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A euphoric week for equity markets

A look at last week’s market and company results and what to expect this week.

Last week was generally euphoric for equity markets as stimulus and prospective stimulus actions globally, combined with strong employment numbers out of the US, lifted sentiment in the near term.

global indices

International data

The Peoples Bank of China (PBOC) reduced the RRR rate (the amount of cash banks need to hold as reserves) in a continued attempt to help accelerate growth within China.  

In the US, non-farm data showed 242 000 workers were added to the payroll (est. 192 000) in February 2016. The unemployment rate was reported at 4.9%. 

Local data 

Trade balance data for South Africa revealed a larger than expected deficit of R17.9 billion in January 2016 (est. R13 billion). The December 2015 trade balance figure was revised to a surplus of R7.60 billion.

Real gross domestic product (GDP) at market prices increased by 0.6% during the fourth quarter (Q4) of 2015. The main contributors to the increase in economic activity in Q4 were the wholesale, retail and motor trade, catering and accommodation industry and finance;,real estate and business services and general government services.

Negative contributions were recorded by the manufacturing industry and the agriculture, forestry and fishing industry.

Commodities

commodities

Commodities have outperformed most asset classes in the last week, as another round of central bank stimulus (PBOC) has fuelled optimism around improved demand from the largest consumer of resources and second largest economy in the world, China.

A weaker dollar, in anticipation of a prolonged low interest rate environment (in the US) has served to further bolster commodity prices.

The rand

rand performance

The rand has continued to show resilience despite a worse than expected trade deficit figure being reported for South Africa in the beginning of last week. While Q4 GDP data being slightly ahead of consensus might have contributed to some strength in the domestic currency, most of the appreciation would consider factors external rather than those local. 

The European Central Bank looks poised to introduce another round of easing measures this week, while the US appears unlikely to raise lending rates next week. The British pound remains vulnerable as market participants consider the possibility of the UK exiting the European Union.

JSE sectors

Company news

Gains over the period were broad-based although led by resource counters, which followed the rebound in commodity prices. Within the sector the following results and updates were released:

  • Exxaro Resources saw a 66.8% drop in FY 2015 diluted headline earnings per share amidst depressed commodity prices; and
  • African Rainbow Minerals issued a trading statement guiding that the group expects a 219% to 242% decline in basic earnings per share.

Three of the four major South African banks (excluding FirstRand which reports this week) released the following earnings and news updates: 

  • The Standard Bank Group FY 2015 results showed a 27% increase in headline earnings per share. The improved earnings figure was largely attributable to the sale assets outside of Africa;
  • Barclays Africa Group FY 2015 results showed diluted headline earnings per share increased by 9.7%. It was also confirmed that Barclays Plc would be looking to divest its 62% shareholding of the group over the next two to three years; and
  • The Nedbank Group FY 2015 results showed diluted headline earnings per share to have increased by 8.52% against the prior year’s comparative

Some of the other major announcements within the broader industrial sector were as follows:

  • The MTN Group released FY 2015 results in which the group saw a 51.4% decline in basic headline earnings. The weaker earnings figures were attributable to the company’s Nigerian operations following the disconnection of 5.2 million unregistered subscribers as well as a R9.3 billion fine provision;
  • Steinhoff International has bid for the French electronic retailer Darty to the amount of 663 million pounds. The company also reported a 67% increase in the groups operating profit (six months) as well as intentions of acquiring Britain’s Home Retail; and
  • Aspen Pharmacare interim results revealed a 22.7% decline in diluted headline earnings per share following write-down’s in the group’s Venezuelan operations.

Upcoming results

2016/03/07

AWA

Arrowhead Properties Limited: Ex-Dividend ZAR: 0.2003

2016/03/07

AWB

Arrowhead Properties Limited: Ex-Dividend ZAR: 0.2003

2016/03/07

CLH

City Lodge Hotels Ltd: Ex-Dividend ZAR: 2.69

2016/03/07

DSBP

Discovery Limited: Ex-Dividend ZAR: 4.80

2016/03/07

GFI

Gold Fields Ltd: Ex-Dividend ZAR: 0.21

2016/03/08

FSR

Firstrand Limited: Interim 2016 Results

2016/03/09

RMH

RMB Holdings: Interim 2016 Results

2016/03/10

SLM

Sanlam: Full year 2015 Results

2016/03/11

ARI

African Rainbow Minerals: Interim 2016 Results

 

Upcoming economic data

Date

Time

Region

Event

Previous

March 8

11:30

SA

Business Confidence Index

80

March 8

10:00

SA

Current account % of GDP

-4.10%

March 8

3:45

CNY

Trade balance

406B

March 9

11:30

GBP

Manufacturing production m/m

-0.20%

March 9

17:30

USD

Crude oil inventories

10.4M

March 10

3:30

CNY

CPI y/y

1.80%

March 10

14:45

EUR

Minimum bid rate

0.05%

March 10

15:30

EUR

ECB press conference

 

March 10

13:00

SA

Manufacturing production y/y

0.40%

March 10

15:30

USD

unemployment claims

278000

March 11

17:00

USD

Prelim UoM consumer sentiment

91.7

March 12

7:30

CNY

Industrial production y/y

5.90%

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