The Trader's Update, 23 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 lower as investors digested a rise in oil prices and data coming out from the Eurozone, i.e.:
The pan-European Stoxx 600 closed 0.5% despite oil and gas stocks closing 3.1% higher. Media and healthcare stocks closed 1.6% lower to lead the losses.
The Euro traded at a two-decade low of 0.9903 against the U.S. Dollar on Tuesday morning and strategists at Citi Bank expect further depreciation in the currency as increasing wholesale gas prices and rising inflation weigh on the currency. The geopolitical tension in eastern Europe and a slowdown in China's economy are also contributing factors to a depreciation in the currency.
Benchmark gas prices in the European Union surged by 13% overnight as the damage to the gas supply pipe from Kazakhstan through Russia into Europe was scheduled for a unplanned maintenance.
August's flash composite Purchasing Managing Index (PMI) released by S&P Global contracted to 49.2 from July's reading of 49.9 and thus a reading below 50 indicates a contraction.
Asia-Pacific Markets
Equity markets in the region closed lower as investors digested the bearish market sentiment experienced on Wall Street overnight.
Hong Kong's Hang Seng closed 0.78% lower at 19,503.25. Tencent's share price dropped slightly after the company bought back around 1.1 million shares for 353.6 million Hong Kong dollars and had bought back around 12.6 million shares so far which accounted for 0.13% of the company's share capital.
Mainland Chinese markets closed lower, i.e.:
Japanese airline stocks surged following a Nikkei report showed that the government is considering ending pre-arrival Covid test requirements with Japan Airlines rising by 3.4% and ANA Holdings closed 1.97% higher. On the data front, the au Jibun Bank Flash Manufacturing Purchasing Managers Index for August fell to 51.0 from July's 52.1. Broader markets closed lower, i.e.:
With the global chip market expected to grow slower than expected in 2023 according to estimates from the World Semiconductor Trade Statistics, shares of Samsung Electronics and SK Hynix in South Korea closed 1.5% and 1% lower. The Kospi closed 1.1% lower at 2,435.34.
Taiwan Semiconductor Manufacturing Company closed 1.18% lower with the Taiex index closing 0.98% lower at 15,095.89.
Singapore's consumer price index for July rose to a 14-year high of 7% year-on-year according to data released by the Monetary Authority of Singapore and Ministry of Trade and Industry. The Straits Time Index closed 0.50% lower at 3,246.21.
Australia's S&P/ASX 200 closed 1.21% lower at 6,961.80.
U.S. Markets
Equity markets erased earlier gains as higher oil prices, corporate earnings and the upcoming Federal Reserve symposium weighed on the market, i.e.:
Fossil-fuel companies were among the best performers in the S&P 500 as oil prices jumped to a two-week high. The spike was encouraged by Saudi Arabia's Energy minister suggesting that OPEC+ might cut production to keep prices high. Other commodities like gold, silver and copper rose raising mining stocks like Freeport-McMoran.
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Zoom Video Communications' share price dropped after it reported a drop in demand for its video conferencing services as more workers returned to their offices. Manufacturer and trader of clothes, shoes and accessories Nordstrom's share price continued to fall post the market closing as the company slashed its full-year profit and sales forecasts.
Macy's, Dick's Sporting Goods, J.M. Smucker and Palo Alto Networks advanced on their release of strong earnings results.
Social media giant Twitter's share price dropped as its former head of security charged it with poor security and lack of effort to eliminate ghost accounts on the platform.
The yield on the 10-year Treasury Note advanced higher by 56bps to 3.05%.
The Commerce Department reported new home sales fell to an annual rate of 12.6% in July, compared to the revised 29.6% drop seen a year ago. The number of new homes available for sale increased by 18.5%.
S&P Global was expected to release its Manufacturing PMI flash index for August and was expected to have dipped to 52 from July's 52.2 and the Services PMI flash index was expected to likely have risen to 49.2 for August compared to July's 47.3.
Segment 2, African Markets Segment
Uganda's Stanbic Bank recorded a 4.7% growth in its profit after tax.
Nigeria is planning to restructure its gold market to attract much needed investment as oil prices continue to react to global headwinds as the country is a large exporter of oil. Data from the Central Bank of Nigeria shows that the country's foreign trade fell by 8.4% to US$10.8 billion in April and trade surplus declined month-on-month by 50.8% to US$930 million.
The Bank of Ghana has launched its Regulatory and Innovation Sandbox which was developed in collaboration with EMTECH Solutions as it aims to provide a regulatory framework for fintechs operating in the country and aims to promote innovation.
The market sentiment on Rwanda's stock exchange was relatively flat with the Rwanda Share Index and All Rwanda Share Index closing unchanged.
Kenya's Nairobi Stock Exchange fell by Sh43 billion on Monday to close trading at Sh2.23 trillion after opposition leader Raila Odinga formally challenged the results of the presidential elections that had taken place in the country's Supreme Court.
The Democratic Republic of Congo has barred some of Vodacom's top execs from leaving as the telecommunications giant resisted paying a new tax on the industry.
Segment 3, South African Markets Segment
The City of Tshwane currently owes Eskom around R1.6 billion on its July bill and the parastatal has threatened to cut power supply to the Capital.
South Africa's official unemployment rate dipped to 33.9% in the second quarter of 2022 and according to data released by StatsSA, an estimated 648,000 jobs were added to the economy between the first and second quarters of 2022.
Momentum Metropolitan expects a jump of between 855% and 875% in its headline earnings for the year ended 30 June as a result of fewer Covid deaths. The earnings per share for the year is expected to likely rise between 720% and 740%.
Alphabet Inc. has launched Google Wallet in South Africa as the tech giant tries to get market share in the country's booming digital payments market.
China has lifted restrictions on imported South African wool after it was banned following outbreaks of foot-and-mouth disease. The value of wool produced locally is around R5 billion per annum and between 70% and 80% is exported to China.
Old Mutual's empowerment scheme is now open to black individuals and black groups where the general public can apply to own shares from as little as R100 upfront payment for low-income households. For those who can afford to participate in the share scheme they are expected to invest around R2,000 for 200 shares.
Segment 4, JSE Market Wrap