🇿🇦 Local Market Indicators & News Highlights
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🌟 Inflation Challenges in South Africa
South Africa's inflation rate fell slightly in June to a six-month low of 5.1%, potentially encouraging the central bank to consider cutting borrowing costs later this year. However, the central bank faces significant challenges in achieving and maintaining its inflation target of 4.5%, primarily due to rising prices of essential services such as electricity and water, which have exceeded general inflation rates for several years. Anticipated increases in economic activity are likely to drive up the costs of rental housing, clothing, and appliances, further complicating the central bank's efforts. Infrastructure backlogs and fiscal constraints contribute to this issue, with essential service prices expected to continue escalating rapidly. Despite the recent dip in inflation, the Reserve Bank's ability to sustain lower rates is hindered by persistent administered price hikes and a weakening rand. Economic forecasts suggest potential rate cuts later in the year, but significant inflationary pressures remain due to the cost of essential services and other economic factors.
🌟 Sasol’s Share Price Rises on Increased Coal Exports
Sasol’s share price surged over 5% to R143.91 following news of a 5% increase in coal export sales volumes for FY2024, driven by improved operations at Thubelisha colliery and better performance at Transnet Freight Rail. Despite a 2% decline in saleable coal production due to reduced mining sections and increased discards, overall mining productivity rose by 3% compared to FY2023. Gas production in Mozambique increased by 6%, while natural gas and methane-rich gas sales in South Africa were up by 4% and 7%, respectively. However, liquid fuels sales volumes dropped by 4%, and the chemicals business saw an 11% revenue decline due to lower prices. Sasol’s production volumes at its Secunda operations were 1% higher.
🌟 British American Tobacco Half-Year Report: Revenue Down, Future Prospects Up
British American Tobacco (BAT) reported a 8.2% drop in revenue, mainly due to exiting the Russian and Belarusian markets and unfavorable exchange rates. When looking at the core business without these factors, revenue only fell by 0.8%, influenced by investments in the U.S. and changes in wholesaler inventory. Revenue from new, smokeless products slightly decreased by 0.4%, but if you account for constant exchange rates, it actually grew by 7.4%. The second half of the year looks promising with plans for new product launches and better performance in the U.S.
Smokeless products now make up 17.9% of BAT's total revenue, adding an extra £165 million. Despite good pricing for traditional tobacco products, overall profit dropped by 28.3%, largely due to higher amortization charges and the loss of revenue from Russia and Belarus. Adjusted core profit fell by 0.9%, but earnings per share (EPS) increased by 13.8% due to some one-off credits, and adjusted organic EPS rose by 1.3%.
BAT announced a sustainable share buy-back program and an interim dividend of 235.52p per share for 2023, payable in four equal parts in 2024 and 2025. In summary, BAT faced some challenges this half-year but is optimistic about the future with new products and improved U.S. performance on the horizon.
🌟Anglo American Faces Restructuring Challenges
Anglo American reported a 3% drop in earnings to $4.98 billion for the first half of 2024. Revenue declined by 8% to $14.46 billion. Despite setbacks, including a fire at its Grosvenor coal mine and a weak diamond market, CEO Duncan Wanblad remains optimistic about completing the restructuring by the end of 2025. The restructuring plan involves exiting diamond mining, separating platinum, and selling coal mines.
Financially, the company swung to a $672 million loss attributable to shareholders. Earnings per share dropped 23% to $1.06, and the interim dividend decreased by 24% to $0.42. Despite challenges, Anglo's cost-savings program is showing early success, but analysts warn of high risks associated with the restructuring plan.
🌍 Global Market Indicators & News Highlights
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🇺🇸 United States: Stocks Mixed, Economic Data Varied
Stocks Mixed Amid Earnings Reports: Stocks had mixed returns for the second week, with small-cap and value shares outperforming large-cap growth stocks. Declines in Tesla and Alphabet shares led to midweek losses, with the S&P 500 dropping over 2% on Wednesday.
Economic Data Highlights Mixed Trends: The housing market weakened with lower-than-expected new home sales, but business investment and consumer spending exceeded forecasts. The economy grew at an annualized rate of 2.8% in Q2.
Fed's Inflation Gauge Steadies Markets: The core PCE price index remained steady at an annual rate of 2.6%, reinforcing expectations for a Fed rate cut in September. Treasury yields ended slightly lower, and bond market activity was stable.
🇪🇺 Europe: Mixed Index Performance and Bond Yields
Mixed Performance in Major Indexes: The STOXX Europe 600 Index rose 0.31%, with Germany's DAX gaining 1.35%. France's CAC 40 and Italy's FTSE MIB saw losses.
Tech and Luxury Goods Earnings Impact: European markets were affected by weak earnings in technology and luxury goods sectors, influenced by declines in U.S. tech stocks.
Eurozone Bond Yields Decrease: Weaker-than-expected economic data led to lower government bond yields, boosting expectations for ECB monetary easing. Political issues affected bond yields in France and Italy.
🇬🇧United Kingdom: Mid-Caps Rally, Potential Tax Increases
Mid-Cap Stocks Rally: The FTSE 250 Index reached its highest level since March 2022, driven by positive earnings and a rebound in U.S. tech shares. The FTSE 100 also rose to a two-month high.
Potential Tax Increases: UK Chancellor Rachel Reeves is set to reveal a public finances audit showing a potential GBP 20 billion deficit, which could lead to tax increases.
BoE Interest Rate Decision: Mixed economic data led to speculation about a potential interest rate cut by the Bank of England in August, with a 50% chance of a quarter-point cut.
🇯🇵 Japan: Market Losses and Currency Strength
Stock Market Losses: The Nikkei 225 Index fell 6.0%, and the TOPIX Index dropped 5.6%, pressured by declines in U.S. mega-cap tech stocks.
Yen Strengthens: The yen strengthened to around JPY 154.2 against the USD, hurting exporters' profit outlook. Speculation about government intervention and narrowing U.S.-Japan interest rate differentials contributed to the yen's strength.
Inflation and Economic Data: The Tokyo core CPI rose to 2.2% year-on-year in July. Flash PMI data indicated growth in the services sector, while manufacturing output saw a slight decline.
🇨🇳 China: Equities Decline, Central Bank Eases
Equities Decline: The Shanghai Composite Index fell 3.07%, and the CSI 300 dropped 3.67% as central bank rate cuts failed to boost confidence. The Hang Seng Index in Hong Kong also declined by 4.38%.
Central Bank Rate Cuts: The People's Bank of China cut its MLF and short-term policy rates, and banks reduced loan prime rates to support growth after weaker-than-expected Q2 GDP.
Disappointing Policy Initiatives: The Third Plenum meeting did not deliver significant policy measures, causing bearish sentiment. President Xi Jinping emphasized "high-quality development" without providing detailed plans.