Taking Stock - Gold shares dragged the market lower.

In todays taking stock, we discuss how gold shares dragged the market lower, tracking a fall in the price on the stronger dollar.

Research Team

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Sasfin Wealth
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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks fell, dragged by gold shares tracking a fall in prices of the yellow metal on the stronger dollar. The mining index fell 1.46%, with gold mining companies the main drag. Sibanye Stillwater, Harmony Gold, DRD Gold, Gold Fields and AngloGold Ashanti all dropped between 1.1% and 1.8%. Food producer and fashion retailer AVI was the second biggest decliner on the All-share index, falling 6.90% after it revealed it had progressed discussions with Mondelez International regarding the potential acquisition of its Snackworks division. Overall, the Johannesburg All-Share index fell 0.64% to 70,558, while the Top-40 index closed 0.62% lower.

 

 

EUROPEAN MARKET COMMENTARY

European stocks eked out small gains on Wednesday as traders digested a fresh batch of economic data and monitored the region’s latest Covid surge. The pan-European Stoxx 600 closed up 0.1% after choppy trading earlier in the session. Telecoms shares rose 1.2% to lead the gains while autos stocks sank 1.5%. European investors continue to monitor the acute Covid crisis in the region this week, with more countries considering stricter restrictions and partial lockdowns to curb rising infections.

 

 

US MARKET COMMENTARY

U.S. stocks pushed modestly higher on Wednesday as the recent jump in bond yields took a breather, allowing tech stocks to recover. Shares of Facebook-parent Meta rose 1.1% to bolster the Nasdaq, while Roku and Peloton shook off rough starts to the week to rise more than 2% each. Computer hardware company HP’s shares got a 10.1% lift after reporting earnings that beat on the top and bottom lines and issuing higher first-quarter earnings guidance.

 

 

ASIAN MARKET COMMENTARY

Shares in Asia-Pacific were mixed earlier today as investors reacted to the Bank of Korea’s rate decision. South Korea’s Kospi led losses regionally, dipping 0.5%. The Bank of Korea raised its policy rate by 25 basis points to 1%, a move that was largely expected by analysts in a Reuters poll. The South Korean central bank’s decision followed a similar move by the Reserve Bank of New Zealand on Wednesday. Shares of developer Kaisa Group soared more than 12% as they resumed trading. Kaisa on Thursday announced an offer to bondholders to exchange their existing bonds with new bonds that have an extended maturity.

 

 

CURRENCY MARKET COMMENTARY

The rand fell to a 12-month low on Wednesday as the U.S. dollar strengthened and contagion from under-pressure Turkish lira lingered. At the close of the session, the rand was 0.46% weaker as it traded around R15.91 to the dollar. The U.S. dollar continued its upward trend on renewed bets the Federal Reserve will hike rates to tame inflation. With no major domestic market moving news, the rand is expected to keep tracking global drivers.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices edged up this morning as the dollar eased slightly, but comments from U.S. Federal Reserve policymakers suggesting the central bank could accelerate stimulus tapering weighed on the metal and kept it well below the key $1,800 mark. Meanwhile, oil prices ticked lower earlier today with investors waiting to see how major producers respond to the emergency crude release by major consuming countries designed to cool the market, even as data pointed to healthy U.S. fuel demand.

LOCAL COMPANIES

Lewis (LEW) +9.5%

The share price of JSE-listed household furniture retailer Lewis Group surged 9.48% on Wednesday, hitting a new 52-week high and closing at R47.45 following the release of a strong performance for the six months ended September 30. Lewis posted a 20.7% increase in its merchandise sales to R1.99 billion, leveraging high volumes of stock availability. The group’s interim results show credit sales grew by 24.4% and cash sales by 17.1%, with credit sales accounting for 50.6% (H1 2021: 49.1%) of total merchandise sales. Comparable store sales increased 17.9%. However, the double-digit growth in sales is compared to the Covid-hit interim period of its prior financial year. Its comparative half-year period (April-September 2020) reflected the impact of the Covid-19 hard lockdown, when all 681 of its SA stores were forced shut for at least six weeks. The retailer says its stores outside SA, which represent 15.8% of the store base, grew 17.5% and accounted for 18.3% of the company’s sales. “Solid merchandise sales growth and reduced debtor costs contributed to operating profit increasing by 23.3% to R341.2 million, with the operating profit margin improving from 16.8% to 17.1%,” Lewis notes in its results statement. The group’s headline earnings increased by 24.5% to R226 million, with headline earnings per share (Heps) increasing 39.7% to 330 cents. The group repurchased 5.4 million shares at a cost of R194.5 million during the past six months. Since the start of the share repurchase programme in 2017, the group has bought back 22.7 million shares at an average price of R29.52 per share. Lewis Group declared an interim dividend of 195 cents per share, 46.6% up compared to its prior interim period.

 

 

GEPF to cut allocation to PIC unit

Africa’s biggest pension fund expects to cut the amount of money it allocates to a division of South Africa’s Public Investment Corp. that has to date helped it fulfill some of its environment, social and governance aspirations. South Africa’s Government Employees Pension Fund allowed a R70 billion allocation agreement with the PIC, the continent’s largest fund manager, to lapse in March and is now negotiating a new mandate. That, according to GEPF Head of Investments Sifiso Sibiya, will include “the introduction of more consequence management” for poor investment decisions. The GEPF’s decision comes after the R2.34 trillion PIC was the subject of a judicial inquiry that concentrated on its Isibaya Fund, which makes investments in unlisted assets and focuses on Black economic empowerment transactions and social infrastructure projects. While the GEPF, which oversees R2.09 trillion, will still benefit from the money that has been spent, no new investment can take place without a fresh mandate. The so-called Mpati Commission questioned the governance of the division and the flouting of investment procedures. A number of senior PIC officials, including former Chief Executive Officer Dan Matjila, have since left the organisation.

INTERNATIONAL COMPANIES

Deere & Co. (DE) +5.3%

Shares of the farm equipment maker jumped about 5% after the company issued stronger-than-expected quarterly earnings. Deere posted earnings of $4.12 per share last quarter, surpassing the consensus estimate of $3.90, according to Refinitiv. Deere said solid demand for its products helped cushion the impact of a month-long workers strike. Its revenue came in slightly below analyst forecasts, however.

 

Apple and Amazon (AAPL, AMZN) +0.3% and 0%, respectively

Italy's competition watchdog has fined Amazon and Apple more than €200m (£168m) for allegedly flouting competition regulations. The fine relates to Beats headphones, a brand bought by Apple for $3bn (£1.8bn at the time) in 2014. A 2018 agreement between the tech giants meant only selected resellers could sell the products on Amazon's Italian website. Both Apple and Amazon said they plan to appeal against the fines. The Italian Competition Authority said the actions of the two companies also violated European Union rules, and affected competition on pricing. It ordered the two companies to end the restrictions and give resellers access in a "non-discriminatory manner."

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Research Team
Media, Sasfin Wealth