Taking Stock - US stocks climbed after jobs report showed solid gains

In today's taking stock we discuss, US stock climbed as they reported that US economy added 559,000 jobs in May.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks on the Johannesburg Stock Exchange partly reversed the previous day's losses to end the week at almost the same level where it ended last Friday. The shares were primarily boosted by the weaker-than-expected US jobs data which eased fears of an overheating of the economy, and thus calmed fears that strong jobs data would mean higher inflation in the coming weeks and months. The benchmark FTSE/JSE All-Share index went marginally up by 0.05% (now at 67,825 index points) while the blue-chip Top 40 index closed up 0.07%.

 

EUROPEAN MARKET COMMENTARY

European stocks closed higher on Friday as investors digested a key US jobs report. The pan-European Stoxx 600 index finished the final trading session of the week up about 0.4%, with most major bourses and sectors pushing into positive territory. Shares of some airlines sank Friday after the UK removed Portugal from its so-called “green list” of travel destinations. British Airways owner IAG fell 0.9% while Wizz Air was down 3.3%.

 

US MARKET COMMENTARY

US stocks climbed on Friday as the key May jobs report showed solid gains, boosting confidence in the economic comeback. The US economy added 559,000 jobs in May, the Labor Department said on Friday. The number came in slightly lower than an estimate of 671,000 from economists surveyed by Dow Jones, but still showed a healthy rebound in the labor market. It’s an improvement from the upwardly revised 278,000 payrolls added in April. The unemployment rate fell to 5.8% from 6.1%, which was better than the estimate of 5.9%.

 

ASIAN MARKET COMMENTARY

Shares in Asia-Pacific were mixed this morning as investors reacted to Chinese trade data for May. China’s exports in dollar terms rose 27.9% in May as compared with a year earlier, according to customs data released Monday. That was lower than forecasts by analysts in a Reuters poll for a 32.1% year-on-year jump in exports.

 

CURRENCY MARKET COMMENTARY

The rand firmed on Friday and looked set for weekly gains, thanks to a rise in commodity prices and a weakening US dollar as investors turned to riskier but high-yielding assets. At the close, the rand was 1.62% firmer as it traded around R13.42 versus the dollar. The rand rallied 2% last week and has gained more than 8% against the dollar this year so far. The dollar fell on Friday after US nonfarm payrolls data showed hiring increased in May as the pandemic eased, but not quite as much as expected, tempering expectations the Fed will tighten monetary policy sooner, rather than later.

 

COMMODITIES MARKET COMMENTARY

Gold prices edged lower this morning as an uptick in the dollar dented the metal's appeal, although lower US bond yields and prospects of a prolonged accommodative interest rate environment limited losses. Oil pulled back after hitting fresh multi-year highs today, as investors awaited the outcome of this week’s talks between Iran and world powers over a nuclear deal that is expected to boost crude supplies.

LOCAL COMPANIES

Nestle SA (NESN) +1%

Nestle is assessing its food and beverage portfolio against external nutrition profiling systems, such as Health Star Rating and Nutri-Score, that help consumers make more informed choices, the maker of KitKat chocolate said in an emailed statement. The project started this year and also involves a review of package labelling, nutritional information and portion guidance. The Financial Times on Monday cited an internal company presentation that designated more than 60% of Nestle’s core food and beverage products as unhealthy. The document, which was circulated among top executives this year, said that some Nestle products will never be healthy no matter how much they’re tweaked, according to the FT. The analysis excluded categories like pet food, coffee and infant nutrition, which make up more than half of Nestle’s total revenue. The Big Food industry, led by multinationals like Nestle, PepsiCo Inc. and McDonald’s Corp., has come under increasing pressure from consumers and governments in recent years to make healthier products amid rising obesity and diabetes rates. Global obesity has almost tripled since 1975, according to the World Health Organisation. Nestle has jettisoned its US confectionery unit and put its ice cream business there into a joint venture. It also sold its Yinlu peanut milk and rice porridge businesses in China and 60% of the European meat-processing brand Herta. Under chief executive officer Mark Schneider, the Swiss firm has shifted its focus to acquiring nutritional supplements and vitamins, as well as expanding its coffee and plant-based businesses.

 

Multichoice Group (MCG) -0.5%

The board considers core headline earnings per share and trading profit as the two most appropriate indicators of the operating performance of the group, as they adjust for non-recurring and non-operational items. Compared to results for the year ended 31 March 2020, the group expects core headline earnings per share for FY21 to be between 32% (182 ZAR cents) and 37% (211 ZAR cents) higher than the prior year´s 569 ZAR cents. Trading profit is expected to be between 25% (R2.0bn) and 30% (R2.4bn) higher than the R8.0bn reported for the prior year. On an organic basis (i.e. reflecting results on a constant currency basis, excluding any M&A) trading profit is expected to be between 40% (R3.2bn) and 45% (R3.6bn) higher than the prior year’s reported R8.0bn. The improved financial performance for FY21 was achieved despite continued macro-economic and COVID-19 challenges across the continent. Resilient revenue growth, strong cost control, shifts in content costs and the impact of embracing new ways of working as a consequence of COVID-19 allowed the business to offset these challenges. A further reduction in losses in the Rest of Africa segment has been the largest contributor to the improvement in group performance.

INTERNATIONAL COMPANIES

Facebook (FB) +1.3%

Facebook is being investigated by UK and European competition watchdogs over concerns it uses advertising data to gain an unfair advantage over rivals. The Competition and Markets Authority is looking into whether it uses information to benefit its own services, such as Facebook Marketplace. The European Commission is examining if Facebook violated EU rules by gathering data from advertisers to compete with them in providing classified ads. Facebook said it would cooperate fully. It said it will demonstrate that both the UK and EU investigations are "without merit". The CMA said Facebook collects data through its digital advertising service as well as its single sign-on option. This allows people to sign-in to other websites, services and apps using their Facebook log-in details. The watchdog said it is examining whether the company has unfairly used the data to compete with other businesses through Facebook Marketplace, where firms and users put up classified adverts to sell items, as well as Facebook Dating which was launched in Europe last year. The European Commission said it had opened a formal antitrust investigation "to assess whether Facebook violated EU competition rules by using advertising data gathered in particular from advertisers in order to compete with them in markets where Facebook is active such as classified ads".

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Media, Sasfin Wealth

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