The Trader's Update, 4-5 October 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 on Tuesday as bond yields continued to fall, i.e.:
The pan-European Stoxx 600 closed 3% higher with travel and leisure stocks closing 6.1% higher followed by tech stocks which closed 5% and industrials stocks which closed 4.2% higher.
German travel company Tui jumped by 9.5% buoyed by an overnight rally on Wall Street. British bakery chain Greggs share price rose by 9.5% in early afternoon trade after the release of a strong earnings report which showed an increase in quarterly sales despite the deepening cost of living in the U.K. and plummeting consumer confidence in the U.K. British power generation firm Drax Group was at the bottom of the Stoxx 600 after BBC Panorama investigation questioned the firm's forestry methods.
Credit Suisse's share price remained under pressure having tumbled by 53% for the year-to-date yesterday session being exacerbated by an increase in credit swap defaults which made the market question the bank's financial position.
The British Pound Sterling rose on Tuesday against the greenback with yields on the Britain's sovereign bonds falling after a heavy sell-off last week.
On the data front, Eurozone producer prices grew by 5% month-on-month in August according to data from Eurostat. On an annual basis, the prices at factory gates across the 19-member common currency bloc soared by 43.3% driven largely by skyrocketing energy prices.
Asia-Pacific Markets
Hong Kong
Markets were closed for a public holiday.
China
Markets were closed for a public holiday.
Japan
Japanese defense stocks like Hosoya-Pyro-Engineering and Mitsubishi Heavy Industries rose by more than 5% and 3.5% respectively. Broader markets closed higher, i.e.:
South Korea
Defense stocks rose immediately after North Korea launched another missile test. Hanwha Aerospace and Korea Aerospace both rose by around 4%. South Korean tech giant Naver fell in early trading after it said it would purchase U.S. e-retailer Poshmark for around US$1.2 billion.
Indonesia
The Jakarta Composite Index is the best performing stock in the Asia-Pacific region after it has risen around 6% since the start of the year.
Australia
The Reserve Bank of Australia hiked interest rates by 25bps to 2.6% missing expectations forecasted by economists on Reuters. This is the sixth consecutive interest rate hike by the central bank in an attempt to increase in interest rates.
U.S. Markets
Equity markets surged on Tuesday on optimism that new economic data could incentivise the U.S. Fed to pull back on its aggressive monetary policy, i.e.:
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Twitter shares soared as Elon Musk confirmed to go ahead with the US$44 billion purchase of the social media giant. Furthermore Boeing, Caterpillar and banking stocks like JPMorgan Chase and Goldman Sachs advanced higher.
Oil futures advanced on optimism that OPEC+ would cut production to raise crude prices and thus fossil fuel stocks like Chevron and Exxon Mobil traded higher.
Semiconductor company Micron Technology lifted as it announced its intention to spend US$100 billion to build a new chip production facility in New York.
Social ecommerce marketplace Poshmark's share price advanced after it was purchased by South Korea's Naver. Rivals like eBay and Etsy advanced.
Electric truckmaker Rivian Automotive shares advanced by 12% after the company increased production by 67% in the third quarter.
The yield on the 10-year Treasury Note declined to 3.62%.
The Labor Department was expected to release the Job Openings and Labor Turnover Survey which was expected to show that 11.2 million job openings were made available in August.
The U.S. Commerce Department was also expected to show that factory orders remained unchanged in August.
Segment 2, African Markets Segment
Sub-Saharan Africa
The World Bank projects that the region's economic growth for the current year to be 3.3%, down from 2021's 4.4% and the reduction is due to a slowing global growth rate, drought, increased risk of debt distress and rising inflation.
Kenya
The government has lifted a 10-year ban on genetically-modified crops due to an exacerbating drought that has gripped the region.
Nigeria
The Nigerian Stock Exchange noted a 22% increase in profitability for the year-to-date and gross earnings grew by 13%.
Lesotho
The mountain kingdom is set to hold its presidential elections on the 7th of May after years of political instability.
Segment 3, South African Markets Segment
The South African Reserve Bank reiterated that it might have to continue hiking interest rates higher even after hiking interest rates by 75bps on 22 September. The inflation outlook coupled with an environment of uncertainty and domestic price pressures are to blame for the aggressive monetary policy.
The country's fixed investment levels are quite low with the current level of fixed investment not enough to keep up with the pace of capital stock depreciation, i.e., investment spending is directed more towards maintenance rather than expansion of productive capacity.
Anglo American and Electricitie de France SA have agreed to jointly form Envusa Energy which will develop wind and solar projects in South Africa. In the first step, more than 600 megawatts of wind and solar projects will be implemented with a plan that by 2030 between 3 to 5 gigawatts of energy being generated from this project.
Growthpoint has launched a ready-to-occupy office concept which allows tenants to lease office space at six selected buildings in Cape Town and Johannesburg for periods as short as 12 months.
Sibanye now owns 84.96% of Keliber, which is a lithium group located in Finland. The next step is an equity capital raise by Keliber that requires Sibanye to inject another €104 million and the company is also raising debt capital to match the €250 equity on its balance sheet.
Segment 4, JSE Morning Update: