Bulls n Bears Daily Market Commentary : 07 January 2020

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Bulls n Bears Daily Market Commentary : 07 January 2020

 


 

 




 



Zimbabwe Stock Exchange Update

 

Market Turnover ZWL$6,700,093.12 with foreign buys at ZWL$922.00 and
foreign sales were ZWL$1,384,720.00 Total trades were 110

 

The All Share index added 0.13 points  to close at 233.67 points. OLD MUTUAL
LIMITED gained $0.2646 to end at $37.0500, TSL rose by $0.0425 to $0.8000
and OK ZIMBABWE  traded $0.0291 higher at $0.6468. ZB FINANCIAL HOLDINGS
also increased by $0.0200 to settle at $0.7400 and CASSAVA SMARTECH ZIMBABWE
LIMITED advanced by $0.0075 to $1.4874.

 

Gains were offset by losses in RIOZIM  which lost $0.4500 to $2.2500, AFDIS
which dropped by $0.1898 to close at $3.0002 and EDGARS which traded $0.0300
lower at $0.1800. NATFOODS  also decreased by $0.0100 to $9.0000 and DELTA
was $0.0027 weaker at $3.4589.

 



 

 

 

 

  Global Currencies & Equity Markets

 

 

 

 

South Africa

 

South African rand firms as demand for riskier currencies returns

(Reuters) - South Africa’s rand strengthened on Tuesday as the absence of
any immediate escalation in tensions between Iran and the United States
prompted investors to return to riskier assets.

 

The rand was trading at 14.3400 to the dollar by 1452 GMT, 0.91% higher than
its previous close.

 

Fears of a fresh conflict in the oil-rich Middle East have kept markets on
edge following the killing of Tehran’s top general in a U.S. drone strike
last week.

 

Power cuts recently in South Africa due to problems at state-run utility
Eskom, which supplies 90% of the country’s power, have also weighed on the
rand.

 

Lloyd Miller, an analyst at ETM, said any further power cuts by Eskom or
comments from its new CEO could drive future fluctuations.

 

Eskom has been struggling to keep the lights on amid severe financial strain
and ailing infrastructure.

 

Reliant on bailouts to survive, it is widely perceived as the biggest risk
to South Africa’s sluggish economy and a huge challenge for President Cyril
Ramaphosa and his bid to revive growth.

 

South African shares also gained on Tuesday, with many rebounding from
losses at the start of the week, but gold stocks fell back. They had risen
over the previous two trading days as investors retreated to safe haven
assets amid fears over the situation in the Middle East.

 

The Johannesburg Stock Exchange’s All-Share index closed 0.33% higher at
57,384 points, while the top-40 index also rose 0.3% to 51,154 points.

 

The biggest winners of the day on the blue-chip index were financial firms
like Investec, FirstRand and Sanlam, which benefit from a stronger rand and
rose 0.59%, 0.58% and 0.56% respectively.

 

Gold stocks featured at the bottom of the index, with AngloGold Ashanti
falling 3.8%, Goldfields shedding 2.53% and Anglo American Platinum slipping
1.28%.

 

In fixed income, the yield on the benchmark government bond due in 2026 was
up 1 basis point at 8.260%.

 

 

 

 

Kenya

 

Kenyan shilling weakens due to importer demand for dollars

(Reuters) - Kenya's shilling weakened on Tuesday due to increased dollar
demand from oil and manufacturing companies, amid scant hard currency
inflows, traders said.

 

At 1138 GMT, commercial banks quoted the shilling at 101.20/30 to the
dollar, compared with Monday's close of 101.05/15.

 

 

 

 

       <mailto:info at bulls.co.zw> 

 

 

 

 

 

 

GLOBAL MARKETS

 

Dollar gains, oil slips as markets focus on Mideast

(Reuters) - The dollar gained, helped by better-than-expected data in the
U.S. non-manufacturing sector, and oil prices retreated on Tuesday as
caution kept investors alert for developments in the U.S.-Iranian stand-off
in the Middle East.

 

Gold prices inched higher after backing off an almost seven-year high on
Monday, when risk-aversion drove demand. Stocks in Europe mostly edged
higher and on Wall Street traded little changed to lower.

 

A U.S. drone strike in Baghdad on Friday killed Iranian military commander
Qassem Soleimani, widely seen as Iran’s second-most powerful figure, in a
slaying that threatens to spark regional conflict.

 

Tehran has vowed retaliation and French President Emmanuel Macron urged Iran
to avoid any actions that could worsen Mideast tensions. Germany called for
a joint European response to Iran’s decision to scrap limits imposed on its
nuclear enrichment program.

 

MSCI’s gauge of stocks across the globe shed 0.03while the pan-European
STOXX 600 index rose 0.25%.

 

Even amid rising geopolitical tensions, cyclical stocks have outperformed
defensive shares, reflecting views that the U.S. economy remains strong and
growth will re-accelerate later in the year despite the flare-up in the
Middle East, he said.

 

The Institute for Supply Management said its non-manufacturing activity
index rose to 55.0 last month from 53.9 in November. A reading above 50
indicates expansion in the services sector, which accounts for more than
two-thirds of U.S. economic activity.

