Bulls n Bears Daily Market Commentary : 04 November 2019

Tue Nov 5 01:40:32 CAT 2019

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Bulls n Bears Daily Market Commentary : 04 November 2019

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Zimbabwe Stock Exchange Update

The All Share index opened the week in the positive after adding 3.55 points
to close at 239.44 points.Cement maker PPC  gained $0.8025 to $4.8150,
PADENGA   rose by $0.1170 to end at $3.0196 and DELTA  was $0.0999 higher at
3.9699. INNSCOR also increased by $0.0921 to $2.9996 and SIMBISA traded
$0.0601 firmer at$1.4503.

Trading in the negative; OLD MUTUAL LIMITED  retreated by $0.0509 to
$36.9297, RIOZIM  dropped $0.0435 to close at $2.1065 and EDGARS  eased
$0.0400 to $0.1850. BINDURA  also decreased by $0.0100 to $0.1200 and
MASHONALAND HOLDINGS  was $0.0010 lower at $0.0690.

 <mailto:info at bulls.co.zw> 

  Global Currencies & Equity Markets

Uganda

Ugandan shilling firms on slumping importer demand

(Reuters) - The Ugandan shilling was marginally firmer on Monday, on the
back of a slump in demand for hard currency from merchandise importers,
traders said.

At 0837 GMT commercial banks quoted the shilling at 3,700/3,710, compared to
Friday’s close of 3,705/3,715. 

South Africa

South Africa rand and bonds bounce on Moody's ratings reprieve

(Reuters) - The South African rand and government bonds jumped on Monday
after ratings agency Moody’s kept the country’s last investment-grade credit
rating intact, but many investors expected the rally could fade soon.

Moody’s decision on Friday to leave South Africa’s sovereign debt at Baa3,
the lowest rung of investment grade, was a relief to beleaguered President
Cyril Ramaphosa, who is battling to stimulate growth in Africa’s most
advanced economy.

But by revising the outlook on that rating from stable to negative, Moody’s
sent a warning that a downgrade could follow in the next 12-18 months - or
sooner if the government doesn’t come up with a credible budget in February.

A downgrade to “junk” status on the local-currency rating could trigger
large outflows from South African government bonds, as they would be ejected
from the benchmark World Government Bond Index.

At 1500 GMT, the rand traded at 14.80 versus the U.S. dollar, around 1.5%
stronger than its previous close.

South Africa’s dollar-denominated sovereign bonds surged, with longer-dated
issues adding as much as 1.3 cents in the dollar. The yield on the benchmark
2026 rand bond fell 17 basis points to 8.405%, while the Johannesburg Stock
Exchange’s Top-40 Index saw modest gains of around 0.5%.

Traders and fund managers expected gains could probably be short-lived, as
it would be hard for Finance Minister Tito Mboweni to present a greatly
improved fiscal picture in February.

Warrick Butler, executive for rand and emerging market spot trading at
Standard Bank, said the three to four months until the February budget was
“a very short period of time to pump the water from the Titanic”.

Part of the reason for Monday’s rally was that South Africa had escaped with
the best of the possible outcomes from Moody’s, said Wayne McCurrie at FNB
Wealth and Investments.

A small minority had thought the rating would be downgraded or Moody’s would
place South Africa “on watch” - both bleaker outcomes than a negative
outlook.

A healthy appetite for high-yielding assets in emerging markets more broadly
and last week’s steep sell-off in South Africa underpinned the rally.

On Wednesday, the rand saw its largest daily fall in over a year, after
Mboweni’s medium-term budget slashed this year’s growth forecast to 0.5% and
showed government debt racing to exceed 70% of gross domestic product by
2023.

DON’T GET ‘FOOLED’

Deutsche Bank analysts warned clients not to be “fooled” by Monday’s strong
gains, adding they were extremely cautious on local government debt and
predicted the rand could sink to 15.50 to the dollar, more than 4% weaker
than its current level.

Those bearish projections - echoed by some local analysts - come at a bad
time for Ramaphosa, who is hosting a summit in Johannesburg this week to try
to woo foreign investors.

Adrian Saville, chief executive of Cannon Asset Managers, said the fact that
South African credit spreads traded in line with some junk-rated sovereigns
showed the bond market had made up its mind.

