By Anchor Capital
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South African Market Review
South African markets closed in the red yesterday, after the IMF again downwardly revised South Africa’s economic growth forecasts for 2015 and 2016. Naspers Limited declined 5.6%, reversing its recent sessions gains. Property sector stocks, Ascension Properties, Growthpoint Properties and Redefine Properties dropped 3.7%, 2.1% and 1.8%, respectively. However, On the flip side, gold miners, AngloGold Ashanti, Harmony Gold Mining Company and Gold Fields advanced 4.4%, 2.2% and 1.6%, respectively. Meanwhile, Gold Fields indicated that it expected reduced gold production totals in 1Q15 due to the Christmas break in South Africa and mine scheduling at its other operations. The JSE All Share Index declined 0.5% to close at 53,311.46.
UK Market Review
UK markets finished higher yesterday, fuelled by a rebound in mining sector stocks. Meanwhile, the UK consumer price inflation was flat for the second month in March. Anglo American, BHP Billiton, and Antofagasta gained 4.1%, 3.1%, and 2.9% respectively, recovering from heavy losses in the previous session amid weak data from China. Banking sector stocks, Barclays and Lloyds Banking Group advanced 1.0% and 0.6%, respectively. Bucking the trend, Hargreaves Lansdown fell 2.2%, after the company announced that its co-founder Peter Hargreaves would step down from the board immediately. The FTSE 100 Index gained 0.2% to close at 7,075.26.
US Market Review
US markets ended mostly higher yesterday, led by gains in energy sector stocks. Ensco, Diamond Offshore Drilling and Range Resources climbed 6.7%, 5.6% and 4.8%, respectively, in line with a rise in oil prices. JPMorgan Chase & Company gained 1.6%, after its 1Q15 revenue and earnings topped market estimates. On the other hand, Google slid 1.6%, following a report that the European Union plans to file an anti-trust suit against the firm for abusing its dominant position in internet searches. Wells Fargo & Company dropped 0.7%, after reporting a drop in its 1Q15 earnings. The S&P 500 Index rose 0.2% to settle at 2,095.84, while the DJIA Index advanced 0.3% to close at 18,036.70. However, the NASDAQ Index fell 0.2% to finish at 4,977.29.
Asia Market Review
Markets in Asia are trading mostly weaker this morning. In Japan, JGC Corporation dropped 5.4%, after it posted lower-than-expected FY15 preliminary profit and lowered its dividend outlook. Best Denki declined 4.5%, after the compared recorded downbeat FY15 operating profit. In Hong Kong, Cnooc and China Petroleum & Chemical jumped 4.4% and 2.7%, respectively, following higher crude oil prices. In South Korea, Grand Korea Leisure advanced 4.4%, amid reports that the company is close to ink a deal with US-based Mohegan to build a casino resort worth KRW1.00tn. The Nikkei 225 Index is trading 0.1% lower at 19,896.01, while the Kospi Index is trading 0.1% higher at 2,113.89. The Hang Seng Index is trading marginally lower at 27,547.75.
Commodities
At 06:00 SAST today, Brent crude oil rose 0.1% to trade at $57.64/bl, after data revealed that China’s GDP increased in line with market estimates on an annual basis in 1Q15. However, then nation’s industrial production and retail sales data fell short of market expectations. The American Petroleum Institute (AIP) indicated that US crude inventories rose by 2.60mn bl last week. Yesterday, Brent crude oil advanced 1.6% to settle at $57.59/bl, on a broadly weaker US dollar and amid continuing unrest in Yemen. Meanwhile, The Energy Information Administration (EIA), in its energy outlook, projected that brent would average $56.00/bl for the remainder of the year before increasing to $76.00/bl in 2018.Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 0.9% to $3.53/bushel.
At 06:00 SAST today, gold prices fell 0.1% to trade at $1,191.28/oz. Yesterday, gold declined 0.5% to close at $1,192.78/oz.
Yesterday, copper declined 0.8% to close at $5,955.00/mt. Aluminium closed 1.0% higher at $1,792.25/mt.
Currencies
Yesterday, the South African rand strengthened against the US dollar, as US retail sales data missed market expectations. Meanwhile, the International Monetary Fund lowered its economic growth forecast on South Africa for 2015 and 2016. Going forward, market will keep an eye on retail sales data in South Africa and industrial production data in the US scheduled later today for further direction to risk appetite.The yield on benchmark government bonds fell yesterday. The yield on 2015 bond declined to 6.06% while that for the longer-dated 2026 issue fell to 7.72%.
