Taking Stock - Markets Rise to Record Levels.

In todays taking stock, we look at how Markets Rise to Record Levels on Progress of a COVID-19 Vaccine.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

 

Local stocks stretched gains to a fourth consecutive session on Friday. The benchmark All-Share index rose 0.8%, its highest level in more than a year (now at 59,419 index points). The blue-chip Top 40 index closed 0.61% higher. Curbing gains were gold stocks, which fell 0.78% as the rand strengthened. South African gold miners benefit from a weaker currency, as their revenues are often in dollars while costs are in rand.

 

 

EUROPEAN MARKET COMMENTARY

 

European markets closed higher on Friday as investors monitored prospects of a US stimulus package and a last-minute Brexit trade deal. The pan-European Stoxx 600 closed up 0.6%, with oil and gas stocks climbing 3.1% to lead gains after OPEC+ members agreed on Thursday to increase production by 500,000 barrels per day beginning in January. Retail stocks declined by 0.5%.  Representatives from the UK and EU talked on Thursday in the hope of securing a trade deal before the December 31st deadline. However, the Financial Times has reported that Britain is accusing France of making new demands at the last second, diminishing the chances of a deal being agreed on.

 

 

US MARKET COMMENTARY

 

US stocks rose to record levels on Friday, notching another weekly advance, as traders shook off a disappointing US jobs report. Chevron and Caterpillar rose 3.9% and 4.3%, respectively, to lead the Dow higher. Energy was the best-performing S&P 500 sector, gaining 5.4%. The US economy added 245,000 jobs in November. That’s well below a Dow Jones consensus estimate of 440,000. The unemployment rate, however, matched expectations by falling to 6.7% from 6.9%. President-elect Joe Biden called for more stimulus, noting Friday’s report foreshadows a “dark winter.” Biden later said it “would be better if they had the $1,200″ stimulus checks, and that he understands “that may still be in play.”

 

 

ASIAN MARKET COMMENTARY.

Asian markets lost steam this morning, with Hong Kong shares down more than 2%. Australia’s benchmark ASX 200 was up 0.36%, trimming some of its earlier gains of more than 1%. Energy and mining stocks were mostly up — shares of Rio Tinto rose 2.03%, Woodside Petroleum was up 0.33%, Fortescue was up 3.76% and BHP added 1.87%. The Nikkei 225 gave up early gains to trade down 0.4% while the Shanghai composite was down 0.74%.

 

 

CURRENCY MARKET COMMENTARY

 

The rand edged firmer during Friday, capping a week of gains spurred by progress globally on a COVID-19 vaccine and investor bets on further stimulus in the United States. At the close the rand was eventually 0.32% weaker at R15.18. A surge in infections in parts of the country slowed the rand's rally. On Thursday President Cyril Ramaphosa tightened COVID-19 rules in the Eastern Cape province where infections are rising the most, but decided against reinstating a nationwide lockdown.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices were little changed in early Asian trade this morning, as hopes of a US fiscal stimulus package being passed this week countered downward pressure from optimism around COVID-19 vaccines roll-outs. Britain is preparing to become the first country to roll out the Pfizer/BioNTech COVID-19 vaccine this week. Oil prices fell today as a continued surge in coronavirus globally forced a series of renewed lockdowns, including strict new measures in Southern California. The restrictions in California call for bars, hair and nail salons and tattoo shops to close again.

LOCAL COMPANIES

Wescoal (WSL) +17.6%

The coal miner and Eskom supplier, Wescoal, posted a R11 million interim profit, from a R51 million loss previously, as production stabilised. CEO Reginald Demana: “Wescoal delivered a satisfactory financial performance, largely driven by a solid operational turnaround strategy in the mining division, despite a tough economic environment of reduced coal offtake from major customers as a result of the COVID-19 pandemic”. The miner raised concerns about higher stock levels, which more than doubled to R287 million in the period, due to a lack of demand from the state electricity producer and other clients. Overall, revenue ticked up to R2.089Bn compared to R2.063Bn in the prior year, with operating profit jumping to R102 million from R15 million on the back of staff cuts.

 

Glencore (GLN) +3.6%

The diversified mining giant announced on Friday that CEO Ivan Glasenberg will step down next year and fellow South African, Gary Nagle, the current head of coal assets at the group, will become the new CEO. “The board has worked with Ivan over the past two years to oversee a seamless transition to the next generation of leadership across Glencore’s business”, Chairman Tony Hayward said. Glasenberg, a former coal trader who became the billionaire boss of the mining and trading group in 2002, said that “now was the right time to step down” and will work with Nagle over the next six months before leaving the miner.

 

INTERNATIONAL COMPANIES

Big Lots (BIG) -11.1%

Shares in the US discount retailer tumbled more than 11% during Friday, after the group posted better-than-expected third-quarter earnings but failed to offer guidance as the retailer said “it does not have sufficient visibility to provide fourth quarter guidance”. The group reported earnings of $29.9 million, or 76 cents a share, a 76% decline from $126.9 million, or $3.25 a share, in the previous year. Overall, revenue jumped 18% to $1.38Bn from $1.17Bn in prior period, slightly beating the $1.35Bn expected as the group managed to grow same-store sales by 17.8%. CEO Bruce Thorn: "We registered our strongest ever third-quarter sales comp and, by way of continued strategic management of our business and tight control of expenses, we delivered our highest ever adjusted EPS in a third quarter”.

 

Genesco (GCO) +4.4%

The specialty retailer, which operates as a retailer and wholesaler of branded footwear, apparel, and accessories, posted estimate beating third-quarter results as costumers continued buying active gear during the global pandemic. The retailer reported adjusted earnings of 85 cents, compared with the prior year’s $1.33, smashing the forecasted a loss of 14 cents per share. Group revenues slipped 11% to $479 million, beating the consensus mark of $457.21 million. 95% of the group’s stores were open during the quarter, but the business’s online sales surged 62%, offsetting some of the lost footfall in stores. CEO Mimi Vaughn: “With the vast majority of the holiday season ahead of us, we believe we are well positioned to meet demand regardless of when and how the consumer decides to shop, thanks to the technology investments we’ve made in our stores and e-commerce platforms”.

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