Taking Stock

Daily insights and analysis on stocks.

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Market Performance

SOUTH AFRICA

  • South Africa’s climbing coronavirus cases, at over 471,000, have kept big bets on ice, while mounting fiscal pressures were underlined this week after the International Monetary Fund approved $4.3 billion in emergency financing, but warned of looming debt stresses.
  • The Johannesburg Stock Exchange’s Top 40 Index fell 1.52% to 51,451 points, and the broader All-Share Index closed 1.52% lower (at 55,845 points).
  • Leading the decliners was steel-maker ArcelorMittal , tumbling 26% after it fell deeper into a half-year loss.
  • Sappi, the world’s largest manufacturer of wood pulp, fell 13% to R25.51 after it reported a loss of $73 million in the quarter ended June.
  • Anglo American dropped 2.45% after a 39% dive in profits in the first six months of the year during the strictest period of lockdown.

EUROPE

  • European markets closed sharply lower Thursday after investors digested a record drop in US gross domestic product and a slew of major corporate earnings.
  • The pan-European Stoxx 600 closed down by over 2% provisionally, with banks shedding more than 4% as most sectors and all major bourses traded in negative territory.
  • Corporate earnings were high on investors’ agenda on Thursday as Volkswagen cut its dividend after reporting a first-half operating loss of 800 million euros ($940 million) amid a 27% plunge in vehicle deliveries due to the coronavirus pandemic, while French rival Renault slumped to a 7.3 billion euro net loss in the first half of the year.

ASIA

  • Stocks in Asia were mixed this morning following a record contraction in US gross domestic in the second quarter.
  • China’s official manufacturing Purchasing Managers’ Index for July came in above expectations on Today.
  • The manufacturing PMI for July was at 51.1, according to the country’s National Bureau of Statistics. That was above expectations of a reading of 50.7 by analysts in a Reuters poll.
  • Mainland Chinese stocks were higher in early trade, with the Shanghai composite up about 1% while the Hang Seng index in Hong Kong advanced 0.73%.
  • Markets in Singapore, Malaysia and Indonesia are closed for a holiday on Friday.

UNITED STATES

  • US stocks finished off their worst levels of the day, with the Nasdaq eking out a positive finish as investors braced for a litany of quarterly results from the behemoths of the technology and e-commerce world, which could influence trade to end a choppy week.
  • Markets were under pressure prompted by the worst GDP on record in the second quarter and a labor-market report that underscores a rise in COVID-19 cases.
  • GDP fell at a 32.9% annualized pace, the Commerce Department said.
  • Separately, first-time claims for unemployment benefits rose slightly last week, to 1.43 million from an upwardly-revised 1.42 million, while continuing claims also rose to 17 million in the week ended July 18.

CURRENCIES

  • The rand weakened 1.31% on Thursday, falling alongside other emerging market currencies as a surge in global coronavirus infections spooked investors fearing a return of strict lockdowns.
  • At the close, the rand was weaker at R16.76 per dollar, its weakest since July 10 as it recorded its third consecutive day of losses, and the worst-performing EM currency on the day.
  • The rand kicked off the week below the R16.50 technical resistance level, buoyed by risk-taking from investors chasing high yields, but momentum evaporated as the week wore with COVID-19 infections locally and in big global centres climbing.
  • Internationally, the US dollar fell to a two-year low and was on course for its worst month in a decade, making bullion cheaper for investors holding other currencies.

COMMODITIES

  • Gold rose today as it was on track to post its best month in more than four years as the dollar slid further after dismal US data added to doubts about a swift recovery from the pandemic-induced economic slump, driving investors towards the safe-haven metal.
  • Oil prices rose on Friday, recovering further ground after touching three-week lows in the previous session, hit by a record decline in US growth as the coronavirus ravaged the world’s biggest economy and oil consumer.
  • Finally, OPEC+, a grouping of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively plan to increase production from Saturday, adding about 1.5 million barrels per day to global supply.

Domestic Company News

MTN (MTN) -5.8%

  • Africa’s largest mobile operator, MTN, released H1 results for its Nigerian unit, MTN Nigeria listed in the country in 2019.
  • MTN Nigeria is the biggest and most profitable contributor to the group and a key growth market.
  • The group said the COVID-19 pandemic weighed on profits even as data traffic surged, with pretax profit slipping 2% to 139.6Bn naira due to increased costs.
  • CEO Ferdi Moolman: “Following a strong first quarter, we experienced a challenging operating environment in the second quarter characterised by COVID-19-induced lockdowns and the broader macroeconomic impact it has had.”
  • Service revenue jumped 12.6% to 637Bn naira (R27.4Bn), as the group show the continued trend of lower demand for voice services with customers opting for data.

ANGLO AMERICAN (AGL) -2.5%

  • The diversified mining giant, Anglo American, announced on Thursday that earnings per share for the first-half tumbled 74% to 38 cents from 148 cents in the previous year.
  • Group production fell 11%, with hours worked falling 20%, as countries shut their economies to combat the spread of the virus. CEO Mark Cutifani: “The year has been nothing like I’ve ever seen in my 43 years in the industry.”
  • Group EBITDA fell 39% to $3.35Bn compared to the $5.45Bn in the prior year.
  • To remain in line with its 40% dividend policy, the group slashed its interim dividend by 55% to 28 cents.

AB INBEV (ANH) +3.9%

  • The world’s largest brewer suffered a $2.5Bn (R41Bn) impairment as it was forced to write down the value of its operations, due to the potential impact of the pandemic on sales in Africa, especially South Africa where alcohol sales were banned.
  • The brewer saw volumes for April decline 32.4%, with May volumes dipping 21.4% and June volumes picking up slightly by 0.7%.
  • “We came out of the quarter with reinforced confidence in the resilience of our business and the global beer category,” the group said.
  • Sales for Q2 totalled $10.3Bn, edging analysts estimated of $9.5Bn as the group reported signs of a rebound in Chinese volumes.

Global Company News

COMCAST (CMCSA) -0.5%

  • The entertainment conglomerate reported Q2 results before the bell on the Wall Street, beating analysts’ expectations.
  • The group posted net income of $2.99Bn, or 65 cents a share, down from $3.13Bn, or 68 cents a share in the comparable period, with consensus calling for 55 cents.
  • Revenue declined to $23.72Bn from $26.86Bn a year earlier, edging the $23.58Bn mark set by analysts.
  • It was the first earnings report since the group launched its new ad-supported streaming service, Peacock in April, to rival the likes of Netflix and Disney plus.
  • The streaming service added 10 million users since opening to the broader public in July, as more people was forced to stay home during the lockdown.
  • CEO Brian Roberts: "Overall, based on our results and the many organic growth opportunities that we have across our company, I am confident in our ability to continue to successfully navigate the impact of COVID-19, and emerge from the crisis even stronger.”

FACEBOOK (FB) +0.5%

  • The social media giant announced Q2 numbers after the close on Wall Street that showed the slowest revenue growth since the group’s IPO in 2012, however it was still ahead of expectations.
  • Key metrics for the group, Daily and Monthly active users both beat estimates, showing 2.7Bn people used the platform actively on a monthly basis.
  • Average revenue per user (ARPU), another metric followed by analysts was also ahead at $7.05 versus the $6.76 pencilled in.
  • Revenue came in $18.7Bn, beating $17.4Bn in estimates.
  • The group provided a revenue growth outlook for Q3 of around 10%, beating analysts’ expectations for growth of 7.9%.

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