reserve’s interest rate announcement and earnings announcements for indications on the health of global economies. Also helping oil prices are China, who are no longer held back by pandemic controls, and have shown signs of more buying.
CURRENCY MARKET COMMENTARY
The Rand dropped slightly yesterday with the focus for investors this week being on the South African Reserve Bank's first interest rate decision of the year, due out on Thursday. At the close, the rand traded at R17.17 against the dollar, 0.23% softer. Looking abroad, the Dollar struggled today, bouncing near a nine-month low to the euro and giving back recent gains to the yen. Meanwhile, sterling was last trading up 0.12% to the Dollar, on the day.
SOUTH32 LIMITED (S32) +2.5%
Group copper equivalent production increased by 12% in H1 FY23, as recent investments in copper and low-carbon aluminium capacity delivered strong growth. H1 FY23 Operating unit costs expected to be in-line or below FY23 guidance at most operations. Worsley Alumina and Brazil Alumina delivered an 8% increase in quarterly alumina volumes. Aluminium production increased by 15% in the December 2022 half year. Sierra Gorda realised sequentially higher copper grades, delivering 45kt of payable copper equivalent production in the December 2022 half year. Australia Manganese achieved record half year production, supporting a 7% increase in total manganese production. Illawarra Metallurgical Coal delivered a 17% increase in quarterly metallurgical coal production. Work completed on Hermosa’s Clark selection phase pre-feasibility study confirmed the opportunity to produce high-purity manganese sulphate monohydrate for the growing North American electric vehicle supply chain.
THE FOSCHINI GROUP LIMITED (TFG) +2.0%
Robust performance off a strong base in Q3 FY2023 with group retail turnover growth of 17,3% compared to Q3 FY2022, and a growth of 20,8% for the nine months ended 31 December 2022. TFG Africa recorded a strong performance in Q3 FY2023 with retail turnover growth of 18,4% and like-for-like retail turnover growth of 5,7%, both compared to Q3 FY2022. Cash retail turnover growth for TFG Africa in Q3 FY2023 of 23,6% compared to Q3 FY2022. Cash retail turnover for Q3 FY2023 now contributes 74,6% to total TFG Africa retail turnover and 81,7% to total Group retail turnover. TFG London showed resilience in Q3 FY2023 with retail turnover growth of 2,0% (GBP) compared to Q3 FY2022. TFG Australia delivered a strong 20,9% (AUD) growth in retail turnover in Q3 FY2023 compared to Q3 FY2022 and group online retail turnover grew 5,6% in Q3 FY2023, whilst online retail turnover contributed 8,3% (Q3 FY2022: 9,3%) to total Group retail turnover for Q3 FY2023.
Spotify (SPOT) +2.1%
In an attempt to limit spending, the music streaming company Spotify has cut about 6% of its workforce. Shares of Spotify climbed more than 3% yesterday on news of the cost-cutting measures. It is reported that the layoffs will affect about 600 of the companies 9800 employees, with most employees working from the US and Sweden. As a severance package employees will receive 5 months of pay and continued health care coverage, said the CEO in a letter to laid off employees. In a filling to the SEC, the company reported that redundancy pay-outs would lead to roughly €35 million ($38 million) to €45 million of severance-related charges. In October, Spotify reported overall third-quarter revenue grew 21% to 3 billion euros, led by growth in paid subscribers, while ad-supported revenue climbed 19% to 385 million euros thanks to its podcasting push. This comes amidst other Tech companies also making layoffs with Microsoft and Google being some of the bigger names to announce job cuts.
Bank of America, JPMorgan and other banks
In a bid to challenge Apple Pay and PayPal, a number of banks are reportedly collaborating on a digital wallet that links with debit or credit cards. The banks involved are Wells Fargo, JPMorgan Chase and Bank of America. This could be seen as a move to muscle in on a market already dominated by PayPal and Apple pay. Apple already offers a branded credit card to its customers and this could be seen as the big banks trying to slow Apples push into banking. But there will be challenges ahead for this initiative, with analysts saying that it will take time for such a new product to make a dent in the pockets of their rivals. Another challenge will be that customers expect a killer customer experience and a compelling merchant value proposition to build the two-sided network to achieve scale.
Microsoft (MSFT) +1.0%
Microsoft have reportedly invested around about 10 billion Dollars with OpenAI, the makers of ChatGPT. This is the third time Microsoft have invested in the company, with the other 2 occasions being 2019 and 2021. Microsoft said this deal will accelerate breakthroughs in AI and help both companies commercialize advanced technologies in the future. OpenAI is considered to be one of the market leaders in AI, boasting with game-playing AI software that can beat humans at video games such as Dota 2, its AI text generator GPT-3 and its quirky AI image generator Dall-E. ChatGPT automatically generates text based on written prompts in a fashion that’s much more advanced and creative. OpenAI and Microsoft already have a solid working relationship with Microsoft being the “exclusive” provider of cloud computing services to OpenAI. The new investment should allow for the 2 companies to create new AI centred experiences and supercomputing at scale.
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