At 06:00 SAST, the US dollar is trading 0.3% higher against the South African rand at R12.0444, while the euro is trading 0.1% lower at R12.7899. At 06:00 SAST, the British pound is trading flat against the South African rand at R17.7612.
Yesterday, the euro strengthened against the greenback, but weakened against the South African rand. Going forward today, most of market attention will be focused on the European Central Bank’s monetary policy meeting along with the post-meeting press conference for further hints.
At 06:00 SAST, the euro slipped 0.3% against the US dollar to trade at $1.0619, while it has weakened 0.1% against the British pound to trade at GBP0.7202.
Economic Updates
The non-seasonally adjusted the Producer Price Index (PPI) core output advanced 0.1% on a YoY basis in the UK, in March, meeting market expectations. PPI core output had recorded a revised rise of 0.3% in the prior month.The retail price index in the UK climbed 0.9% on a YoY basis in March, compared to a rise of 1.0% in the prior month. Market anticipations were for the retail price index to rise 1.0%. The National Statistics has reported that, on an annual basis in the UK, the consumer price index remained steady in March, similar to a flat reading in the prior month. Markets were anticipating the consumer price index to record a flat reading.
The National Institute of Statistics has indicated that, on a monthly basis in March, the consumer price index rose 0.6% in Spain, meeting market expectations. The consumer price index had registered a rise of 0.2% in the prior month.
The final consumer price index in Italy slid 0.1% in March on a YoY basis, in line with market expectations. In the previous month, the consumer price index had registered a similar fall. The preliminary figures had also indicated a drop of 0.1%.
The wholesale price index dropped 1.1% on a YoY basis, in March, in Germany. In the previous month, the wholesale price index had dropped 2.1%.
The seasonally adjusted industrial production registered a rise of 1.1% in the Eurozone on a monthly basis in February, compared to a revised drop of 0.3% in the prior month. Market expectations were for industrial production to rise 0.4%.
In March, on a monthly basis, producer price registered a rise of 0.2% in the US, meeting market expectations. Producer price had dropped 0.5% in the prior month.
Advance retail sales in the US recorded a rise of 0.9% on a monthly basis in March, less than market expectations for a rise of 1.0%. In the prior month, advance retail sales had recorded a revised drop of 0.5%.
In 1Q15, on a QoQ basis, the gross domestic product (GDP) rose 1.3% in China, compared to an advance of 1.5% in the prior quarter. Market anticipations were for GDP to advance 1.4%.
Corporate Updates
South AfricaGold Fields Limited
: The gold mining company, in its 1Q15 production and cost guidance, stated that attributable gold equivalent production is anticipated to be around 501.00k oz, compared with 556.00k oz at All-in Sustaining Costs (AISC) of $1,145.00/oz and All-in Costs (AIC) of $1,165.00/oz. The company indicated that production was planned lower due to the Christmas break in South Africa and mine scheduling at the other operations. The company kept its FY15 gold production guidance unchanged at 2.20mn oz.SABMiller Plc: The brewing and beverage company announced that Tony van Kralingen, its Group Director of Integrated Supply and Human Resources, and a member of the group’s executive committee, intends to retire at the end of December 2015.
Trencor Limited: The company indicated that it has received formal notification that clients of Allan Gray (Pty) Limited have, in aggregate, acquired an interest in the company, such that the total interest held by Allan Gray’s clients now amounts to 5.1348%.
Evraz Highveld Steel and Vanadium announces business rescue: Evraz Highveld Steel and Vanadium announced on Tuesday it is commencing with voluntary business rescue proceedings in terms of section 129 of the Companies Act.
Sappi selected as preferred bidder of Ngodwana biomass project: Sappi has been selected as preferred bidder of the Ngodwana energy biomass project in the fourth window of the South African government’s renewable energy independent power producer programme.
Tower Property Fund bolsters industrial exposure: Tower Property Fund (Tower) has continued its acquisition spree, this time bulking up its industrial sector exposure by acquiring HTP Holdings which owns a property portfolio of eight industrial properties.
FirstRand picks banks to set up meetings: FirstRand Ltd., Africa’s largest lender by value, hired four banks to help it arrange meetings with fixed-income investors from Germany to Hong Kong as it plans to sell dollar bonds, a person with knowledge of the matter said.
Delta International CEO resigns: Delta International Property CEO Louis Schnetler has resigned due to “unforeseen personal reasons.” Schnetler’s resignation will be effective on 7 July, the company said in a Sens announcement on Tuesday.
UK and US
Johnson & Johnson: The pharmaceutical company, in its 1Q15 results, indicated that its sales dropped 4.1% to $17.37bn from $18.12bn posted in the same period prior year. The company reported diluted EPS of $1.56, better than market estimates of $1.53. Additionally, the company lowered its adjusted EPS guidance for FY15 to the range of $6.04 to $6.19 from the previous estimated range of $6.12 to $6.27.
