Stocks Drop After Fed Flags Risks

20/08/2020 The JSE ended weaker yesterday down -1.04%, with Sasol falling for the fourth day running as it prepares to execute a rights issue to pay down its debt pile, while Truworths gained the most after releasing a better-than-expected trading statement. MRP again led the gainers and have issued a trading statement this morning that sees 1H earnings at least 20% lower y/y. World markets are lower after the Fed minutes signaled tempered optimism about second-half growth, Gold sold off and the Dollar has gained. IG Markets Top 40 are down 495 points.
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Out this A.M
• MR PRICE GROUP LIMITED – Trading update for the 20 weeks ended 15 August 2020 and trading statement for the 6 months ending 26,SEES IH EARNINGS AT LEAST 20% LOWER Y/Y AND HAS NO IMMEDIATE INTENTION TO ACTION EQUITY RAISED.
• IMPERIAL LOGISTICS LIMITED – Trading Statement for the 12 months ended 30 June 2020, SEES FY BASIC EPS& BASIC HEPS 20% LOWER Y/Y
• Gold Fields Profit Doubles as Metal Rally Offsets Virus Turmoil, 1H REV. $1.64Bln, 1H HEADLINE EPS 20C, Interim dividend per share 1.60 rand.
• STANDARD BANK 1H ADJ EPS 4.74 RAND VS. 8.374 RAND Y/Y, declares NO dividend.
• KAP FY Net Loss 2.15 Bln Rand Vs. Profit 1.03 Bln Rand Y/y.
Overnight in the US all the Indices retreated after the Fed minutes were released, the Fed said “the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term.” The Fed kept rates unchanged last month, noting the economy was still in need of monetary support. That comment knocked the S&P 500 from a new intraday record set on Wednesday. The Dow and Nasdaq also turned negative. The Dow closed down-0.31%, the S&P was 0.44% lower and the Nasdaq gave back 0.57%, Futures this morning all point lower with the DOW down 140 points, the S&P down 18 points and Nasdaq down 59 points.
Apple, however, made history on Wednesday as the iPhone maker became the first U.S. company to reach a market cap of $2 trillion. With that milestone, Apple officially doubled its valuation in just over two years. The stock is up nearly 60% in 2020 and remains responsible the market’s rally off its springtime low.
Geopolitical tensions remain on the agenda after U.S. Secretary of State Mike Pompeo warned Russia and China not to contravene the reimposition of UN sanctions on Iran. While White House economic advisor Larry Kudlow told CNBC on Wednesday that Trump wants to prevent China from accessing some of the proceeds from the sale of TikTok’s U.S. operations. Kudlow admitted that would be “unusual” for the U.S. Treasury to receive some form of payment. We have US jobless data out later today with the est that some 920 K first-time applicants filed for unemployment benefits during the week ended August 15.
Asia trades lower this morning on the back of The Fed minutes while China announced no changed to its benchmark lending rate, with the one-year loan prime rate (LPR) kept at 3.85%, while the five-year LPR was on hold at 4.65%. South Korean stocks were among the biggest losers regionally, with the Kospi dropping 2.77% while Kosdaq index plunged 2.88%. The moves came as local news agency Yonhap reported daily new coronavirus cases in the country rising by triple digits for the seventh straight day. The Hang Seng is 1.95% lower, Tencent down 0.59%, Nikkei down 0.94%, SPX 200 -0.77% and Aussie Miners – 0.95%. Overall, the MSCI Asia ex-Japan index dropped 1.68%.
Oil prices are lower as major producers warned of a risk to demand recovery if the coronavirus crisis is prolonged, while U.S. crude inventories dropped less than expected. Stockpiles of crude in the United States fell for a fourth straight week, even as net imports rose. However, the 1.6 million barrel decline was less than a Reuters poll showing expectations for a 2.7 million barrel fall. Fuel demand was down 14% from the year-earlier period over the last four weeks, the EIA data also showed. Brent $ 44.98, WTi $ 42.49.
Gold has rebounded this morning after getting hammered 3.5% yesterday ahead and after the Fed minutes as the dollar strengthened, Gold is up 1.1 % at $1950, elsewhere, silver rose 1.2% to $27.05 per ounce, platinum climbed 0.8% to $938.81, and palladium gained 0.3% to $2,163.50. to $2,165.86.
Have a great day.