Local Market Update

The Johannesburg Stock Exchange saw its first rise of the week, driven by mining and industrial stocks. The All-Share index closed 0.8% higher (now at 76,175 index points) while the Top 40 index gained approximately 0.9%. The South African Reserve Bank raised the repo rate to 8.25%, marking its 10th consecutive hike and reaching a 14-year high as the central bank tackles inflation. South African inflation has remained above the central bank's target range of 3% to 6% for about a year, with April's consumer prices rising by 6.8% year-on-year.

European Market Update

European markets ended lower due to ongoing negative sentiment. Germany's statistics office revised its gross domestic product downward from zero to -0.3% for the first quarter, indicating a technical recession for Europe's largest economy. The benchmark Stoxx 600 finished around 0.24% lower. However, tech stocks defied the trend and closed 1.8% higher following Nvidia's strong results, which boosted related stocks.

US Market Update

The S&P 500 and Nasdaq Composite experienced gains as investors responded positively to Nvidia's quarterly results, leading to a rally in technology stocks. Negotiations to raise the U.S. debt ceiling continued, with a looming default deadline. According to Reuters, talks between congressional leaders and President Joe Biden progressed on Thursday, with both parties needing to agree on $70 billion in spending. Fitch Ratings placed the U.S. AAA long-term foreign-currency issuer default rating on a negative watch.

Asia Market Update

Asia-Pacific markets were mixed following Wall Street's tech rally led by Nvidia, while U.S. negotiators made progress on a debt ceiling deal with a potential default deadline approaching. Tokyo's core-core inflation, excluding fresh food and fuel costs, experienced its fastest pace since 1982, rising by 3.9%. However, Japan's capital, seen as a gauge for the nationwide reading, saw a slower increase of 3.2% in May compared to April's figure of 3.5%. Australia's retail sales remained flat month-on-month in April, lower than economists' expectations of a 0.2% rise and March's 0.4% increase.

Commodity Market Update

Gold rose as the dollar retreated from a two-month high, but it was on track for a third consecutive weekly decline as traders monitored U.S. debt ceiling negotiations and the Federal Reserve's next policy moves. Oil prices softened due to conflicting messages from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting, along with a stronger dollar. Russian President Vladimir Putin stated that energy prices were approaching economically justified levels, suggesting no immediate changes to the group's production policy.

Currency Market Update

The rand unexpectedly experienced a sharp decline as the central bank raised its benchmark lending rate by 50 basis points to address persistent food inflation and support the weakened currency. At the end of the day, the rand was trading around R19.64 to the dollar, marking a 2.15% decrease. The dollar remained near a two-month high against major currencies, poised for a third consecutive weekly gain on expectations of prolonged higher U.S. interest rates.

REINET INVESTMENTS SCA (RNI) -0.4%

Reinet, a financial company, has reported a net asset value of EUR 5.7 billion, indicating a compound growth rate of 8.8% per year in euro terms since March 2009, inclusive of dividends paid. However, the net asset value as of March 31, 2023, has decreased by EUR 170 million or 2.9% compared to the previous year, reaching EUR 5,890 million. The net asset value per share as of March 31, 2023, stands at EUR 31.46, a decrease from EUR 31.99 in the previous year. Reinet has successfully completed its fifth share buyback program, repurchasing 2.5 million ordinary shares for approximately EUR 49 million, excluding transaction costs. Throughout the year, Reinet has made commitments totaling EUR 332 million for new and existing investments, including a commitment of EUR 278 million for Coatue funds. Additionally, commitments of EUR 171 million were funded, with EUR 63 million allocated to TruArc Partners and EUR 50 million to Coatue funds. Dividends from British American Tobacco during the year amounted to EUR 122 million, while Reinet paid a dividend of approximately EUR 51 million, or EUR 0.28 per share (excluding treasury shares). Reinet has proposed a dividend of EUR 0.30 per share to be paid after the 2023 annual general meeting, reflecting a 7% increase compared to the prior year's dividend of EUR 0.28 per share (September 2022).

LIFE HEALTHCARE GROUP HOLDINGS LIMITED (LHC) -7.0%

During the first half of the year, the group's revenue experienced a notable increase of 12.9%, reaching R15.3 billion. This growth was driven by an 11.6% increase in revenue within South Africa, amounting to R10.6 billion, primarily attributed to strong performances in hospital and complementary services, PPD growth, and a 15.5% rise in AMG revenue to R4.4 billion. The latter was mainly due to significant growth in Ireland and northern Europe, as well as continued expansion in the United Kingdom and Italy. The group's growth initiatives also played a role, contributing to a revenue growth of 24.6% to R289 million. Additionally, the group's normalised EBITDA increased by 13.5% to R2.7 billion, driven by higher demand for hospitals and complementary services, improved facility occupancy, and increased operating leverage. Despite these positive developments, the group's EPS decreased by 8.7% to 37.9 cents, while HEPS decreased by 3.4% to 40.0 cents. However, NEPS, which excludes non-trading related items, experienced a modest increase of 1.1% to 44.6 cents.

GAP (GPS) -22.7%

Gap reported a decline in sales and net losses for another quarter across its four brands, but the company remains optimistic about its progress. Despite the negative figures, Gap managed to significantly improve its margins, leading to a surge in shares during extended trading. In the three-month period ending April 29, the company's net loss decreased to $18 million, or 5 cents per share, compared to $162 million, or 44 cents per share, in the same period the previous year. Adjusted earnings were reported at $3 million, or 1 cent per share. Sales also experienced a decline, dropping to $3.28 billion, a 6% decrease from $3.48 billion the previous year. Gap, which encompasses its namesake brand, Old Navy, Banana Republic, and Athleta, has been without a CEO for nearly a year as it focused on restructuring the business, gaining a better understanding of its customers, and returning to profitability. The company stated that progress has been made in these areas, acknowledging the long-standing need for such improvements.

NVIDIA (NVDA) 24.4%

Nvidia experienced a significant surge in its stock price, with shares closing up 24% on Thursday, reaching an all-time high. The boost was driven by an impressive earnings report that surpassed consensus estimates. The chipmaker's market capitalization was set to open at $975 billion, following a 30% increase in after-hours trading the previous day. Nvidia reported adjusted earnings per share of $1.09 for the first quarter, surpassing the Refinitiv consensus estimate of 92 cents. Additionally, its first-quarter revenue of $7.19 billion far exceeded the consensus estimate of $6.52 billion. However, it was Nvidia's leading position as an AI chip supplier and its guidance of $11 billion in sales for the current period that likely contributed to the further surge in shares. As a result, Nvidia shares have risen by an impressive 160.6% year-to-date.

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