 

The report came after an ISM survey last week showed its measure of U.S.
factory activity dropped in December to its lowest since June 2009,
contracting for a fifth straight month.

 

History suggests when a discrepancy between manufacturing and services is
large, the gap will be closed with the former rebounding, Joseph LaVorgna,
chief economist in the Americas at Natixis, said in a note.

 

Rising European and U.S. semiconductor stocks offset a decline in energy
shares as Microchip Technology raised its third-quarter sales outlook. The
technology index rose 1.3%, the most among European sub-sectors.

 

Infineon Technologies jumped 5%, helping Germany’s DAX close up 0.8%, while
STMicroelectronics’s 2.5% gain lifted Italian stocks by 0.6%.

 

On Wall Street, the Dow Jones Industrial Average fell 119.7 points, or
0.42%, to 28,583.68 The S&P 500 lost 9.1 points, or 0.28%, to 3,237.18 and
the Nasdaq Composite dropped 2.88 points, or 0.03%, to 9,068.58.

 

Emerging market stocks rose 0.31%.

 

The safe-haven Japanese yen fell from a three-month high versus the dollar
and the Swiss franc pulled back from recent highs against the greenback,
despite concerns about U.S.-Iranian tensions.

 

The dollar index rose 0.36%, with the euro down 0.44% to $1.1144. The yen
weakened 0.14% versus the greenback at 108.54 per dollar.

 

The dollar was up 0.29% at 0.9712 franc.

 

Oil prices fell almost 1%, surrendering some of the gains of recent days as
investors weighed the likelihood of immediate supply disruptions in the
Middle East.

 

Brent crude fell 64 cents to settle at $68.27 a barrel. U.S. West Texas
Intermediate crude settled down 57 cents at $62.70 a barrel.

 

Euro zone government bond yields edged up from three-week lows and yields on
U.S. Treasuries were little changed.

 

Germany’s benchmark Bund yield was little changed at around -0.28%, having
risen from more than three-week lows on Monday at -0.31%. But it remained
below last week’s seven-month highs amid euphoria over the year-end stock
rally.

 

Benchmark 10-year Treasury notes fell 4/32 in price to yield 1.8247%.

 

Gold prices rose. Absent aggressive rhetoric, the perceived risk to oil will
diminish and reduce gold’s appeal, said Bart Melek, head of commodity
strategies at TD Securities.

 

 

Spot gold rose 0.34% to $1,571.21 an ounce. U.S. gold futures settled 0.3%
higher at $1,574.30.

 

 

 

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Commodities Markets

 

Copper edges higher as investors take stock and look to China

(Reuters) - Copper prices clawed higher on Tuesday as U.S.-Iran tensions
eased and investors expected leading metals consumer China to extend its
stimulus policies.

 

Global equities steadied and oil pulled back from multi-month highs as
investors judged the prospects of an all-out conflict between the United
States and Iran had eased.

 

Data last week showed that Chinese business confidence shot up in December,
lifting investor sentiment even though factory activity expanded at a slower
clip.

 

Three-month copper on the London Metal Exchange (LME) failed to trade in
official open-outcry trading but was bid up 0.3% at $6,157 a tonne,
extending a 0.2% gain in the previous session.

 

* COPPER STOCKS: Copper inventories in LME-monitored warehouses MCU-STOCKS
have slumped by almost 60% since late August and are currently at 140,925
tonnes, the lowest since March 2019.

 

Copper stocks have been low for a while, “but the reality is no one has felt
the need to chase prices higher”, said Guy Wolf, global head of market
analytics at brokerage Marex Spectron in Singapore.

 

“Without resolution on the tariff situation, no one is really going to feel
the need to risk-up and start filling the supply chain again.”

 

* ALUMINIUM SPREAD: LME cash aluminium’s discount to the benchmark
three-month contract CMAL0-3 increased to $33 a tonne, its highest since
September last year, having swung from a premium of $22.75 early last month.
That indicates healthy supplies of metal for near-term use in the LME
warehouse system.

 

 

LME aluminium was the only metal in the red, slipping 0.4% to trade at
$1,826 a tonne in official rings after hitting its highest since July 22 on
Monday.

 

* BAUXITE: Aluminum Corp of China (Chalco) has shipped the first cargo of
bauxite from its Boffa mine in Guinea, a company spokesman said.

 

* PRICES: LME nickel rose 0.8% to trade at $13,935 a tonne in official
activity, zinc was bid up 0.5% to $2,335, lead was bid up 0.1% to $1,922.50
and tin was bid up 0.5% to $16,925. ($1 = 6.9513 yuan) 

 

 

 

Base metals hope for manufacturing recovery in 2020: Andy Home

(Reuters) - Well, at least there was nickel.

 

Looking back on 2019 it was nickel that provided most of the thrills and a
fair share of the spills in the base metals complex.

 

The rest of the London Metal Exchange pack was largely moribund. Full-year
performances ranged from up 5% (copper) to down 15% (tin) with aluminium,
zinc and lead closing December barely changed from the start of January.

 

The obvious culprit for such a subdued performance was President Trump,
given the pervasive uncertainty generated by the United States’ trade
stand-off with China.

