Taking Stock – Market commentary

Daily insights and analysis on stocks.

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Market Commentary

SOUTH AFRICAN MARKET COMMENTARY

Many Johannesburg-listed stocks fell on Friday, in line with global equity market jitters over rising global coronavirus infections and this week's US presidential election. The All Share index closed down 0.41% (now at 51,685 index points) while the Top 40 index dipped 0.22%. Curbing further losses, market heavyweight Naspers rose 3.98% to R3,161.32 after Prosus said it would buy back up to $5 billion in its own and parent Naspers' shares. Another gainer was telecoms firm MTN, which closed 4.11% higher after flagging a rise in revenue.

 

EUROPEAN MARKET COMMENTARY

 

European markets closed mostly higher Friday after better-than-expected economic data, despite worries over tightening coronavirus restrictions. The pan-European Stoxx 600 closed up by around 0.2% after a choppy trading session, with oil and gas shares climbing 1.9% to lead the gains. Euro zone GDP (gross domestic product) jumped by more than expected in the third quarter, with a quarterly climb of 12.7%, according to preliminary data from the EU statistics office on Friday. The partial rebound from the previous quarter’s pandemic-induced plunge was driven in large part by France, Italy and Spain. Meanwhile inflation for the bloc in October was -0.3%, unchanged from the previous month.

 

US MARKET COMMENTARY

 

US stocks fell on Friday, led by major tech shares, as Wall Street wrapped up a difficult week in which coronavirus cases rose, US fiscal stimulus talks broke down and traders braced for this week’s presidential election. The Dow and S&P 500 fell 6.5% and 5.6%, respectively, and posted their biggest weekly losses since March. Those weekly losses came as the seven-day average of new coronavirus cases in the US hit an all-time high this week, according to data from Johns Hopkins University. Finally, data compiled by RealClearPolitics showed former Vice President Joe Biden holding an average lead of more than 7 percentage points over President Donald Trump.

 

ASIAN MARKET COMMENTARY.

 

Stocks in Asia rose this morning, as data showed China’s manufacturing activity grew in October. A private survey showed that China’s manufacturing sector expanded for the sixth straight month. The Caixin/Markit Purchasing Managers’ Index (PMI) for Chinese manufacturing came in at 53.6 for October, higher than the 53.0 reading forecast by analysts in a Reuters poll. Mainland Chinese stocks were also higher, with the Shanghai composite up around 0.3% while Hong Kong’s Hang Seng index edged 0.9% higher.

CURRENCY MARKET COMMENTARY

 

The rand gained against the US dollar on Friday, with analysts citing the country's relatively high yields. At the close, the rand was 1.08% stronger at R16.22 per dollar, clawing back some of the week's losses linked to a dismal mid-term budget policy statement (MTBPS) that forecast higher debt levels than in June. Analysts and ratings agencies have said that Finance Minister Tito Mboweni's pledge on Wednesday to freeze public sector wages for the next three years will be hard to achieve. Moody's said in a research report that the budget lacked detail on how and when the government would implement policies to boost economic growth. The local currency was trading around R16.24 to the dollar this morning.

 

COMMODITIES MARKET COMMENTARY

 

Gold edged lower this morning weighed down by a stronger dollar, while investors await the outcome of Tuesday’s hotly contested US presidential election. With a day to go, Democrat Joe Biden holds a commanding national lead over President Donald Trump, but Trump has stayed competitive in the swing states that could decide the White House race. Oil prices slumped more than 4% today, reaching its lowest levels since May on worries a swathe of coronavirus lockdowns across Europe will weaken fuel demand, while traders braced for turbulence during the US Presidential election week.

Local Companies

Prosus (PRX) +3.0%

The European-listed technology group announced on Friday a $5Bn (R82Bn) share buyback programme as it seeks to close the value gap between itself and the most valuable company on the JSE, Naspers. The group was spun out of Naspers and separately listed in September 2019, in an aim to reduce the holding company discount at which its shares trade relative to its net asset value per share. “It is a sensible use of capital given full market valuations in consumer internet M&A, and the sizeable discount to the group’s NAV”, the group said in the statement. The tech company intends to buy back up to $1.37Bn of its own shares, and up to $3.63Bn of the shares of its parent Naspers.

 

MTN (MTN) +4.1%

The largest telecoms operator on the African continent released a quarterly update for the period end-September, informing shareholders the group managed to increase SA subscribers by 1.9 million to 30.9 million. Overall data traffic has remained resilient at elevated levels, the group said, but warned voice traffic is under pressure. Group data traffic surged 80.6%, as the operator added 500,000 active data users to 14.7 million, which led to a 16% increase in overall mobile data revenue. The group said it has reduced its effective data tariff by approximately 34.7% since September 2019, as order by the government. “As the Covid-19 pandemic has continued to impact lives and livelihoods across our markets, the group has demonstrated strong operational execution and resilience during the period under review”, the group said.

International Companied

Under Armour (UAA) +0.4%

The global fitness apparel group reported earnings and revenue that topped expectations, as customers stocked up on sneakers and workout gear during the pandemic. The group announced that it will be selling MyFitnessPal to investment firm Francisco Partners for $345 million, five and a half years after acquiring it for $475 million. The group’s net income declined to $38.9 million, or 9 cents per share, from $102.3 million, or 23 cents a share, a year earlier, with revenue mostly flat at $1.43Bn outpacing the $1.16Bn estimates. The business is one of many making big changes to their wholesale strategies saying it would exit 10,000 locations by 2022 in North America.

 

Exxon (XOM) -1.1%

The energy giant reported its third straight quarter of losses as depressed oil demand due to the coronavirus pandemic and lower oil prices impacted the group’s operations. On an adjusted basis, the oil group lost 18 cents per share while generating $46.2Bn in revenue, exceeding the estimates of Wall Street analysts, who were expecting a 25-cent per share loss and $46.01Bn in revenue during the period. CEO Darren Woods: “We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend.” The group warned it could cut the number of global employees by 15% and would lay off about 1,900 employees in the US.

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