In todays taking stock, we look at how Microsoft exceeds analysts’ expectations.
6 reading min
27 Jan 2021
SOUTH AFRICAN MARKET COMMENTARY
The local equities market retreated from record highs as investors focused more on potential obstacles to US President Joe Biden's planned $1.9 trillion stimulus weighed on sentiment. The Johannesburg All-Share index fell 0.99% (now at 63,924 index points) after hitting an all-time high in the previous session, while the Top-40 index declined 1.16%. Among the decliners, market heavyweight media and internet company Naspers declined 4.96% while its international arm Prosus retreated from a record high, falling 5.21%.
EUROPEAN MARKET COMMENTARY
European stocks closed higher on Tuesday, ending two consecutive sessions of declines. The pan-European Stoxx 600 climbed 0.7%, with chemicals and financial services stocks adding 2% and 1.8% respectively to lead gains, as most sectors and major bourses finished in positive territory. In Italy, Prime Minister Giuseppe Conte resigned on Tuesday and will seek to lead a new mandate, plunging the country into more political turmoil amid concurrent health and economic crises. British-Swedish drug maker AstraZeneca has been accused by the EU of not doing enough to resolve a dispute over how many doses it will be able to supply to the bloc.
US MARKET COMMENTARY
The S&P 500 slipped slightly from a record high on Tuesday as Wall Street geared up for the heart of corporate earnings season including reports from a slew of blue-chip companies and major tech players. General Electric shares jumped 2.7% on its better-than-expected industrial free cash flow for the fourth quarter and a rosy outlook for the year. Johnson & Johnson popped more than 2% after the drug maker’s earnings topped expectations. The Biden administration signalled Tuesday that it could be open to tweaking eligibility for future stimulus checks. President Joe Biden’s $1.9 trillion proposal calls for $1,400 direct deposits, but the plan has drawn critiques from a bipartisan group of lawmakers because of its lofty price tag.
ASIAN MARKET COMMENTARY
Stocks in Asia were mixed this morning as the International Monetary Fund (IMF) raised its growth forecast for the global economy this year. The IMF now expects the global economy to grow 5.5% this year. That’s a 0.3 percentage point increase from October’s forecasts. China’s industrial profits rose 4.1% year-on-year in 2020, the country’s National Bureau of Statistics announced today. For December, industrial profits in China soared 20.1% year-on-year.
CURRENCY MARKET COMMENTARY
The rand firmed by more than 1% on Tuesday in a return of risk appetite globally as investors continued to weigh the benefits of fiscal stimulus and coronavirus vaccine rollouts over concerns about second and third wave infections. Eventually, the rand lost ground against the dollar as it closed at R15.24 or 0.65% weaker. The South African currency, along with fellow emerging market currencies, were boosted by a weaker dollar, which was down 0.2% in the session.
COMMODITIES MARKET COMMENTARY
Gold prices held steady this morning ahead of the US Federal Reserve's monetary policy decision due later in the day and as investors awaited a stimulus package in the world's largest economy. Democrats in the US Senate will move forward on US President Joe Biden's $1.9 trillion coronavirus relief plan without Republican support if necessary, Senate Democratic leader Chuck Schumer said on Tuesday. Oil prices climbed this morning after industry data showed US crude stockpiles fell unexpectedly last week and China, the world's second-biggest oil user, reported its lowest daily rise in COVID-19 cases, bolstering hopes of a pick-up in demand.
Pepkor (PPH) -3.6%
South African retailer Pepkor Holdings said on Tuesday that sales in its first quarter rose by 7.7% as it continued to acquire market share as cash-strapped shoppers battling job losses turned to its budget outlets. Group revenue at the clothing and homeware retailer grew to R20.3 billion ($1.33 billion) in the three-month period ended December 31 from R18.9 billion a year earlier. South African clothing retailers have been hit as a second wave of the Covid-19 pandemic and job losses constrain discretionary spending. However, Pepkor, majority-owned by Steinhoff, is faring better than others with its focus on budget-conscious consumers, including more than 17 million South Africans on welfare and special Covid-19 grants. The retailer, which vies with TFG’s Jet clothing chain, said revenues at its clothing and general merchandise division rose by 8%, with the Pep and Ackermans clothing brands reporting sales growth of 8.9%, or 6.3% on a like-for-like basis.
African Bank reported a full-year loss a day after announcing the unexpected resignation of Basani Maluleke, the only Black women to lead one of South Africa’s top banks. The unsecured lender swung to a R560 million ($37 million) loss in the 12 months through September, compared with a year-earlier profit of R267 million, Johannesburg-based African Bank said in a statement Tuesday. The coronavirus pandemic and the nation’s moribund economy caused credit impairments to soar 58%, resulting in a credit-loss ratio of 11.7% from 7.5% previously, it said. “Unfortunately, our financial numbers have not withstood the worsened economic climate and the overlay of the effects of the Covid-19 pandemic,” Maluleke said in the statement. The second half of the year saw “signs of reduced risk and improved earnings.”
Microsoft (MSFT) +1.2%
Microsoft exceeded Wall Street analysts' expectations for quarterly revenue by nearly $3 billion and hit a three-month sales record, it reported Tuesday. The results signal that the pandemic is continuing to buoy the tech giant's business — from computers and gaming systems to the cloud computing systems helping companies navigate continued remote working. Microsoft (MSFT) posted $43.1 billion in revenue for its fiscal second quarter — a 17% increase from the same period in the prior year and well above the $40.2 billion analysts had predicted. Income hit $15.5 billion, or $2.03 per share, compared with the $1.64 earnings per share Wall Street predicted. The company's stock shot up as much as 6% in after-hours trading immediately following the report. About two hours after the report, shares were up just over 3%.
Starbucks (SBUX) +1.2%
Starbucks on Tuesday reported that its US same-store sales fell 5% during its fiscal first quarter after a surge of new Covid-19 cases led to harsher dining restrictions. The company also announced that COO Roz Brewer will be leaving Starbucks at the end of February. People familiar with the matter told CNBC later Tuesday that she will become chief executive of Walgreens. Her responsibilities will be split among other members of Starbucks’ existing leadership team. The company reported fiscal first-quarter net income of $622.2 million, or 53 cents per share, down from $885.7 million, or 74 cents per share, a year earlier. Excluding items, the coffee giant earned 61 cents per share, topping the 55 cents per share expected by analysts surveyed by Refinitiv. Net sales dropped 5% to $6.75 billion, falling short of expectations of $6.93 billion. Worldwide, same-store sales fell 5%. The company saw 19% fewer transactions during the quarter, but the average ticket jumped 17%.
28 January 2021
5 reading min
Taking Stock - US stocks fell sharply on Wednesday.
In todays taking stock, we look at how US stocks fell sharply on Wednesday amid disappointing earnings, while concern about heightened speculative trading activity deepened.
©2019 Sasfin. All right reserved. Financial Services Provider (FSP) 23833 and Registered Credit Provider NCRCP22