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Morning News 21 May 2015

Local Headlines

Local markets closed lower yesterday in somewhat directionless trade. At the end of the session, the All Share had lost 0.25% to 54‚192.07 points, with the resource index having fallen 0.52%. Among resource stocks, BHP Billiton dropped 0.43%, while Assore and Exxaro shed 3.3% and 2.13% respectively. Platinum stocks rebounded, up 0.45%, helped along by a 1.55% gain in Amplats. Retailers had a tough day on the markets, as Spar lost 0.56%, while Clicks and Foschini fell 2.46% and 1.21% respectively. Lastly, telecommunication stocks were also lower, with MTN losing 2.95% and Vodacom down 1.35%.

Sens

Spar: In its results for the 6 months ended 31 March 2015, SPP achieved turnover growth of 40.7% to R36bn, from R25.6bn in the previous corresponding period. With an increase to 8.6%, from 8%, in the gross margin, the group reported a 21.9% increase in profit after tax to R788.3mn from R642.9mn previously. For the period, headline earnings per share increased by 22.4% to 455.5 cents, up from 372 cents in 2014, with the domestic business contributing 420.8 cents. Lastly, the board announced an interim dividend of 239 cents per share. Tiger Brands: For the 6 months ended 31 March 2015, the group’s results were charaterised by a solid performance in domestic operations, but these were largely offset by foreign exchange losses and a weak performance in its foreign operations. For the period, turnover increased by 7% to R15.9bn with operating income declining by 5% to R1.6bn. Attributable profit after tax from continuing operations increased by 122% to R1.bn, following the R849mn impairment last year of goodwill and intangible assets relating to the group’s investment in Dangote Flour Mills. Therefore, the headline earnings per share from continuing operations, which is a better indicator of performance, came in at 853 cents, in line with last year’s performance. Lastly, a dividend of 339 cents was announced, an increase of 3%.

European Headlines

European shares closed higher on Wednesday, but markets struggled to gain momentum amid worries about Greece and as focus turned to the release of the minutes from the U.S. Federal Reserve. Comments from a Greek official, that it may be unable to make an upcoming repayment to the IMF, helped send the euro to a 3-week low against the dollar and further undermined sentiment in equity markets. Among the banks; UBS, RBS and Barclays featured as big movers, up 3%, 2% and 3% respectively after receiving fines for currency manipulation. Overall, the FTSEurofirst 300 finished 0.5% higher.

American Headlines

U.S. stocks ended marginally lower yesterday, after Wall Street saw little in the minutes from last month's Federal Reserve meeting to alter expectations of when it will raise interest rates. Following the minutes' release, the Dow and S&P 500 pushed into record territory before giving up their gains. At the close, 5 of the 10 major S&P 500 indexes were lower, led down by a 0.37% decline in industrials. Among the 4 banks which were fined a total of $6bn for manipulating currency rates, Citigroup lost 0.79% and JP Morgan fell 0.79%. At the close, the Dow was 0.15% lower, with the S&P 500 declining 0.09%.

Asian Headlines

Asian equity markets were mixed this morning, as an uninspiring finish on Wall Street and data due out of China kept investors on edge. China’s flash HSBC PMI for May is estimated to come in at 49.3, signaling that the China's massive factory sector remains in contraction. Despite this, the Shanghai Composite was up 1.21%, with the Hang Seng flat. Meanwhile, the Nikkei gained 0.4% to scale a 15-year peak of 20,264 points, with a weaker yen helping sentiment. Meanwhile, the Bank of Japan also kicked off its 2-day policy meeting this morning. The ASX added 0.2% in early trade, with trading mixed among the banking and resource heavyweights.

Commodities Headlines

Oil prices rebounded yesterday, with U.S. crude snapping a 5 day decline, after another weekly inventory draw but gains were still limited by a huge supply overhang and concerns about a stronger dollar. As a result, Brent crude added $1.01, or 1.6%, to settle at $65.03/barrel. This morning, oil prices began rising after initial dips, with Brent crude gaining $0.17 to $65.20/barrel. Spot gold was little changed this morning, as minutes from the Fed showed that it was unlikely to hike interest rates in June. Spot gold was firm as a result, trading at $1,208.95/oz, after gaining 0.2% in the previous session.

Currencies Headlines

The rand firmed against the dollar on Wednesday after softer-than-expected inflation data bolstered the case for local interest rates to remain on hold. At 17:00, the rand was trading at R11.863/$, pulling away from the crucial 12.00 mark after April headline inflation quickened to 4.5% year-on-year, slightly below expectations. Sentiment toward local assets also benefitted from the public sector wage deal late on Tuesday, which averted a potentially crippling strike by 1.3mn workers. Attention will now be on the MPC interest rate decision today, with expectations that the rate will be left unchanged at 5.75%.

Happy Trading…

 

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