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Markets: under pressure

A look at last week’s market and company highlights.

Local data

In what was a relatively quiet week, in terms of local economic data, manufacturing and business confidence data both came in well ahead of consensus estimates.

South African manufacturing PMI data showed an index reading to 54.90 in April 2016, from an index reading of 50.50 in the month preceding.

South African business confidence data rose to an index reading of 82.5 in April 2016 from an index reading of 81.2 in the month preceding.

Ratings agency Moody’s reaffirmed South Africa’s long-term government bond and issuer rating of ‘Baa2’ while assigning a negative outlook, concluding the group’s downgrade review for the country.

The rand

The rand sold off significantly over the last few days of last week, to test the R15/USD mark, the currency’s weakest level in four weeks. The currency’s weakness followed a selloff in emerging markets, as a risk-off environment has followed weaker Chinese PMI data which has continued to fuel global growth concerns.

shaun 3

Source: IG

 

Companies

Broad-based sector weakness was the order of the week with only the Consumer Goods and Forestry & Paper indices managing to eke out gains. Within these two sectors, heavily-weighted contributions from the likes of British American Tobacco, SABMiller and Mondi Group look to have benefited from favourable currency movements relative to their UK primary listings.

shaun 4

Source: IG

Some of the major corporate news releases over the period were as follows:

ArcelorMittal South Africa’s operational update noted that steel production was 9% lower than the comparative period while sales were 3% higher.

Interim results from Redefine Properties showed a 2.8% increase in total income. Diluted headline earnings per share decreased by 12.78% and an interim dividend of 41.70c was declared.

Old Mutual Plc saw gross sales increase by 17% in Q1 2016, while funds under management increased by 3%.

The Bidvest Group announced that it expects good results in FY2016 with strong trading activity across all of its relevant markets.

Barclays Plc sold off more than 100 million ordinary shares in the Barclays Africa Group, reducing the company’s holdings to 50.1% of the issued share capital.

SABMiller Plc announced that it along with The Coca-Cola Company and Gutsche Family Investments and the South African Government, have agreed to a comprehensive set of commitments that will be recommended to the Competition Tribunal in connection with the proposed creation of Africa’s largest soft-drink beverage bottling operation.

Holdsport’s FY2016 results highlighted sales that have increased by 11.8% and headline earnings per share that have increased by 21.31% over the period.

Tiger Brands’ trading statement guided that the company expects earnings per share to have increased by between 23% and 28% in the interim reporting period.

Rhodes Food Group issued a trading statement guiding that it expects headline earnings per share to have increased by between 85% and 90% in the interim reporting period.

International data

Global markets were under pressure for most of last week as a consensus miss on Chinese data kicked the week off, while worse-than-expected US jobs data ended the period.

shaun 1

Source: IG

In China, both manufacturing and Caixin manufacturing PMI data fell short of consensus estimates with index readings of 50.1 (est. 50.3) and 49.4 (est. 49.8) respectively.

In the US, non-farm employment change data showed 160 000 workers to have been added to the payroll. Expectations were for 200 000 workers to have been added. The unemployment rate remained at 5% in April 2016. 

Commodities
Hawkish comments from the Atlanta Federal Reserve President Dennis Lockhart, have catalysed renewed dollar strength which has bode poorly for commodity prices over the course of the week.

shaun 2

Source: IG

The Federal Open Market Committee (FOMC) member was quoted as saying that a rate hike in June is a real possibility, which lifted the greenback off near two-year lows, offsetting some of the recent gains witnessed in commodity prices.

Iron ore was hardest hit over the period, with short-term losses compounded by speculative retail trade in China.

Upcoming corporate news

2016/05/09

PSG Group: ex-dividend R2.00

2016/05/09

Anglogold Ashanti: Q1 2016 earnings release

2016/05/10

Life Healthcare Group: Q2 2016 earnings release

2016/05/11

Datatec: Q4 2016 earnings release

2016/05/12

Reunert: Q3 2016 earnings release

2016/05/12

Mondi: Q1 2016 sales and revenue release – trading update

2016/05/12

Reunert: Q3 2016 earnings release

2016/05/13

Liberty Holdings: Q1 2016 earnings release

2016/05/13

Oceana Group: Q2 2016 earnings release

 

Upcoming economic news

11-May

10:30am

GBP

Manufacturing production m/m

-1.10%

11-May

4:30pm

USD

Crude oil inventories

2.8M

12-May

1:00pm

GBP

BOE inflation report

 

12-May

1:00pm

GBP

MPC official bank rate votes

0-0-9

12-May

1:00pm

GBP

Monetary policy summary

 

12-May

1:00pm

GBP

Official bank rate

0.50%

12-May

1:45pm

GBP

BOE Gov Carney speaks

 

12-May

2:30pm

USD

Unemployment claims

274K

13-May

8:00am

EUR

German prelim GDP q/q

0.30%

13-May

2:30pm

USD

Core retail sales m/m

0.20%

13-May

2:30pm

USD

PPI m/m

-0.10%

13-May

2:30pm

USD

Retail sales m/m

-0.30%

13-May

4:00pm

USD

Prelim UoM consumer sentiment

89

14-May

7:30am

CNY

Industrial production y/y

6.80%

 

Shaun Murison is a senior analyst at IG South Africa

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