The Traders' Update, 3-4 June 2024
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: Overseas Markets
European Markets
Equity markets closed mostly higher at Monday as investors look ahead to the interest rate decision by the European Central Bank (ECB) on Thursday, i.e.:
The pan-European Stoxx 600 closed 0.65% higher with construction stocks leading the gains to close 1.74% higher. Health care stocks bucked the trend to close 0.55% lower.
On the individual shares front, British retailer JD Sports shares rose recovering from losses on Friday after the company reported a fall in its first-quarter U.K. sales.
British pharameutical company GSK shares fell to the bottom of the Stoxx 600 on reports that the company is set to face a jury trial on allegations that its Zantac heartburn drug caused cancer.
On the data front, the HCOB Eurozone manufacturing activity rose to a 14-year high in May, due to activity in Spain growing at its fastest pace in two years. In France and Germany, manufacturing activity showed signs of recovery, however, the purchasing managers' index (PMI) remained below the 50 mark. A reading below 50 indicates a contradiction.
The European Central Bank is expected to cut rates for the first time since 2019, however, investors are awaiting a higher-than-expected Eurozone inflation print to be released on Friday.
Asia-Pacific Markets
Hong Kong
The Hang Seng closed 1.79% higher at 18,403.04.
China
The Caixin seasonally adjusted manufacturing PMI in May rose to 51.7 from the 51.4 recorded in the previous month. The reading showed that activity accelerated at its fastest pace in two years, however, the official government reading released on Friday was different. Polled economists expected a reading of 51.5.
Mainland markets closed mixed, i.e.:
Japan
Broader markets closed higher on Monday, i.e.:
South Korea
Energy stocks including Korea Gas Corporation shares rose after the government approved the exploratory drilling for oil and gas resources off the east coast.
A private survey showed that the country's manufacturing activity increased at its fastest pace in three years with headline PMI in May coming in at 51.6 compared to the 49.4 recorded in the previous month.
Korean markets closed higher, i.e.:
Singapore
The Straits Times Index closed 0.37% higher at 3,348.87.
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Australia
The S&P/ASX 200 closed 0.77% higher at 7,761.00.
U.S. Markets
Equity markets closed mixed as investors digested the latest PMI data, i.e.:
Entertainment company Paramount Global shares rose to the top of the S&P 500 on reports that the company has accepted an updated buyout offer from Skydance Media (which is a production company). Skydance in partnership with private equity firms RedBird Capital and KKR are expected to purchase half of Paramount Global's Class B shares at US$15 per share.
Cruiseline operator Carnival Corp. shares rose after customer deposits which represent initial payments for future cruises grew on an annualised basis in the first quarter. The company is expected to generate additional revenue due to increased capacity acquired through the purchase of three new ships expected to be launched later in the year.
Semiconductor company Nvidia shares rose after the company revealed its next-generation artificial intelligence (AI) system. The company announced that it will release its new platform in 2026. Analysts at Bank of America boosted their price target on the stock following the report.
Provider of engineering and product design software Autodesk shares rose after the company reported a positive update on an internal investigation surrounding its accounting practices. The company stated following the internal probe, there will be no restatements or adjustments to its previously reported financial statements.
Supplier of farmers' and ranchers' products Tractor Supply Co. shares fell to the bottom of the S&P 500 even though the company opened a high-tech distribution centre, recently, in the state of Arkansas. The centre is powered by autonomous mobile robots. The retail sector in which the company operates in remains highly competitive with its logistics and supply chains remaining complex.
Utility company Vistra shares continued to slide on Monday, extending losses posted on Friday, after the company announced plans to upgrade the Texas power grid with 2 gigawatts (GW) of dispatchable capacity powered by natural gas. Investors are concerned that the additional capacity could lead to a potential oversupply.
Oil and gas stocks like Halliburton and Diamondback Energy fell as crude oil prices dropped on concerns about economic growth following the release of worse-than-expected manufacturing data.
The Institute of Supply Management (ISM) reported that May's PMI fell by 0.5% to 48.7, with economists predicting that the reading would come in at 49.7. A drop in new orders and productions is what caused the deterioration in manufacturing sentiment.
Segment 2: African Markets
Tanzania
South Korea has agreed to lend the government US$2.5 billion (?3.43 trillion) over the next five years through concessional loans.
Zambia
The Chinese Finance ministry said that it will assist the government in restructuring its debt and support it in any way possible to achieve its objectives.
Segment 3: South African Markets
Wholesale retailer Pick 'n Pay reported its worst financial results in history in the last week. The retailer reported a 373% plunge in its net profit to a net loss of R3.2 billion and it further indicated that it had suffered a technical insolvency of R183 million. The retailer has also breached all its debt covenants and will not be able to honour its debt repayments. However, the retailer's creditors used the company's Boxer shareholding to relax some of the covenants.
Absa's manufacturing PMI showed that sentiment amongst domestic manufacturers waned in May. The PMI reading fell to 43.8 and its the third straight month of a decline as business activity and new sales suffered due to weaker demand.
British oil and gas company Shell lost an appeal to overturn a ruling blocking an offshore seismic activity opposed by environmental groups.
Segment 4: JSE Market Morning?Update