Morning News 20 October 2015

Local Headlines

Local markets ended higher on Monday, with the JSE All Share gaining 0.45% to trade at 53,184.10 points. The banking index led the gains, after a challenging few weeks, as a 3.45% surge in Standard Bank helped the index to climb 2.61%. The financial index was short on its heels with a 2.36% jump, as Alexander Forbes rose 2.03% amongst others. On the downside, the gold index shed 4.6%, as Gold Fields and Harmony fell 5.77% and 7.66% respectively. Platinum stocks also traded sharply lower, down 3.42%, with Impala Platinum declining 3.78% for the session. Lastly, Shoprite fell 6.33% after releasing a weak operational update.


Selected Announcements

Shoprite Holdings: In an operational update for the 3 months to September 2015, SHP saw turnover increase by 6.7%, compared to the previous corresponding period. South African supermarkets increased sales by 4.9%, while internal inflation fell from 6% to 3.4% during the period. This serves as further confirmation that Shoprite’s key customer base remains under pressure from mining job cuts, rising electricity costs, labor instability and lack of job creation. Meanwhile, foreign-based supermarkets grew its turnover by 12.8% and 18.6% in constant currency terms. Lastly, the group’s performance was also influenced by fewer store openings than in the previous corresponding period, but this trend is set to reverse in the remaining three quarters of the financial period. The Pivotal Fund: In a trading statement for the 6 months ended 31 August 2015, PIV has advised shareholders that the group expects its net asset value per share to increase by between 22% and 26%. Hence, the group expects the figure to come in at between R19.00 and R19.60, compared to R15.55 in the previous corresponding period. Lastly, the group expects to release its results for the period on or about the 2nd of November 2015. Indluplace Properties: Yesterday, Indluplace announced that it was considering the acquisition of a portfolio of residential properties from the South African Workforce Housing Fund (SAWHF) for a consideration of R782mn and at a net yield of 8.4%. The portfolio consists of about 1,400 units, with 21% being located in the Western Cape, 23% in Mpumalanga and the rest in Gauteng. Lastly, the acquisition remains subjects to conclusion and the signing of formal agreements.

European Markets

European markets ended higher on Monday, boosted by a surge in pharmaceutical stocks. Novo Nordisk and Shire were among the gainers, with Novo Nordisk gaining 2.5% after a broker upgrade. At the close of the session, the FTSEurofirst 300 had gained 0.2% to trade at 1,438.49 points, while the Euro STOXX 50 index also rose by a similar margin. However, the German DAX outperformed the overall index with a 0.6% increase, helped by a 3.7% surge in Deutsche Bank. This comes after investors welcomed Chief Executive John Cryan’s plan to restructure the bank and cull managers in a move to cut costs and put its past scandals behind it.

States Headlines

U.S. markets ended slightly higher on Monday, as the Dow Jones and the S&P 500 pared losses late in the session. Nike added 2.1% during the session, which helped to boost the Dow, while gains in Apple and Intel helped to support all 3 major indices. Meanwhile, the energy index shed 1.9% as U.S. crude oil fell 2.9%, which in turn weighed on Exxon and Chevron as they fell 1.8% and 1.4% respectively. In other news, Morgan Stanley fell 4.8% after releasing its results during the session. Lastly, at the close, the NASDAQ featured as the top performer with a 0.38% gain, while the Dow and S&P 500 added 0.08% and 0.03% respectively.

Asian Headlines

Asian markets were mostly lower this morning in what has been a choppy session following renewed Chinese growth concerns and dampened risk sentiment. The Australian ASX was among the main decliners, down 0.45%, as worries about China weighed on mining and energy stocks following China’s GDP data release. Meanwhile, the Hang Seng declined by a similar margin, while the Shanghai Composite was trading marginally lower, down 0.09%. Lastly, the Nikkei was one of the few indices in the green, as the index bucked the trend to trade 0.3% higher.

Commodities Headlines

Oil prices traded sharply lower on Monday as a tumble in gasoline futures added pressure to a market which was already weighed down by slower growth in China and signs that Iranian oil will shortly return to the market. As a result, Brent crude fell $1.85, or 3.7%, to settle at $48.61 a barrel. This morning saw Brent erase some losses as it gained 0.3% to trade at $48.75 per barrel. Meanwhile, spot gold was marginally lower this morning after 3 consecutive days of losses. This comes after the dollar strengthened somewhat on renewed expectations that the Federal Reserve might still raise rates this year. At the time of writing, spot gold was trading at $1,168.92/oz.

Currency Headlines

Yesterday, the rand, along with other emerging market currencies, weakened drastically against a host of major currencies amid concerns about a slowdown in economic growth in China. This comes after Chinese GDP for the 3rd quarter slowed to 6.9%, beating expectations, but lower than 7% for the first time since 2009. At 9:30, the rand hit a session high of R13.024/$, but erased all of its gains as the session progressed. By 17:00, the rand was trading at R13.248/$, from a previous close of R13.1183, before trading a session low of R13.295/$ at 23:20. This morning the rand was trading at R13.272/$.


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