Wells Fargo & Co.: The banking and financial services holding company, in its 1Q15 results, indicated that its total revenue grew 3.2% to $21.28bn from $20.63bn in the same quarter last year. Its diluted EPS stood at $1.04, compared with $1.05 recorded in the corresponding last year. Both EPS and revenue topped market expectations.
JPMorgan Chase & Co.: The financial services company, in its 1Q15 results, revealed that its revenue rose to $24.82bn from $0.97bn posted in the same quarter a year ago. It reported EPS of $1.45, better than market estimates of $1.38. The company also indicated that its board intends to increase the quarterly common stock dividend for 2Q15 by 10.0%.
Intel Corporation: The semiconductor manufacturing company, in its 1Q15 results, indicated that its revenue stood at $12.78bn, compared with $12.76bn posted in the same quarter last year. It reported diluted EPS of $0.41, in line with market expectations. For FY15, the company expects revenue to be approximately flat and gross margin to be 61.0%, plus or minus a couple of percentage points.
CSX Corporation: The transportation company, in its 1Q15 results, stated that its revenue rose to $3.03bn from $3.01bn recorded in the corresponding quarter last year. It posted EPS of $0.45, up from $0.40 recorded in the previous year. The company also announced that its board of directors has approved a 13.0% increase in its quarterly dividend to $0.18/share. The board has also approved a new $2.00bn share repurchase programme.
Avon Products: Media reports indicated that the company is exploring strategic alternatives, including a sale of the company or its struggling North American business.
Alliance Trust: The investment and financial services company, in its trading update for 1Q15, stated that it has reiterated its focus on generating a real return for shareholders over the medium to long term through capital growth and rising dividend. It indicated that it has delivered strong shareholder returns over both short and long term horizons. Total Shareholder Return (TSR) was 6.9% and Net Asset Value Total Return (NAV TR) was 7.9% for the quarter. The company stated that its investment process and the portfolio are well positioned to deliver increased value of shareholders investment.
Ashmore Group: The investment management company, in its assets under management (AuM) update in respect of the quarter ended 31 March 2015, stated that its AuM declined to $61.10bn through a combination of net outflows of $2.00bn and negative investment performance of $0.60bn.
Michael Page International: The recruitment company, in its 1Q15 trading update, revealed that its 10.9% increase in gross profit in constant currencies reflects continued annual overall growth in all its regions. It stated that in reported rates, the company’s gross profit was up 7.2% to GBP135.60mn. The company continues to believe the performance for FY15 will be in line with its expectations.
Poundland Group: The variety store chain company, in its trading statement for FY15, indicated that total revenue, excluding Spain, increased by 11.8% on a constant currency basis and by 2.4% on a like-for-like basis. Furthermore, on an actual currency basis, total revenue, excluding Spain, increased by 11.4% to GBP1,111.50mn. It revealed that the group opened a net 15 new stores in the UK and Ireland during 4Q15, taking the total to a net 60 stores during FY15.
Centrica Plc: The utilities company announced the appointment of Mark Hodges as Managing Director, British Gas with effect from 1 June 2015, at which time he will also join the company’s board.
British Land Co.: The property development and investment company announced that it has completed the acquisition of One Sheldon Square, Paddington Central, for GBP210.00mn from the Employees Provident Fund, Malaysia. It stated that the acquisition is in line with its strategy of expanding in London and the South East including in and around the company’s existing assets.
Evraz Plc: The steel making and mining company announced that the board of directors of Evraz Highveld Steel and Vanadium have decided to file for voluntary business rescue procedures. It stated that both the companies would be managed by an independent business rescue practitioner appointed by the board of Highveld, effective 14 April 2015.
John Wood Group: The oil and gas services company revealed that it has won a new five year contract from EnQuest to provide engineering, design, construction, procurement and commissioning services to the Thistle, Heather and Northern Producer offshore assets in the North Sea.
Riverstone Energy Limited: The energy investment company announced that Lord John Browne and Tidu Maini have notified that they do not intend to offer themselves for re-election to the board of directors at its forthcoming annual general meeting on 13 May 2015 and would step down from the board at the conclusion of the meeting.
Imagination Technologies Group: The semiconductor R&D and licencing company announced that it has partnered with Quanta Computer and Celeno Communications to create an end-to-end WebRTC-enabled IP camera that lets OEMs and service providers deliver their own branded solution for video conferencing, home surveillance and other applications.
