Taking Stock – Local and Global View

Daily insights and analysis on stocks.

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Market commentary

SOUTH AFRICA

Local stocks rose, as shares globally recovered amid new virus lockdowns thanks to strengthening factory data in China and Europe. The Johannesburg Stock Exchange's blue-chip Top 40 Index closed 1.94% higher, while the broader All Share index was up 1.81% to 52,618. On the economic data front, the Absa Purchasing Managers' Index (PMI) recovered further in October, recording its sixth straight expansion, but businesses said they feared the impact on exports of the COVID-19 resurgence in Europe. New car sales for October showed another dip, albeit at a slower pace. Bonds weakened, with the yield on the benchmark government bond due in 2030 up 6.5 basis points to 9.38%.

 

EUROPE

European stocks closed higher on Monday as promising manufacturing data out of the euro zone and China boosted sentiment. The pan-European Stoxx 600 closed up by 1.6%. Oil and gas stocks jumped 3.6% to lead gains as all sectors — with the exception of travel and leisure — and major bourses entered positive territory. October’s final manufacturing PMI data for the euro zone came in at 54.8, up from 53.7 in September, outstripping expectations. The upside surprise was driven in part by resurgent factory activity in Germany.

 

US

US stocks rose yesterday, as markets recovered some of the sharp losses from last week and braced for the US presidential election. One analyst said Monday’s gains for the Dow and S&P 500 may be driven in part by easing concerns over a delayed or contested election result. Ahead of today’s election, Joe Biden held a substantial national lead over President Donald Trump. The former vice president garnered 52% of support from registered voters versus 42% for the president, according to a recent poll. Honeywell and Walgreens Boots Alliance were the best-performing Dow stocks on Monday, gaining more than 5% each. The S&P 500 was led higher by gains in the energy, materials and industrial sectors.

 

ASIA

Stocks in Asia were higher this morning as investors await the Reserve Bank of Australia’s interest rate decision. Hong Kong’s Hang Seng index jumped 1.57% in early trade, while mainland Chinese stocks were also higher, with the Shanghai Composite gaining 0.76%. In Australia, the S&P/ASX 200 in Australia gained nearly 2%. Japanese markets are closed for a holiday today.

 

 

 

CURRENCY

The rand barely budged on Monday, reflecting caution seen across currencies around the world ahead of the US presidential election. At the close, the rand was 0.1% firmer at R16.20 per dollar. After opening at R16.26, the rand hovered around that level for most of the session with investors avoiding any major bets. The local currency was trading around R16.21 this morning. In dollar news, bets against the greenback are expected to linger or even increase in the immediate aftermath of the presidential election, despite jitters in the run-up along with surging coronavirus cases, a Reuters poll showed.

 

COMMODITIES

Gold prices were little changed this morning, after rising nearly 1% in the previous session, as caution set in ahead of the U.S presidential elections. Gold has gained over 24% so far this year on unprecedented stimulus measures and expectations for inflation due to it. Oil prices slipped on Tuesday as worries about soaring COVID-19 cases, rapidly rising Libyan supply and U.S election jitters outweighed growing hopes that major producers would hold back on planned production increases.

International companies

Clorox (CLX) – +4.2%
The household-supplies producer posted the strongest quarterly sales growth in more than two decades. The global pandemic has increased the demand for hygiene products, from wipes, disinfectants and personal-care, resulting in sales surging 27% to $1.92Bn. The bleach maker reported a 104% spike in net income to $415 million, or an adjusted $3.22 per share, topping Wall Street analysts’ expectations of $2.23 per share. CEO Linda Rendle: “We delivered another quarter of outstanding results to have a strong start to the fiscal year, with broad-based strength across our portfolio, driving double-digit sales growth in all reportable segments.”

Ryanair (RY4C) +4.7%
The Irish airline, which is the largest low-cost carrier in Europe, recorded its first loss for the key European summer period in 30 years due to the global COVID-19 pandemic. The airline posted a €197 million loss for the period to end-September, as the COVID-19 related travel restrictions slashed traffic by 80% and warned investors of deeper losses in the second half. CEO Michael O’Leary: “It's going to rebound very strongly with huge pent-up demand and Ryanair will, in my view, be by far the best positioned”, when he was questioned by analysts during a conference call on his view of the airline sector in the region.

Local Companies

Tiger Brands (TBS) – +1.5%

The largest of the JSE-listed food producers, Tiger Brands, said sustained domestic demand for its products led to improved expectations for full-year revenue and profit since August. In an updated trading statement, the group said it expects HEPS from total operations to decline by as much as 30% from the R13.22 it reported in the previous year. This is better than previous trading statement which warned of HEPS dropping between 35% and 40%. “In addition, improved performances were achieved from Cameroon and other export markets whilst a better than anticipated performance from Carozzi aided income from associates”, the group said.

 

Aspen (APN) – +11.5%

South Africa’s biggest drug-maker announced on Monday that it has entered into a preliminary agreement with Johnson & Johnson to manufacture its COVID-19 vaccine candidate. The SA pharma play entered into the arrangement with, Janssen Pharmaceuticals and Janssen Pharmaceutica NV, two pharma holdings of Johnson & Johnson. “The vaccine candidate is currently undergoing clinical trials. Aspen Pharmacare will perform formulation, filling and secondary packaging of the vaccine for supply to Johnson & Johnson,” the group said. The business invested in excess of R3Bn in the facility in Port Elizabeth, which contains the high technology equipment and systems that will be used to manufacture state-of-the-art sterile drugs and vaccines, packaged into vials, ampoules and pre-filled syringes.

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