Taking Stock - US markets rise.

In todays taking stock, we look at how US markets rise amid the Fed’s latest pledge to support the economy.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local markets finished slightly lower on Tuesday, with markets closed yesterday for Reconciliation Day celebrations. Meanwhile, administrators at struggling South African Airways (SAA) said on Wednesday they have issued a 48-hour notice to prevent nearly 400 pilots from accessing the company’s premises until they agree to new employment terms and conditions. In other news, the South African government on Tuesday won a court case over public-sector wage increases that it has refused to pay, boosting its efforts to repair a gaping budget deficit and soaring debt.

 

 

EUROPEAN MARKET COMMENTARY

European stocks closed higher on Wednesday as the EU signalled progress in talks over a post-Brexit trade agreement with the UK. The pan-European Stoxx 600 closed up by 0.8%, with almost all sectors bar banks in positive territory. Insurance shares led the gains, climbing 2.1%. “There is a path to an agreement now,” European Commission President Ursula von der Leyen said Wednesday, in comments that boosted sentiment. The surge in coronavirus cases is also a key focus for investors with several major economies changing Christmas plans to relax restrictions.

 

 

US MARKET COMMENTARY

The S&P 500 rose slightly on Wednesday amid the Federal Reserve’s latest pledge to support the economy and the apparent progress in US fiscal stimulus negotiations. The US central bank said it will buy at least $120 billion of bonds each month “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.” Wednesday’s moves were kept in check by a steeper-than-expected drop in US retail sales. The Commerce Department said retail sales fell by 1.1% in November.

 

 

ASIAN MARKET COMMENTARY

Shares in Asia were mostly higher this morning as investors reacted to the latest announcements from the US Federal Reserve. Australia’s unemployment rate in November was at 6.8%, according to seasonally adjusted estimates released by the Australian Bureau of Statistics on Thursday. That compared against October’s 7% unemployment rate. Mainland Chinese stocks edged higher, with the Shanghai composite up 0.63% and the Nikkei 225 gained 0.14%.

 

 

CURRENCY MARKET COMMENTARY

The rand eased early on Tuesday as concerns about rising COVID-19 cases and stricter lockdowns globally outweighed optimism over the roll-out of coronavirus vaccinations. However, concerns have deepened about the economic impact of new restrictions at home and elsewhere, with South Africa's government saying on Monday that beaches on the eastern coast would be closed down and public gatherings would be limited ahead of the festive season. Yesterday, with local markets closed, the rand finished the day

 

 

COMMODITIES MARKET COMMENTARY

Gold prices steadied near a one-week high this morning, as investors cheered progress on a US fiscal stimulus deal, while the Federal Reserve's pledge to keep rates low until an economic recovery is secure added to the support. Oil prices hit a nine-month high early today after US government data showed that crude stockpiles fell last week and on optimism over a coronavirus relief package in the United States.

LOCAL COMPANIES

Jasco (JSC) -11.8%

The JSE-listed technology group suffered an annual loss of R110.9 million, significantly more than its current market cap of R39 million. “The group faced tough trading conditions in the first half to December 2019, particularly in the ICT Carriers business due to a sharp reduction in spend by a major telecommunications operator”, the group said in a statement. Full-year revenue declined 17% to R939.2 million from R1.14Bn in the previous year. The tech group flagged debt reduction as a key initiative for the next financial year, and looks set to sell off assets to lower its current burden.

 

Pan African Resources (PAN) +2.8%

The African-focused gold producer announced on Tuesday it will invest R140 million in the construction of a nearly 10 Megawatt (MW) solar power plant at its Evander Mines operation in South Africa. Construction will commence in the first quarter of 2021, with first power expected in the third calendar quarter of 2021, as the miner estimated the project payback period as 5 years. “The Evander Mines solar photovoltaic plant will provide an estimated 30% of Elikhulu’s power requirement during daylight hours and is expected to materially reduce electricity costs at this operation”, the group said in a statement.

INTERNATIONAL COMPANIES

Hennes & Mauritz (HMB) -0.2%

Swedish listed, H&M, the world’s second biggest fashion retailer reported sales in constant currency terms slipped 10% in the fourth quarter, with a pronounced slowdown in the final month as the second wave of the COVID-19 pandemic and subsequent lockdowns curbed spending. “Between 22 October and 30 November sales decreased by 22% compared with the corresponding period last year”, the group said in a statement. The group’s net sales amounted to Swedish krona (SEK) 52.54Bn compared with SEK 61.69Bn in the prior year.

 

Inditex (ITX)

The Spanish fashion retail giant, who owns brands like Zara, Massimo Dutti and Pull & Bear, said revenue is recovering, boosted by the group’s online sales strategy. Group revenue decreased 10% to €6.1Bn for the third quarter compared to the previous year, however it’s a clear improvement the first and second quarter, when revenue dropped 44% and 31% respectively. As the coronavirus continues to spread over Europe, 5% of the group’s stores were closed during the quarter and 88% had to operate with restricted hours and capacity. The retailer managed to slash operating expenses by 17% and reduce inventories by 11%, leading to a net profit of €866 million.

 

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Media, Sasfin Wealth

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