Financial Times
Insurance veteran to head British Gas: Energy giant Centrica has tapped insurance industry veteran Mark Hodges to head British Gas, one of the most politically-sensitive business jobs in the UK.
Brussels to investigate Google’s Android platform: Brussels will launch a formal investigation into Google’s Android smartphone platform on Wednesday, opening a fresh front in the EU’s antitrust battle with the US group.
HSBC hires headhunters in search for new board members: HSBC is preparing to refresh its board of directors after a bruising few months in which some of its most senior members were criticised by parliamentary committees over a tax evasion scandal at its Swiss private bank.
Doughty Hanson abandons €2bn buyout fundraising: Doughty Hanson, one of Europe’s oldest private equity groups, has abandoned plans to raise money for its latest buyout fund after it failed to win enough interest from backers.
Poundland sales pass £1bn as 99p Stores deal hangs in balance: On the eve of the recession in 2008, discount retailer Poundland had just 170 stores and GBP330.00mn in sales. On Tuesday, after seven years of squeezed household incomes, the pound shop chain of almost 600 shops reported more than GBP1.00bn in yearly sales for the first time.
Russian financier tightens grip on Gulfsands Petroleum: A Russian financier and the main shareholder of UK-listed oil explorer Gulfsands Petroleum has tightened his grip on the company with the appointment of an ally as executive chairman following months of public feuding among directors and shareholders.
Asos appoints Helen Ashton as finance director: Asos has raided the ranks of a UK debt management company to find a finance director, ending a six-month search to replace Nick Beighton who was promoted in autumn to help revive the online retailer’s fortunes following three profit warnings.
FCA fines Clydesdale Bank record £21m for PPI failings: The UK’s financial regulator has imposed its largest penalty to date for failings around selling payment protection insurance (PPI), fining Clydesdale Bank GBP20.70mn for shortcomings that included staff falsifying information on its policies.
Emerging markets retreat continues to weigh on Ashmore: Ashmore, the emerging markets-focused investment group, has reported a 4.0% third quarter decline in assets under management as investors continue a retreat from its core markets, spooked by the strengthening US dollar and tumbling commodities prices.
Antofagasta sounds warning on Chile copper industry: Chile’s copper industry risks losing its competitiveness, as productivity declines to levels last seen in the early 1990s due to ageing mines and higher labour costs, miner Antofagasta has warned.
Morgan Stanley offered $1bn for oil unit: Morgan Stanley has been offered more than $1.00bn for its merchant oil trading business by a US-based trading house, after two failed transactions with foreign buyers.
Norway oil fund begins policy of revealing how it votes: Norway’s $880.00bn oil fund will on Wednesday usher in a new era in corporate governance when it begins to disclose in advance how it will vote at companies’ shareholder meetings, in a bid to become a more active investor.
Leading Indonesian family behind rival to Rothschild bid for Arms: One of Indonesia’s richest family-owned businesses has emerged as backer of a possible offer for Asia Resource Minerals, the distressed London-listed mining group which is subject to a refinancing offer led by a leading shareholder, Nat Rothschild.
Billionaire Wilbur Ross sells down Virgin Money stake: Two backers of Virgin Money are aiming to sell a stake of at least $277.00mn (GBP187.00mn) after shares in the challenger bank soared nearly 50.0% only five months after listing on the London stock market.
JPMorgan shares hit record after beating forecasts: JPMorgan Chase reported a boost to its trading revenues, and its profits, as it opened Wall Street’s 1Q15 earnings season for 2015 – sending shares in the US bank to a record high.
Exor looks to thwart Axis offer for PartnerRe: Exor, the investment company of Italy’s Agnelli family, the dynasty behind Fiat, has launched a $6.40bn bid to scupper Axis Capital’s tie-up with the US-listed reinsurer PartnerRe.
Wells Fargo profit slips for first time in 7 years: Wells Fargo’s 1Q15 profits slipped for the first time in seven years, as the biggest bank by market capitalisation in the US raised staff costs while making provisions to cover potential hits to its big energy portfolio.
J&J cuts guidance as strong dollar hits sales: Johnson & Johnson has cut its full-year earnings guidance as the strengthening of the US dollar caused a dip in 1Q15 sales.
Seinfeld crackles them up for Sony: Jerry Seinfeld, the comedian, took the stage in Manhattan on Tuesday to kick off a pitch to advertisers from Crackle, Sony’s ad-supported online video service. Mr Seinfeld’s latest show, Comedians in Cars Getting Coffee, has been a hit for Crackle, which has picked it up for a sixth season this year.
AOL launches new platform for buying advertising across media: AOL has unveiled a new platform for buying advertising across different media, as the internet company positions itself to ride the near-$600.00bn global ad industry’s shift into a data-driven, automated future.
