Taking Stock - Mercedes-Benz pushes for improvements to harbour.

In todays taking stock, we discuss how Mercedes-Benz pushes for improvements to East London harbour.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange slipped a tad on Friday but the overall performance was a mixed bag as investors continued to ponder inflation trajectory and a possible Fed rate hike. Inflation eats into the future value of stock investments and higher interest rates increase the cost of capital for companies to fund growth. The benchmark All Share index closed down 0.07% at 66,215 points while the blue-chip Top 40 index ended down 0.08% at 60,140 points.

 

 

EUROPEAN MARKET COMMENTARY

European stocks climbed on Friday to close out a winning week amid the prospect of a steady economic rebound and fears of a tapering of monetary stimulus. The pan-European Stoxx 600 eked out a 0.1% gain Friday, bringing its weekly gain to 1.2%. The UK is set to publish plans next month to lift travel restrictions for fully vaccinated people, except those at the highest Covid-19 risk level. Meanwhile, the Bank of England on Thursday forecast inflation surpassing 3% at its peak before cooling down, but insisted the spike above its 2% target would be transitory and kept its monetary stimulus at full throttle.

 

 

US MARKET COMMENTARY

US stocks rose on Friday with the S&P 500 building on its rally to records, as investors bet that higher inflation will be temporary as the economy continues to recover from the pandemic. Friday’s rally came after a key inflation indicator that the Federal Reserve uses to set policy rose 3.4% in May, the fastest increase since the early 1990s, the Commerce Department reported Friday. The reading matched the expectation from economists polled by Dow Jones. The core index rose 0.5% for the month, which actually was below the 0.6% estimate.

 

 

ASIAN MARKET COMMENTARY

Stocks in Asia-Pacific were mixed this morning. Meanwhile, official data showed that China’s industrial profits for May slowed. Data released Sunday by China’s National Bureau of Statistics showed profits at China’s industrial firms rose 36.4% in May as compared with a year earlier. That was a slowdown from the 57% year-on-year growth posted in April. Hong Kong Exchanges and Clearing announced Monday that the morning trading sessions of both the securities and derivatives markets, including Stock Connect trading, have been delayed due to a black rainstorm warning.

 

 

CURRENCY MARKET COMMENTARY

The rand traded stronger on Friday as the dollar weakened on the back of uncertainty as to what direction the US Federal Reserve would take on rate hikes. A raft of mixed signals from the Fed in the last couple of weeks has made the rand jittery as investors fear rising inflation numbers in the United States could force the Fed to clamp down on a loose monetary policy in 2022 instead of 2023 as earlier expected. At the close, the rand was trading around R14.15 to the dollar or 0.31% firmer.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices inched higher this morning, as the dollar eased and tamer-than-expected US inflation data allayed fears of an early monetary policy tightening by the Federal Reserve. Oil prices climbed to highs last seen in October 2018 earlier today as the United States and Iran wrangled over the revival of a nuclear deal, delaying a surge in Iranian oil exports, while investors eyed the outcome of the OPEC+ meeting this week.

LOCAL COMPANIES

 

Steinhoff International Holdings (SNH) +0.5%

South Africa-based retailer Steinhoff said its half-year core earnings rose by 7%, as demand for value lines and a focus on home furnishings offset the impact of pandemic restrictions. During Steinhoff’s October to March reporting period many countries in Europe tightened restrictions or re-imposed lockdowns which hit its in-store operations and trading hours. Despite this, Steinhoff said on Friday that its total revenue from continuing operations rose 4% to 4.497 billion euros ($5.37 billion) in the period, from 4.342 billion euros. “Individual businesses, such as Pepkor Africa and Pepco Group, with their everyday value focus, continued to perform robustly,” Steinhoff said in a statement. “Others, such as Mattress Firm and Greenlit Brands Group reported strong trade as restrictions moderated and the operations focused strategically on consumers investing in their homes,” the company added. Steinhoff owns furniture, electronics, homeware and clothing brands under majority-owned Pepkor in Africa, Pepco in Europe, Greenlit Brands in Australia and New Zealand, LIPO in Switzerland and a 50% stake in Mattress Firm in the US. It said earnings before interest, taxes, depreciation and amortization (EBITDA) – a measure of operating profit – from continuing operations rose to 686 million euros, from a restated 639 million euros in the comparable prior period. The loss from continuing operations dropped to 319 million euros from 1.3 billion euros. Total group debt increased to 10.4 billion euros from 9.9 billion euros as the interest accrued exceeded debt repaid, Dutch-registered Steinhoff said.

 

Mercedes-Benz SA

Transnet and premium vehicle manufacturer Mercedes-Benz South Africa are involved in discussions about major upgrades and extensions to the harbour in East London. Mercedes-Benz South Africa (MBSA) CEO and executive director of manufacturing Andreas Engling confirmed the company is not satisfied with the state of the harbour and there have been ongoing discussions with Transnet since 2019. About 650 000 units of the previous generation Mercedes-Benz C-Class were produced in East London during the seven-year lifecycle of this model, with the bulk of these cars exported to various global markets. Speaking ahead of an event to celebrate the launch of production of the next generation C-Class at MBSA’s East London plant last week, Engling said Mercedes-Benz is discussing a three-step approach with Transnet about improvements to the harbour. “The first step is to increase capacity in the East London harbour by installing more technical equipment. “The second step is deepening the harbour so that bigger vessels are able to enter the harbour in the future but that is maybe a three- to four-year project. “The third step would create a complete harbour environment around East London, but I don’t know if that will really come through or not because it is a really huge and expensive exercise. “But the first two steps are definitely discussions we are already having with Transnet port,” he said.

INTERNATIONAL COMPANIES

Johnson & Johnson (JNJ) +0.5%

US drugs giant Johnson & Johnson is to pay $230m (£165m) to settle claims it fuelled an opioid addiction crisis in New York State. The firm did not admit liability or wrongdoing in settling with the state. The payments remove it from a trial due to begin on Tuesday in which several large opioid makers and distributors are defendants. J&J said the settlements were consistent with a prior agreement to pay $5bn to settle US opioid claims. The settlement with New York State also calls for J&J to stop selling the painkillers nationwide. "The opioid epidemic has wreaked havoc on countless communities across New York state and the rest of the nation, leaving millions still addicted to dangerous and deadly opioids," New York attorney general Letitia James said. "Johnson & Johnson helped fuel this fire, but today they're committing to leaving the opioid business - not only in New York, but across the entire country," she added, saying her focus remained "getting funds into communities devastated by opioids as quickly as possible." Opioids are a class of powerful drugs found in opium poppies that can be used to block pain signals between the brain and the body. They can be found as legal prescription medications, but they can also be found as illegal street drugs, such as heroin. Opioid addiction to both legal and illegal drugs has been a serious, ongoing problem in countries such as the US, which had nearly half a million deaths from overdoses between 1999 and 2019, according to the US Centers for Disease Control and Prevention.

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Media, Sasfin Wealth

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