Meta beats on ads, shares jump, but AI spending ramps up

South African Market Summary

South African equities advanced, with the JSE All Share Index rising 1.34% to 125,069.19, while the Top 40 gained 1.49% to 117,341.78. The move was driven by a strong rally in resources, up 4.96%, as commodity-linked counters outperformed, while financials and industrials declined 0.69% and 0.55% respectively. In policy commentary, BMW South Africa said the auto industry favours targeted industrial support rather than steep tariff hikes, despite WTO headroom. Attention now turns to the South African Reserve Bank’s interest rate decision, a key near-term driver for bonds, equities and the rand.

European Market Summary

European equities retreated, with the STOXX 600 falling 0.7% to 608.51, led lower by a 3.8% slide in luxury stocks as LVMH dropped 7.9% on cautious management commentary. Investors remained defensive ahead of major technology earnings and the US Federal Reserve decision. Germany trimmed growth forecasts, citing trade uncertainty and muted policy impact. In the UK, housing activity improved as mortgage rates eased, with prices up 1.2% year on year. Separately, Norway’s sovereign wealth fund increased its US Treasury holdings to $199 billion, reflecting continued demand for high-quality fixed income.

US Market Summary

US equities were little changed as the Federal Reserve held rates steady at 3.5%–3.75%, citing persistent inflation alongside resilient growth and a stabilising labour market. The Nasdaq edged higher on chip strength, while the S&P 500 was broadly flat as investors awaited clearer policy direction, with markets now leaning towards a possible June rate cut. Attention shifted to early “Magnificent Seven” earnings, which drove mixed after-hours moves. With valuations elevated, scrutiny is intensifying on whether heavy AI-related capital expenditure across large-cap technology will translate into sustainable earnings growth.

Asian Market Summary

Asia-Pacific markets traded mostly lower as investors digested regional policy signals. Singapore’s MAS left monetary settings unchanged, maintaining the slope of its exchange-rate policy band while flagging upside inflation and demand risks amid resilient growth. In India, economists expect the RBI to hold its policy rate at 5.25% through 2026 after cumulative easing of 125 basis points since early 2025, with inflation contained and activity firm. In capital markets, Shenzhen Han’s CNC Technology launched a Hong Kong listing seeking to raise up to HK$4.83 billion via a primary share offering.

Currency Market Summary

The South African rand weakened as investors positioned ahead of key interest rate decisions in both South Africa and the United States, while broader dollar direction remained uncertain amid shifting policy and geopolitical signals. The Federal Reserve’s relatively steady assessment of labour market and inflation risks reinforced expectations that US rates may stay higher for longer, lending some support to the greenback. In contrast, commodity-linked currencies outperformed, with the Australian dollar reaching a three-year high as surging gold prices and expectations of tighter domestic policy boosted sentiment across the antipodean complex.

Commodity Market Summary

Oil prices climbed for a third consecutive session as geopolitical risk premia increased amid reports the United States could consider military action against Iran, raising the prospect of disruption to supply from a key OPEC producer. Additional support came from a surprise draw in US crude inventories, which fell by 2.3 million barrels versus expectations for a build. Heightened uncertainty also drove strong safe-haven demand, with gold surging to a record high and silver nearing historic peaks, underscoring investor caution around escalating Middle East tensions and broader macroeconomic risks.

Mr Price Group Limited (MRP) +1.22%
Mr Price reported Q3 FY2026 retail sales growth of 3.6% to R15.1bn, outperforming the South African market and gaining share in its core apparel categories despite a constrained consumer backdrop. Momentum improved into December, with group sales up 5.9% in the peak month. Gross margin declined modestly, but full-year margin is expected to be maintained, supported by disciplined stock and cash management. Apparel and homeware delivered steady gains, while telecoms remained a standout growth and margin contributor. Online sales growth accelerated in December. Management expects improving macro conditions in 2026 to support discretionary demand, although global risks persist.

Datatec Limited (DTC) -1.28%
Datatec announced that subsidiary Westcon-Comstor has acquired Slovenia-based REAL Security, a specialist value-added cybersecurity distributor operating across the Balkans. The transaction establishes a strategic regional foothold spanning eight countries and strengthens Westcon-Comstor’s European cybersecurity capabilities in a structurally high-growth segment. REAL Security brings established vendor relationships, technical expertise and a recognised regional partner network, including its annual RISK cybersecurity conference. Management expects the deal to accelerate regional growth and enhance partner enablement by combining local market depth with Westcon-Comstor’s global scale. The acquisition was completed on 27 January 2026 and was not subject to shareholder approval.

Trustco Group Holdings Limited (TTO) 0.00%
Trustco announced it has accepted the repudiation of the shareholder-approved LSH transaction framework following actions by Riskowitz Value Fund that the board believes sought to alter governance control. The company will cease further implementation of the transaction and pursue legal processes to unwind prior steps, including reversing shares issued and returning LSH shares received. Trustco has reserved rights to seek restitution and recover associated losses and costs. The earlier cautionary announcement has been withdrawn, with management stating the matter no longer requires trading caution, while further updates will be provided as legal and regulatory processes progress.

Microsoft Corporation (MSFT) +0.22%
Microsoft reported fiscal Q2 revenue growth of 17% to $81.3 billion, with Azure expanding 39%, narrowly ahead of expectations, but heavy AI-related capital expenditure unsettled investors. Quarterly capex surged to $37.5 billion, largely for chips and data-centre capacity, as the group deepens its OpenAI partnership and scales Copilot, now at 15 million paid users. Cloud backlog more than doubled, though a significant portion is linked to OpenAI, highlighting concentration risk. Management guided to slightly slower Azure growth next quarter and flagged rising hardware costs, reinforcing debate over the timing and returns of Microsoft’s AI investment cycle.

Meta Platforms Inc. (META) -0.63%
Meta reported a strong fourth quarter, with advertising revenue rising 24% year on year to $58.14 billion, driving results ahead of market expectations and supporting a ~6% after-hours share price gain. The company forecast first-quarter revenue of $53.5–$56.5 billion, above consensus estimates. However, aggressive AI investment continues to reshape the cost base: capital expenditure is set to rise sharply this year, while full-year expenses are projected at $162–$169 billion. Higher infrastructure, depreciation and AI talent costs weighed on margins, underscoring that earnings growth is increasingly being reinvested into long-term artificial intelligence capacity.

Tesla Inc. (TSLA) +0.13%
Tesla signalled a sharp strategic pivot, planning record capital expenditure of more than $20 billion this year, with investment shifting away from traditional electric vehicle production toward autonomous driving, robotics and battery supply chain capacity. Management highlighted spending on Cybercab production lines, the Tesla Semi, Optimus humanoid robots and lithium refining, while indicating reduced emphasis on legacy passenger models. The move underscores Tesla’s positioning as an artificial intelligence and robotics platform rather than a conventional automaker. With over $44 billion in cash and investments, the group retains balance-sheet capacity, but execution risk rises as growth increasingly depends on still-unproven technologies.

Prefer to read the full report offline? Click here to download the full report.