BlaBlaCar buys ride-sharing competitors to lock in European lead: BlaBlaCar is buying its strongest competitor in Europe as the online ride-sharing company looks to consolidate its position on its home turf while continuing to expand worldwide.
Phones4U secured creditors to get up to 24p in the GBP1.00, says PwC: Close to GBP170.00mn owed to unsecured creditors in collapsed mobile phone retailer Phones4U will be almost entirely wiped out, according to the first progress report into the group’s demise by administrator PwC.
French government backs Nokia bid for Alcatel-Lucent: France’s economy ministry has thrown its support behind Nokia’s proposed acquisition of Paris-based Alcatel-Lucent, signalling a shift in tone on the contentious issue of cross-border industrial tie-ups.
Nokia in advanced talks over bid for Alcatel-Lucent: Nokia is in advanced talks to launch a takeover bid for all of Alcatel-Lucent, as the Finnish telecoms equipment company seeks to challenge the industry leader Ericsson.
Modi reforms crucial to Siemens’ India plans: Siemens is preparing to build two new rail infrastructure factories in India but cautioned that further investment increases are conditional on the delivery of wider economic reforms by Prime Minister Narendra Modi.
Fighter jets deal signals Indian procurement shift: New Delhi’s decision to buy 36 “ready-to-fly” Rafale fighter jets from France has in effect ended commercial negotiations on the purchase of 126 aircraft direct from Dassault Aviation, India’s defence minister has said.
Barclays: took on 1.0% to 262.20p after JPMorgan’s quarterly results showed a bounceback for investment banking revenue.
Standard Chartered: fell 2.0% to GBP10.84 after JPMorgan highlighted weaker demand for trade finance in Asia.
Lex
Intel: chippin’ away: If performance is about meeting expectations then Intel had a good quarter, hitting its revenue forecast bang-on at $12.80bn. The quarterly growth target that was met so neatly had actually been lowered by $1.00bn earlier in the year, because of lower global demand for personal computers (most of which use Intel chips). Sales next quarter are expected to fall, compared with the year prior. Intel hopes its full-year revenues will be flat. However, Intel lags behind in the fast-growing smartphone market, where its chips have struggled to catch on. Its mobile group has reported more than $9.00bn in cumulative operating losses since 2012. Those losses will be masked under Intel’s new reporting structure, which lumps mobile and PC into a single new segment, making it conveniently impossible to parse out mobile revenues or losses. The word “mobile” barely appears in Intel’s latest earnings release – hardly a vote of confidence. On top of that, Intel believes the global tablet market will shrink this year.Weight Watchers International: Skin and bones: In 2012 Weight Watchers shares traded at $75.00, and they have since lost 90.0% of their value. Its problem is one that confronts many face-to-face consumer services: the rise of smartphone apps and wearables that, to some extent, have replaced Weight Watchers meetings and counselling. The weight management market is estimated to be worth $60bn, but Weight Watchers thinks of itself more as a lifestyle or social network rather than simply a diet. Members pay either $43.00/month to attend weekly group meetings, or $19.00/month for online tools to track calorie consumption. In 2012, Weight Watchers had a total of 3.5m subscribers. By the end of 2014 that had fallen to 2.50mn. Meanwhile, the 2015 consensus revenue estimate of $1.20bn is a third lower than 2012. Hopes were high that 2015 would be the year that subscriber growth would again appear. But on the fourth-quarter earnings call, Weight Watchers said its January trend (crucial because it is post-holidays) was weaker than in 2014, which itself was disappointing. A new marketing campaign did not catch on; nor did new one-on-one coaching and 24/7 online chat products.
JPMorgan: pushing hard: JPMorgan can breathe easier – for now. After months of chatter about whether the bank should break up, it delivered a solid first quarter. Revenue of $24.80bn was up 4.0% from last year, while earnings per share of $1.45 beat expectations by a few pennies. The numbers showed some of the diversified strength that for a long time made Jamie Dimon’s company the envy of Wall Street. JPMorgan, though, is still a bank in the traditional sense of lending to businesses and individuals and that part of the group still struggles. Long-term interest rates continue to contract so the spread between funding (eg deposits) and rates charged is narrower than lenders would like. The group’s net interest margin fell 7 basis points to 2.07% and loan growth was just one per cent. The outlook JPMorgan gave was not especially rosy, although the shares rallied and touched an all-time high. But neither that rally, nor the content of the first quarter numbers, was enough to push JPMorgan’s valuation up past 1 times book value. Even after a solid first quarter Mr Dimon still has to convince the doubters that universal banking is working.
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