Paramount Skydance preferred for Warner Bros Discovery with $31 offer as Netflix exits

South African Market Summary

The JSE All Share index declined 0.13% to 126,583.84, with the Top 40 down 0.22% to 118,446.33, as investors digested softer domestic inflation data. Producer price inflation eased to 2.2% year-on-year in January, below expectations, driven by lower fuel costs amid softer oil prices and rand strength. This reinforces a benign near-term inflation outlook. Separately, Spur Corporation disclosed an increased legal claim of R233 million linked to a disputed joint venture agreement, highlighting ongoing litigation risk within the consumer sector.                                                       

European Market Summary

European equities edged lower, with the STOXX 600 closing 0.1% down after briefly reaching a record high, as weakness in healthcare and technology offset supportive corporate earnings. The FTSE 100 outperformed, hitting a fresh record high driven by strength in Rolls-Royce and LSEG following a forecast upgrade and share buyback activity. On the macro front, ECB President Christine Lagarde noted that AI adoption has yet to materially disrupt labour markets. Meanwhile, UK vehicle production declined sharply, reflecting weaker global demand and ongoing structural pressures in the automotive sector.

US Market Summary

U.S. equities weakened, led by technology, as underwhelming Nvidia earnings pressured sentiment around AI-linked stocks. The Nasdaq declined 1.2%, with the semiconductor index falling 3.2%, while rotation into cyclicals supported relative resilience in the Dow. Major indices remain on track for modest weekly losses, with the S&P 500 and Nasdaq also set for monthly declines. On the macro front, the 30-year mortgage rate eased to 5.98%, its lowest level since 2022, although economists caution that lower rates alone are unlikely to materially lift housing demand without improved supply dynamics.

Asian Market Summary

Asian markets traded weaker, tracking U.S. losses as concerns around elevated technology valuations, particularly following Nvidia’s earnings, weighed on sentiment. Japanese equities declined in line with global peers, while broader risk appetite remained subdued amid ongoing Middle East tensions supporting energy price uncertainty. In China, Hong Kong’s IPO market showed renewed momentum, with multiple listings signalling improving capital market activity. On the macro front, Tokyo core inflation slowed below the Bank of Japan’s 2% target for the first time in 16 months, reinforcing expectations of a cautious and gradual policy normalisation path.

Commodity Market Summary

Gold traded broadly flat, supported by lower U.S. Treasury yields which reduced the opportunity cost of holding bullion, although gains were capped by a firmer dollar and tentative progress in U.S.–Iran negotiations. Oil prices edged lower and are set for a weekly decline, as easing geopolitical risk following extended nuclear talks reduced supply disruption concerns. However, volatility remains elevated, with reports of stalled negotiations and OPEC+ expected to consider a modest production increase, highlighting a finely balanced outlook between geopolitical risk and supply-side normalisation.

Currency Market Summary

The South African rand traded steady as markets absorbed the national budget, which reinforced government commitment to fiscal consolidation and debt stabilisation. Globally, currency markets reflected diverging monetary policy expectations, with the U.S. dollar on track for a 0.6% monthly gain amid a slightly more hawkish Federal Reserve tone, despite markets still pricing in two rate cuts this year. The Australian dollar strengthened on expectations of tighter policy, while the yen weakened as the Bank of Japan faces ongoing pressure to balance reflation efforts with policy normalisation.

Tiger Brands Limited (TBS) -6.17%

Tiger Brands reported a resilient start to FY2026, with revenue from continuing operations rising 1% for the four months to 31 January, supported by 2% volume growth despite 1% price deflation. Adjusted revenue increased 2%, with volumes up 5%, driven by Culinary and Milling & Baking. Margins expanded on favourable mix, continuous improvement initiatives and logistics efficiencies, sustaining a double-digit operating margin. Portfolio optimisation progressed, including the Randfontein transaction, while Chococam disposal remains on track. Management expects gradual consumer recovery, maintaining a focus on affordability, execution and strategic growth initiatives.

Nedbank Group (NED) -8.07%

Nedbank expects FY2025 basic EPS to decline materially to 1,625–1,733 cents (down 52%–55%), reflecting the accounting impact of recycling cumulative foreign exchange and fair value losses from the disposal of its Ecobank stake. Importantly, this non-cash adjustment does not affect headline earnings, capital or net asset value. Operationally, performance remained resilient, with HEPS forecast to increase 1%–3% to 3,667–3,740 cents and ROE broadly stable at 15.3%–15.5%. NAV per share is expected to rise 3%–5%, supporting underlying balance sheet strength ahead of results on 3 March 2026.

Discovery Limited (DSY) +7.64%

Discovery expects strong H1 FY2026 performance, with normalised profit from operations rising 22%–27% and headline earnings increasing 27%–32%, supported by 12% growth in new business API. Earnings per share is forecast to increase 25%–30% to 826.6–859.7 cents, reflecting broad-based strength across the portfolio. Discovery Bank continues to scale rapidly, while Health, Life and Insure delivered solid growth and margin expansion. The Vitality Shared-value model remains a key earnings driver globally, supporting improved returns, despite currency and distribution headwinds in select international operations.

OUTsurance Group Limited (OUT) -1.90%

OUTsurance reported a solid H1 FY2026 performance, with normalised earnings supported by strong premium growth, new business momentum and improved claims and cost efficiencies in its core South African operations. OHL normalised earnings are expected to increase 10%–15%, with OUTsurance SA delivering robust growth of 66%–72%, offset by weaker performance at Youi due to elevated catastrophe claims. Group NEPS is forecast to rise 4%–10% to 145.6–154.0 cents, while HEPS and EPS are expected to increase 11%–17%, reflecting resilient underlying operations despite non-recurring comparative earnings.

Truworths International Limited (TRU) +3.53%

Truworths delivered a stable H1 FY2026 performance, with retail sales flat at R12.5 billion and merchandise sales up 0.4% to R12.1 billion, reflecting constrained consumer demand. Margins remained resilient, with gross margin at 51.8% and operating margin at 22.5%. Earnings per share increased 1.2% to 494.6 cents, with HEPS up 1.3%, supported by disciplined cost control and capital management. The group maintained a strong balance sheet, with net cash of R1.1 billion, while returning R746 million via share buybacks and increasing the interim dividend by 1.3% to 321 cents.

Warner Bros Discovery Inc. (WBD) -0.35%

Paramount Skydance has emerged as the preferred bidder for Warner Bros Discovery after Netflix withdrew from the process, citing valuation discipline. Paramount’s revised $31-per-share offer, above Netflix’s $27.75 bid, includes enhanced deal certainty through a higher $7 billion break fee and coverage of Warner’s $2.8 billion termination cost. Backed by $45.7 billion in equity from the Ellison Trust and $57.5 billion in debt financing, the transaction underscores intensifying consolidation in global media. The proposed merger is expected to enhance scale and content competitiveness, subject to board and regulatory approvals.

Rolls-Royce Holdings plc (RR) +3.24%

Rolls-Royce delivered a strong FY2025 performance, with underlying operating profit rising 40% to £3.46 billion, materially ahead of expectations, driven by robust demand in civil aerospace and power systems. The group upgraded guidance and medium-term targets, forecasting 2026 operating profit of £4.0–£4.2 billion and margins of 18%–20%. Growth is supported by increased engine utilisation, data centre demand and defence spending. Capital returns were enhanced with a £7–£9 billion buyback programme. Ongoing strategic execution continues to drive a significant turnaround, supporting record share price performance and improved investor confidence.

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