It was an interesting trading week last week as markets struggled to find a committed direction with local data mixed relative to expectations, while news from the UK data impressed and US and Japanese data underwhelmed.
A brief summary of the major data points follows:
- In the UK, preliminary GDP data showed quarter-on-quarter growth of 0.6%, ahead of consensus estimates which had predicted 0.5% growth.
- The Bank of Japan renewed monetary stimulus in the country by expanding an electronic funds transfer programme to $58 billion a year. The announcement was seen as a modest expansion relative to the stimulus expected.
- In the US, the Federal Reserve kept lending rates unchanged (as was expected) although it noted that the global economic backdrop looked to have improved, which in turn has led to speculation that the commencement of interest rate hikes this year now has an improved probability. Advance GDP data showed economic growth of 1.2% within the region which was less than half of expectations (est. 2.6%).
- The annual percentage change in the PPI for final manufactured goods in South Africa was 6.8% in June 2016. South African employment declined in the second quarter of 2016 by 129 000 to 15.5 million. The quarterly decline in total employment was driven by job losses in services, agriculture, transport and mining.
- Local trade balance data showed a second consecutive monthly trade surplus in June, as exports of vegetable products climbed, while oil imports also rose. The surplus was recorded at R12.5 billion.
Commodity prices in general were mostly buoyant last week as the dollar traded softer over the period, after US Fed officials decided not to increase lending rates on Wednesday and GDP data was a significant miss on Friday.
However crude oil prices bucked the trend, having continued to sell off after Morgan Stanley downgraded the commodity’s outlook. The company suggested that oil supplies are increasing on the back of fewer disruptions in what is an already-oversupplied market. Key demand for oil was also said to be decelerating.
The rand remained surprisingly resilient last week, despite Fitch Ratings downgrading South Africa’s local currency debt rating in line with South Africa’s foreign currency rating at BBB-.
On Friday the currency would have found some vigour after local trade balance data showed a second consecutive monthly trade surplus in June, while strength against the dollar on Friday would have also followed the worse-than-expected GDP data out of the US.
Gains in resource counters last week (particularly platinum and precious metals) were more than offset by weaker consumer goods and services counters over the period. Industrial rand hedge stocks would have been negatively affected by a firmer rand and led by declines in heavyweight counter, SABMiller Plc, as the takeover deal by Anheuser-Busch InBev (AB InBev) started to stall.
A summary of company releases last week follows:
ArcelorMittal interim results revealed revenue to have increased by 3% following a 10% increase in sales volumes.
Liberty Holdings interim results showed group BEE normalised headline earnings of R1 821 million were 9% lower, representing a 15% decline in BEE normalised operating earnings and a 4% increase in earnings from LibFin Investments – Shareholder Investment Portfolio (SIP).
Barclays Africa Group’s interim results showed diluted headline earnings to have increased by 7%.
AB InBev Q2 2016 revenue grew by 4% in the quarter, with strong revenue per hl growth of 5.9%
Intu Properties interim results revealed underlying earnings per share to have increased by 10% against the comparable interim period.
British American Tobacco interim results revealed group revenue to be up 7.8% at constant rates of exchange, or 6% on an organic basis, driven by a strong volume performance and good pricing.
Anglo American Plc interim results showed group underlying earnings before interest and tax (EBIT) of $1.4 billion, a 27% decrease, due to lower commodity prices ($1.2 billion underlying EBIT impact), partially offset by weaker producer country currencies ($0.9 billion underlying EBIT benefit) and incremental cost reductions.
BHP Billiton announced that it will recognise a provision in the range of US$1.1 billion to US$1.3 billion, which is approximately equivalent to a 50% share of the current estimate of Samarco’s funding obligations under the terms of the Framework Agreement entered into on March 2 2016.
Hulamin’s interim results revealed revenue to have increased by 25% while operating profit increased 86%.
Anglo American Platinum interim results revealed headline earnings to have fallen 58% from the previous year’s comparative interim period.
Kumba Iron Ore interim results revealed headline earnings per share (Heps) to have increased by 20% against the comparable interim period.
AEC interim results revealed headline earnings to have increased by 15% after adjusting for the Somerset West bulk land sale andloss on PRMA settlement
The Mondi Group released a trading statement guiding that it expects basic headline EPS (euro cents) at 73 to 77 (2015: 60.1), an increase of between 21% and 28%
Capital & Counties Properties’ interim results revealed that equity attributable to owners of the Parent is GBP2.8 billion (December 2015: GBP 2.9 billion)
Sibanye Gold released a trading statement guiding that it expects Heps to be between 484% and 611% higher than the comparative interim period.
The Spur Corporation has guided that FY2016 total restaurant sales had increased by 12.9% from the comparable reporting period.
The MTN Group announced that it intends to list on the Nigerian Stock Exchange.
Shaun Murison is a senior market analyst at IG.com