Despite positive changes to governance at state firms and greater certainty
on energy policy, Ramaphosa’s reforms were moving at a “glacial pace,”
Saville said.

Investors want to see progress cutting a bloated public-sector wage bill and
rescuing state power utility Eskom from crisis.

But those who are more risk-averse have been jettisoning South African bonds
for years on the expectation the country would be cut to junk.

Bank of America Merrill Lynch’s David Hauner estimates investment grade-only
investors now hold around $1.5-$2 billion of South African local-currency
bonds, down from $10 billion three years ago.

       <mailto:info at bulls.co.zw> 

GLOBAL MARKETS

Stocks gain on trade hopes, risk appetite lifts dollar

(Reuters) - The dollar strengthened and global stock markets rallied on
Monday on signs the United States and China are nearing the end of a
damaging trade war as well as indications the world economy may dodge a
recession.

The three major U.S. stock indexes closed at fresh record highs and MSCI’s
gauge of equity performance across the globe rose to less than 2% from an
all-time peak set in January 2018.

Beijing and Washington spoke Friday of progress in trade talks and U.S.
Commerce Secretary Wilbur Ross said on Sunday licenses for U.S. companies to
sell components to China’s blacklisted Huawei Technologies Co will come
shortly.

Washington has effectively banned federal agencies from buying Huawei
telecommunications equipment and barred U.S. companies from doing business
with Huawei, citing national security.

Gold edged lower while the dollar gained on higher risk appetite as trade
hopes grew after Ross said there was no reason a deal could not be on track
for signing this month.

A generally upbeat U.S. employment report on Friday raised optimism a
slowing U.S. economy was not headed toward recession.

European shares rallied more than 1%, with many reaching their highest level
since January 2018. The STOXX 600 index of small, mid-sized and large
companies across Europe surged to highs last seen in July 2015.

Tariff-exposed European miners gained 2.9% while auto stocks also rose 2.9%.
Reports that Fiat Chrysler and Peugeot owner PSA aimed to sign a final
merger agreement as early as next month also lifted stocks.

Earlier, trade hopes sent Asian stocks surging, with MSCI’s broadest index
of Asia-Pacific shares outside Japan rising 1.3%.

Technology stocks boosted Wall Street, with the Philadelphia Semiconductor
index hitting a new high, up 2.2%.

MSCI’s gauge of stocks across the globe gained 0.54% while its emerging
markets rose 1.46%.

On Wall Street, the Dow Jones Industrial Average rose 114.75 points, or
0.42%, to 27,462.11. The S&P 500 gained 11.36 points, or 0.37%, to 3,078.27
and the Nasdaq Composite added 46.80 points, or 0.56%, to 8,433.20.

The euro slipped as investors awaited Christine Lagarde’s first speech as
European Central Bank president. But the single currency remained near
multiple-week highs after Ross said Washington may not slap tariffs on
imported vehicles after “good conversations” with automakers in the European
Union, Japan and Korea.

The dollar index rose 0.31%, with the euro down 0.34% to $1.1127. The
Japanese yen weakened 0.37% versus the greenback at 108.57 per dollar.

Euro zone and U.S. bond yields rose on optimism a U.S.-China trade deal
appeared near.

Data on Monday showed morale among investors in the euro zone jumped in
November to its highest since June.

Germany’s benchmark 10-year Bund yield rose to -0.35% while the benchmark
10-year U.S. Treasury note fell 14/32 in price to push its yield up to
1.7770%.

Oil prices rose, buoyed by an improved outlook for crude demand as
better-than-expected U.S. jobs growth fed hopes.

Brent crude futures for January rose 44 cents to settle at $62.13 a barrel.
U.S. crude futures settled up 34 cents at $56.54 a barrel.

Spot gold dropped 0.4% to $1,507.25 an ounce.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Copper firms on hopes for trade deal, China data

(Reuters) - Copper prices extended gains on Monday, boosted by hopes of a
resolution to the protracted trade conflict between the United States and
China.

The world’s two largest economies said they had made progress in
negotiations to end the damaging dispute, while upbeat manufacturing data
from top metals consumer China added to the positive mood.

