Taking Stock - global markets lower.

Concerns around a pushback on Biden’s proposed stimulus programme push global markets lower.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local markets closed lower on Friday as the All-Share index closed 0.29% (to 63,988 index points) lower and the Top 40 index was 0.14% weaker. South Africa’s regulator granted the health department permission to distribute the vaccine from AstraZeneca Plc and the University of Oxford in its first nod for Covid-19 inoculations. The National Department of Health has been recognised by the South African Health Products Regulatory Authority as a supplier of The Serum Institute of India Ltd., Health Minister Zweli Mkhize said in a statement late Friday. An initial 1.5 million doses will come from the institute, which is producing the version developed by AstraZeneca and Oxford.

 

 

EUROPEAN MARKET COMMENTARY

European markets pulled back Friday as investors monitored coronavirus restrictions and new economic data out of the euro zone. The pan-European Stoxx 600 slipped 0.6% by the close, with travel and leisure stocks dropping 2.5% to lead losses. This came after European governments announced further travel restrictions to fight growing Covid infection rates and highly-infectious variants. Business activity in the euro zone fell to a two-month low in January, preliminary data showed on Friday, on the back of stricter coronavirus-related lockdowns.

 

 

US MARKET COMMENTARY

The S&P 500 fell slightly on Friday, retreating from record levels, while the strength in major technology names pushed the Nasdaq Composite to another all-time high. Dow-component IBM dropped 9.9% after the company reported fourth-quarter sales below analysts’ expectations. Revenue fell 6% on an annualized basis, the fourth consecutive quarter of declines. Intel shares retreated 9.3% following a 6% pop on Thursday after it released better-than-expected earnings. Hopes for a robust earnings season from the largest communications and tech companies sparked a rally in mega-cap stocks during the holiday-shortened week, pushing the broader market higher.

 

 

ASIAN MARKET COMMENTARY

Stocks in Asia were mixed in morning trade today as investors continue to monitor the situation surrounding the coronavirus pandemic. China surpassed the US as the world’s largest recipient of foreign direct investment, according to a report released Sunday from the United Nations Conference on Trade and Development. China brought in $163 billion in inflows last year, compared to $134 billion attracted by the US, according to the report.

 

 

CURRENCY MARKET COMMENTARY

The rand was weaker early on Friday, as a rally in riskier assets driven by hopes of US economic stimulus faded. At the close, the rand traded at R15.14 versus the dollar, 1.36% weaker than its previous close. The rand has mainly moved on global factors recently, shrugging off a series of poor domestic data releases that point to lingering weakness in Africa's most industrialised economy. On Thursday, the central bank kept its main lending rate unchanged, providing some support to the currency.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices gained this morning as the dollar eased and hopes that a massive economic stimulus in the world's largest economy would be passed remained intact. Oil prices slipped for a second straight session today as renewed Covid-19 lockdowns raised fresh concerns about global fuel demand. China reported a climb in new Covid cases today, casting a pall over demand prospects in the world’s largest energy consumer. Iran’s oil minister said on Friday the country’s oil exports have climbed in recent months and its sales of petroleum products to foreign buyers reached record highs despite US sanctions.

LOCAL COMPANIES

Mr Price Group (MRP) +1.5%

During the third quarter (27 September 2020 to 26 December 2020) of the financial year ending 3 April 2021, the group continued its pursuit of further market share gains through its proven cash-based, fashion-value business model. This was achieved as market share grew 230 basis points in October and November 2020 combined, the latest period for which Retailers’ Liaison Committee (RLC) data is available. The group recorded growth in retail sales and other income (RSOI) of 5.0% to R7.8bn over the corresponding period in the prior year (Corresponding Period). Total retail sales of R7.5bn grew 5.8% and other income decreased 16.0% to R253m. South African retail sales grew 5.4% to R6.9bn. Store sales were up 4.6% with the group’s online channel performing strongly, increasing 66.3% (Corresponding Period:   17.4%) over the Corresponding Period. Non-South African corporate-owned stores sales grew 10.2% to R552m. Cash remains the preferred tender type of customers and the group’s private label product assortment and value price points supported cash sales growth of 8.2%, constituting 86.8% (Corresponding Period: 84.9%) of total sales.

 

Mediclinic (MEI) -3.8%

The diversified international private healthcare services group, provided a trading update for the third quarter period between October and December of the financial year ending 31 March 2021. Ronnie van der Merwe, Group Chief Executive Officer, said: “Through the third quarter of our financial year, a more severe second wave of COVID-19 cases has placed greater demand on our acute care capacity. We continue to effectively navigate the challenges this presents through the tireless efforts of our medical professionals and staff who deserve our sincere appreciation and thanks. Unlike early in the first wave, there have not been national restrictions on elective procedures and outpatient activity during Q3. Our ability during the period to continue with elective procedures, when and where we have capacity, as well as the unseasonable demand for our inpatient services in Southern Africa and the UAE during December 2020 supported our Q3 financial performance.” Q3 Group revenue up 2.5%; supported by unseasonably high inpatient activity in December 2020 at Mediclinic Southern Africa and Mediclinic Middle East.

INTERNATIONAL COMPANIES

Tencent +8.7%

Tencent, the creator of the messaging platform WeChat, is in talks with banks for a $6 billion loan, according to people familiar with the matter. That would be the biggest dollar loan syndicated in Asia for a Chinese firm since 2019, according to data compiled by Bloomberg. It would also mark a flurry of potential debt financings by tech giants after people familiar said earlier this month that rival Alibaba Group Holding Ltd. was looking to sell up to $8 billion of bonds. Under the terms being discussed, Tencent’s five-year deal would pay an interest margin of 80 basis points over Libor and offer all-in pricing of 85 basis points, the people said, asking not to be identified as they aren’t authorised to speak publicly. The proceeds are for general corporate purposes, they added. Tencent has in recent years spent billions of dollars buying stakes in promising start-ups, extending its reach in areas from social media to grocery delivery. It agreed last month to buy an additional 10% of Universal Music Group.

 

TGI Fridays

TGI Fridays CEO Ray Blanchette said that President Joe Biden’s proposal to eliminate the tipped minimum wage would likely result in fewer hours for the chain’s waitstaff and higher menu prices. Biden has proposed raising the federal hourly minimum wage from $7.25 to $15 and eliminating tip credits, a change that would primarily affect the restaurant industry. The changes would mean that employers would have to pay every worker at least $15 an hour, even if they receive tips. In 43 states, employers can pay their workers as little as $2.13 an hour as long as that hourly wage and tips add up to the locality’s pay floor. Otherwise, the employer has to make up the difference. The tipped minimum wage was last raised in 1991. TGI Fridays already pays most of its kitchen employees more than $15 an hour, according to Blanchette. The pain would come from paying its waiters the new minimum wage.

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