Taking Stock - US President Donald Trump accepts the transition.

US President Donald Trump accepts the transition to a Joe Biden presidency which pushes markets higher.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange ended stronger on Tuesday, tracking global markets, which were up on Biden's move towards Presidency and vaccine hopes as AstraZeneca also reported success to its trials. The benchmark All-Share index closed up 1.08% and is now at 57,762 index points. The blue-chip Top 40 index ended 1.09% higher. The rise in stocks was largely universal, with banks taking the lead once again as the banking index was up 3.59%. Sasol was up almost 15% after the company said it was selling 50% stake in its Texas petrochemicals plant for $404 million. However, gold stocks fell heavily after gold prices dropped to a four-month low as vaccine hopes shifted investors to riskier assets.


EUROPEAN MARKET COMMENTARY

European stocks closed higher on Tuesday amid growing optimism that another effective coronavirus vaccine has been discovered, and on news that the Trump administration has accepted President-elect Joe Biden’s transition into office. The pan-European Stoxx 600 gained 0.8% by the close, oil and gas stocks bouncing 4.3% to lead gains as almost all sectors and major bourses entered positive territory. Health care stocks bucked the trend to fall 0.7%. European markets have been boosted by positive vaccine news.


US MARKET COMMENTARY

The Dow Jones Industrial Average rallied on Tuesday, breaking above 30,000 for the first time amid positive vaccine news, hope for a strong economic recovery in 2021 and easing of political uncertainty as the Trump administration approved the start of the presidential transition. Tuesday’s gains put the Dow up more than 13% for the month, which would be its biggest monthly gain since 1987. The S&P 500 and Nasdaq are up 11.2% and 10.3%, respectively, in November. The Dow’s rally to record levels has been driven in part by investors increasing their exposure to beaten-down value names.


ASIAN MARKET COMMENTARY.

Stocks in Asia rose this morning following a record session on Wall Street as coronavirus vaccine hopes and reduced uncertainty in US politics buoy investor sentiment. In Japan, the Nikkei 225 jumped 1.87%, while the Hang Seng index in Hong Kong also saw robust gains as it advanced 1.37%. Hong Kong-listed shares of Chinese smartphone maker Xiaomi fell more than 3% in Wednesday morning trade. The declines came despite the firm posting a roughly 19% year-over-year surge in its adjusted net profit for the three months ended September 30th.


CURRENCY MARKET COMMENTARY

The rand gained on Tuesday as appetite for riskier assets grew after US President Donald Trump accepted the transition to a Joe Biden presidency. The rand is seen by some investors as a proxy for emerging- market risk and tends to gain strongly when global market sentiment is upbeat. At the close, the rand traded at R15.20 versus the dollar, 1.41% stronger than its previous close. The dollar nursed losses this morning as progress in developing a novel coronavirus vaccine and expectations for a fiscal boost from a new US government triggered a shift of funds from the greenback to riskier assets.


COMMODITIES MARKET COMMENTARY

Gold prices edged up this morning helped by a weaker dollar, though a robust appetite for riskier assets kept the safe-haven metal near a more than four-month low hit in the previous session. Oil rose for a fourth straight day this morning, shrugging off an industry report showing a higher-than-unexpected rise in US crude stockpiles and extending a rally driven by hopes that a COVID-19 vaccine will boost fuel demand. OPEC+ will continue production cuts into 2021 after a meeting set to start on November 30th following technical talks this week.

LOCAL COMPANIES

Sasol (SOL) +14.9%

The South African petrochemical giant announced on Tuesday that it had agreed to sell another US asset as the group looks to lower its debt burden amid lower oil and chemicals prices, without tapping shareholders via a rights issue. The energy group is selling its 50% stake in US-based Gemini high-density polyethylene joint venture to its partner INEOS Olefins and Polymers for $404 million (R6.2Bn). “The Sale represents a further step in achieving Sasol’s strategic and financial objectives by accelerating the focus on specialty chemicals and reducing net debt. Proceeds from the transaction will be used by Sasol to repay near-term debt obligations”, the group said in a statement.

 

Omnia (OMN) +4.1%

The JSE-listed chemicals and agricultural company says it “delivered a resilient performance in a challenging operating environment”, posting a 1.2% decline in revenue from continuing operations to R8.2Bn for the interim period, while profit after tax surged to R252 million from R35 million previously. The Group’s agricultural interests, which account for about half of its revenue, have seen a 14% jump to R2.1Bn for the period. The group is upbeat about SA’s agricultural sector, expecting favourable weather and on-going input demand. CEO Seelan Gobalsamy: “The group is well positioned to capitalise on growth opportunities, a key pillar of our strategy that will be driven by appropriate capital allocation”.

INTERNATIONAL COMPANIES

Tiffany & Co (TIF) 0.0%

The luxury retailer blew past Wall Street expectations for the third-quarter as sales in Mainland China surged 70% from the previous year and US demand showed signs of recovery. The results bode well for the upcoming holiday season, after the luxury sector was hit hard by the global pandemic. The retailer and LVMH ended a bitter legal battle last month and agreed to new terms that would see the French firm buy the jeweller for $15.8Bn or $425 million less than previously agreed. The group posted net income of $119 million with adjusted per-share earnings coming in at $1.11, well ahead of the 66 cents consensus. E-commerce sales rose 92% and accounted for 12% of total sales year-to-date, as total sales slipped 1% to $1Bn, topping the $973 million expected.

 

Dick’s Sporting Goods (DKS) +0.3%

The American sporting goods retailer announced on Tuesday its current president, Lauren Hobart, will succeed Ed Stack as the new CEO on 1 February. Stack took over the business from his dad, Dick Stack, in 1984 at the age of 29 and took the group public in 2002. The retailer continues to benefits from workout equipment, sporting goods and outdoor gear demand during the COVID-19 pandemic. Online sales jumped 95% and the group posted record same-store sales growth of 23%, leading to a 23% rise in net sales to $2.41Bn, ahead of the $2.23Bn forecast by analysts. Net income grew to $177.2 million, or $1.84 per share, and when adjusted for one-time charges the group earned $2.01 per share, smashing the $1.01 consensus mark. 

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