Benchmark copper on the London Metal Exchange (LME) ended 0.5% higher at
$5,877 a tonne, adding to the previous session’s 1% gain.

On Monday, the Chinese foreign ministry said the presidents of China and the
United States had been in continuous touch through “various means”.

CHILE SUPPLY: Antogafasta trimmed its annual production targets by about
10,000 tonnes as national protests in Chile, the world’s top producer,
hobbled operations.

Several of the world’s largest miners, including BHP , Anglo American and
Glencore, have operations in Chile, the world’s largest copper producer.

ALUMINIUM: LME aluminium gained 1.6% to $1,815 a tonne, touching its highest
since Sept. 20. This added to a gain of 1.8% made on Friday.

Support for aluminium has come from smelter outages in top producer China
and warnings of plant closures from Rio Tinto , but it is still the second
worst performing metal on the LME this year.

ALUMINIUM POSITION: The net speculative short position for LME aluminium is
expected to have fallen for a fourth consecutive session on Friday to levels
last seen in mid-September, according to Marex Spectron estimates.

CHINA ALUMINIUM OUTPUT: China’s September output slipped 1.6% year on year,
hit by continuing outages at two smelters. The world’s biggest producer now
faces a struggle to register annual output growth.

INVENTORIES: Aluminium stocks available to the market in LME registered
warehouses fell to 788,475 tonnes, their lowest in more than a month.
MALSTX-TOTAL

SPREAD: LME cash aluminium maintained its premium over the three-month
contract CMAL0-3 - at just above $4 a tonne - indicating tight nearby
supplies. On Friday, the spread flipped to a premium from a discount for the
first time since January.

STEEL: The European Union argued for the withdrawal of tariffs imposed by
U.S. President Donald Trump on metal imports which set duties in 2018 of 25%
on incoming steel and 10% on aluminium.

LME PRICES: LME nickel ended 2.4% higher at $16,380 a tonne, zinc rose 0.8%
to $2,539, lead was barely changed at $2,162 and tin was bid down 0.6% to
$16,425.

Gold eases on stronger equities, U.S.-China trade optimism

(Reuters) - Gold inched lower on Monday on increasing risk appetite amongst
investors, driven by optimism on U.S.-China trade talks and fading fears of
a global economic slowdown.

Spot gold fell 0.1% to $1,511.44 per ounce at 1220 GMT. U.S. gold futures
edged 0.2% higher at $1,513.70.

European shares soared to a near two-year high on strong earning reports and
hopes for a trade deal between Washington and Beijing.

However, weak manufacturing data from major European regions indicated
further uncertainty in global growth, which is supportive of demand for
bullion as a safe-haven asset, said analysts.

In Berlin, the European Central Bank’s new head, Christine Lagarde, gives
her first speech in the role later in the day and markets expect her to
stick to an easy policy script left by her predecessor, Mario Draghi.

On the trade front, the United States and China on Friday said they made
progress in talks aimed at defusing a nearly 16-month-long trade war that
has harmed the global economy, and U.S. officials said a deal could be
signed this month.

Markets drew further optimism from U.S. economic data last week that eased
apprehensions of a slowdown fuelled by the trade war.

Last week, the U.S. Federal Reserve cut interest rates for the third time
this year, but signalled there would be no further reductions unless the
economy takes a turn for the worse.

Speculators increased their net long positions in both gold and silver in
the week to Oct. 29, data showed.

Among other metals, silver rose 0.2% to $18.13 per ounce.

Platinum rose 0.3% to $948.77 per ounce, having earlier hit its highest
since Sept. 25 at $955.75, while palladium advanced 0.2% to $1,808.21.

INVESTORS DIARY 2019

Company

Event

Venue

Date & Time

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy or
subscribe for any securities. The information contained in this report has
been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
suitable for all investors. Securities of emerging and mid-size growth
companies typically involve a higher degree of risk and more volatility than
the securities of more established companies. Neither Faith Capital nor any
other member of Bulls ‘n Bears nor any other person, accepts any liability
whatsoever for any loss howsoever arising from any use of this report or its
contents or otherwise arising in connection therewith. Recipients of this
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investigation into the business, financial condition and future prospects of
any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

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