The Trader's Update, 18 August 2022
Realeboha Molaba
Actuarial Junior Consultant; Actuarial Science Honours Graduate from the University of Cape Town; Actuarial Science and Mathematical Statistics Graduate from the University of the Witwatersrand
Segment 1, International Markets
European Markets
Equity markets closed higher amid growing concerns about the inflationary outlook, i.e.:
The pan-European Stoxx 600 closed 0.3% higher with oil and gas stocks rising by 1.7% to lead the gains followed by tech stocks rising by 1.2%. Retail stocks unfortunately slid by 1.5%.
On the corporate earnings front, Swiss life science company Siegfried led the gains in the Stoxx 600 after the company outperformed its first-half year earnings estimates. Dutch payments company Adyen was the worst performing stock in the Stoxx 600 after it missed first-half earnings projections and thus its share price plunged by 11%. Danish hearing aid maker GN Store Nord climbed by more than 5% after it reported strong second quarter profit growth.
On the data front, the Eurozone inflation print which was published on Thursday rose by annualised 8.9% in July and 0.1% month-on-month. Energy remained the largest contributor to the spike in the inflation print exacerbated by supply chain issues caused by a lack of energy as the EU reduces its reliance on Russia for imported gas.
The U.K's CPI figure for July rose to 10.1% annually in July according to the Office for National Statistics and the Bank of England expects the figure to peak around 13.3% in October.
Asia-Pacific Markets
Markets in the region traded lower after the rally on Wall Street cooled overnight.
In Hong Kong, tech giant Tencent's share price rose by 3.1% on Thursday after it posted disappointing quarterly sales data on Wednesday which were hurt by a lack of game approvals and regulations that tend to limit playing time and a weak Chinese economy that scarred its ad sales. The Hang Seng closed 0.8% lower at 19,763.91.
Chinese property developer Country Garden issued a profit warning that its net profit for the first half of the year may fall below last year's net profit level due to a decrease in property sales, increased provision for impairment for property projects and foreign exchange losses. Nomura cuts it GDP forecast for China for 2022 from 3.3% to 2.8% as official July GDP data showed that Chinese officials said that the economy missed targets. Mainland Chinese markets closed lower, i.e.:
Japanese markets closed lower, i.e.:
South Korea's Kospi slid by 0.33% to close at 2,508.05.
The Phillipines Central Bank hiked policy rates by 0.5% to 3.75% following July's surprise move of 0.75%. Coca-Cola and Southeast Asia's ride hailing and delivery app Grab have announced a partnership to launch and engaging customers through GrabAds.
The S&P/ASX 200 closed 0.21% lower at 7,112.80.
The Reserve Bank of New Zealand hiked interest rates by 0.5% on Wednesday with the Governor citing confidence that inflation was falling.
U.S. Markets
Equity markets closed higher as oil prices rose and a new batch of retail earnings provided a mixed picture of consumer spending, i.e.:
Fossil fuel companies like APA Corporation and Halliburton rose as a larger-than-expected drop in U.S. oil supplies sent crude futures back above US$90 a barrel.
Networking equipment maker Cisco Systems' share price rose by more than 5% after the company raised its revenue guidance and indicated that supply chain constraints are easing. Electronic test and measurement equipment firm Keysight Technologies' share price advanced as the company's profit and sales data beat forecasts.
Warehouse retailer BJ's Wholesale Club Holding's share price hit an all-time high after it posted record quarterly results and boosted its full-year guidance. The retailer noted that the rising inflation brought more cost-conscious consumers to its stores. Another retailer Kohl's share price fell along with department store rivals Target and Nordstorm after a drop in its sales and profit was blamed on higher prices and it slashed its full-year guidance.
U.S.'s largest pharmacy chain company Walgreens Boots Alliance was the worst performing stock in the S&P 500 after a court ruled against the company along with CVS Health and Walmart in a court case relating to opioid endemic in Ohio state.
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Verizon Communications' share price fell after an analyst downgraded the stock.
After Bed Bath & Beyond's share price soared earlier in the week boosted by retail meme stock traders, its share price plunged after activist investor Ryan Cohen said that he is selling off his stake in the company.
The yield on the 10-year Treasury Note declined to 2.88%.
The VIX index declined by 1.71% to 19.56%.
The National Association of Realtors was expected to report existing home sales for July and expectations are that 4.85 million homes were sold and 270,000 fewer homes than in June.
The Conference Board was also expected to release its Leading Economic Index for July and the consensus estimate is a 0.3% decline after a 0.8% decline in June.
The Labor Department reported that initial jobless claims for state unemployment benefits declined more than anticipated for the latest week.
Segment 2, African Markets Segment
Dubai's Emirates airline is set to suspend flights to Nigeria from next month due to the failure to repatriate funds frm the country due to the country experiencing a shortage of foreign exchange. It receives about 90% of its foreign exchange from the exported oil. The International Air Transport Association said that Nigeria was withholding around US$450 million in revenue that international carriers operating in the country had earned from June.
Following a raise in transport fares and cutting of commissions on ride-hailing services by Tanzania's transport authority, Bolt has indicated that it might exit the market after cutting its operations in the country.
Tanzanian telecommunications authorities have installed high-speed internet services on the slopes of Mt. Kilimanjaro at an altitude of 3,720 meters above sea level.
The Bank of Ghana has raised its monetary policy rate by 300bps or 3% from 19% to 22% to curb the high inflation pressures and curb the depreciation of the cedi against the US$.
Stanbic Bank Kenya, the largest subsidiary of Stanbic Holdings Plc, has posted strong first half earnings with earnings per share jumping by 41% to a record 12.13 shillings.
The National Bank of Rwanda issued a statement that showed that the country's banking assets grew by 18.8% in the first half of the year and thus remains strong, sound and profitable.
Zimbabwe's equity market has plunged by 50% since the end of April after tax authorities increased taxes on equity transactions and took other steps to support a crumbling local currency.
Angola is set to be in talks with the European Union to start trade talks in participating in a regional trading bloc where the EU sources its oil imports as the union reduces its reliance on Russian oil and gas imports.
Segment 3, South African Markets Segment
The South African Reserve Bank has warned that above-inflation wage hikes granted to unions would lead to a price spiral since productivity gains in the various sectors do not offset the larger wage hikes. Hence the SARB would be required to intervene by initiating a more aggressive rate hikes with economists already expecting another 1% rate hike before the end of the year.
The Financial Services Conduct Authority said that it will publish the regulatory framework for cryptocurrencies for public comment soon and the SARB's Prudential Authority has announced plans to declare cryptocurrencies as financial assets. The Prudential Authority has requested the commercial banks to work with crypto exchanges rather than shutting down their bank accounts.
Sanlam's Group Risk CEO says that the country's life insurance industry has been hit by rising disability claims amid the turbulent economic pressures the country is experiencing. Furthermore late cancer diagnoses also are adding pressure to the industry for worse-than-expected experiences and hence placing pressure on insurer's risk profitability levels.
Telkom has initiated a microfinancing institution which provides small businesses with business lending services from R20,000 to R5,000,000 and its digital services is aimed at helping enterprises accessing cash in very short periods.
Eskom coal supplier Exxaro has declared an interim dividend of R15.93 per share as its earnings grew by 75% for the six months ended 31 June 2022. The boost was bolstered by a rise in the price of coal.
According to NeilsenIQ's measurements bread sales increased by 33% for the four weeks ending 8 July as consumers forgo meat with cooking oil, detergent and frozen chicken have risen due to high levels.