 

But deal-or-no-deal uncertainty simply added to the markets’ core malaise,
namely the weakest synchronised demand performance since the bad old days of
2008-2009.

 

Usage flat-lined or fell across the metallic board with, again, the single
exception of nickel. Lest electric vehicles bulls get too excited, nickel
benefited not from its use in lithium-ion battery chemistry but from China’s
super-strong stainless steel sector.

 

Broad-based manufacturing weakness kept the metals in check last year.

 

Most analysts are looking for something better this year but the early
indications are that bulls will have to be patient.

 

CHINESE RECOVERY

China has accounted for much of the growth in global metals demand in recent
years so it should be no surprise that the country’s stuttering
manufacturing sector was the single most important headwind for base metals
last year.

 

China’s official manufacturing purchasing managers index (PMI) spent much of
2019 below 50, the threshold reading dividing expansion from contraction.

 

The PMI turned positive in November and stayed positive in December with a
reading of 50.2 in both months.

 

The alternative Caixin PMI, which captures activity among medium-sized and
smaller companies, recovered earlier with December’s reading of 51.5
denoting a fifth consecutive month of expansion.

 

Relative to years past these are still subdued rates of implied growth but
after last year’s dismal performance metals traders will take any growth at
all as a net positive.

 

The so-called “Phase 1” trade agreement with the United States, promising at
the very least no further tariff escalation, has helped improve sentiment.

 

But the expansion in manufacturing activity is also the result of Beijing’s
ongoing stimulus package.

 

This is no shock-and-awe investment splurge such as seen in 2010 or 2016 but
rather a more targeted stabilisation programme aimed at preventing a broader
slowdown in economic growth.

 

China’s leaders are promising more of the same in 2020 with a stated aim of
keeping growth around 6% through infrastructure investment.

 

It’s worth remembering that what’s good for China is good for the rest of
Asia, given regional raw material and finished good trade flows.

 

South Korea’s manufacturing sector, for example, also returned to growth in
December after seven consecutive months of contraction. The key turnaround
was a jump in new export orders.

 

EUROPEAN GLOOM, US DOWNTURN

Signs of renewed growth in China’s manufacturing activity are a major
positive for base metals demand and by implication prices this year.

 

However, eastern promise is tempered by continued dark clouds in the west.

 

Europe’s manufacturing sector had a miserable 2019 with little sign of any
imminent turnaround.

 

Activity in the euro zone contracted for an 11th month in December, the IHS
Markit manufacturing PMI sliding to 46.3 from November’s 46.9.

 

The protracted weakness in Europe is part cyclical but also part structural
with the automotive sector, a key manufacturing pillar in countries such as
Germany, struggling to cope with tighter emissions standards and the
resulting need to switch to mass production of electric vehicles. It’s
proving to be a bumpy road.

 

The December PMI captured a slight improvement in sentiment but IHS Markit’s
chief economist Chris Williamson said “a return to growth remains a long way
off given that new order flows continued to fall at one of the fastest rates
seen over the past seven years.”

 

The United States’ manufacturing sector was one of the main bright spots in
the first half of last year but there are worrying signs of a sharp
slowdown.

 

The Institute for Supply Management’s PMI slid to 47.2 last month from 48.1
in November. It was the fifth month of straight contraction and December’s
number suggested that factory output is now slumping at its fastest rate
since 2009.

 

There may be one-off factors at work, such as Boeing’s decision to cease
production of its 737 Max jetliner in the wake of two crashes. It was
certainly noticeable that transportation equipment was one of the weakest
industrial sectors last month.

 

Moreover, the scale of the downturn implied by the fast-falling PMI doesn’t
tally well with continued positive signs from the construction and
automotive sectors, both key metallic demand drivers.

 

However, together with ongoing weakness in Europe, the latest ISM survey
suggests the world is still some way from the sort of synchronised growth
that would lift metals such as copper and aluminium.

 

MORE UNCERTAINTY?

Of course the Phase 1 deal between the United States and China could be a
major boost for both countries’ manufacturing sectors.

 

Whether there is ever going to be a “Phase 2” deal is a moot point but at
the very least there is a sense that we may have passed the point of peak
tariffs.

 

A renewed sense of optimism has been evident in the sharp turnaround in fund
positioning on copper, as ever the metallic bellwether for the
risk-on-risk-off trade.

 

The money men held a net collective short on the CME copper contract for
most of 2019 but turned net long in the last days of the year.

 

Mind you, the last report from the Commodity Futures Trading Commission
covered positions as of Dec. 31, since when global political tensions have
reignited after the U.S. drone strike on Iran’s General Qassem Soleimani.

 

One major source of uncertainty may have been removed but it has quickly
been replaced with another, witness the ensuing jump in oil prices.

 

If that means more price volatility in industrial metals, many traders will
welcome it after last year’s turgid performance.

 

And if all else fails, there’s still always nickel for a bit of excitement.

 

 

 

 

 

 


 

INVESTORS DIARY 2020

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 


 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
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opinions expressed and recommendations made are subject to change without
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suitable for all investors. Securities of emerging and mid-size growth
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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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