Markets WRAP: Rand closes at R14.50/$, after a weak session

Rand trading weaker ahead of elections and amid flaring US-China trade tensions

The rand on Monday morning opened at R14.38. The local unit weakened as much as R14.54/$ along with other emerging market currencies. This is on the back of rising trade tensions between the US and China, after US President Donald Trump recently threatened to raise tariffs from 10% to 25% on $200bn worth of imported goods from China.

The rand closed at R14.50.

The local currency has averaged at R14.06 to the US dollar over the past 10 trading days, Investec Chief Economist Annabel Bishop said in a currency note issued on Monday.

She added that the run up to SA's sixth democratic elections has also created some uncertainty domestically - which has limited potential appreciation of the rand against neutral US monetary policy expected later this year.

"While the various poll results on the likely outcome of SA’s May elections tend to agree on an ANC majority win, they have also shown diverging results on the degree of voter support the ANC is likely to garner, not least due to dissimilarities in survey methods and a significant number of potential voters not clearly signalling their intentions. This has fed the uncertainty," Bishop said.

"Market expectations also centre around the view that the ANC will gain a majority win in the elections, but the domestic currency is possibly holding back on worries that this may not be a strong majority result, resulting in the ANC entering some coalitions, particularly in Gauteng, SA’s key provincial economy," she added.

DRG Gold board changes

DRG Gold on Monday announced the appointment of Prudence Lebina as an independent non-executive director. Her appointment was effective of from May 3. 

Lebina is a chartered accountant, and holds a BCom degree and a higher diploma in accounting from Wits University, and a certificate in Business Leadership from Columbia Business School.

Lebina is also a member of the South African Institute of Chartered Accountants.

She is currently Chief Executive Officer of GAIA Infrastructure Capital Limited.  

Stocks slide as Trump's trade threat reverberates

Equities slumped globally and Treasuries rallied after President Donald Trump’s threat to increase tariffs on Chinese imports called into question the chances of a resolution to the trade war.

The S&P 500 index tumbled at the start of regular trading in New York, signaling a potentially punishing week on Wall Street after Trump tweeted a plan to hike tariffs this coming Friday.

From JD.com and Skyworks to Apple and Caterpillar, tech companies with China exposure and machinery companies – which are seen as proxies for the trade war – were among the biggest decliners in early trading.

The VIX gauge of stock volatility headed for its biggest increase this year.

"The key question for investors is whether this is simply aggressive posturing in the hopes of securing greater concessions or something that could truly scuttle any brewing trade deal," said Alec Young, managing director of global markets research for FTSE Russell.

"Stocks have largely discounted a trade agreement, and therefore a total breakdown in talks could fuel much greater equity volatility."

Changes to Sanral board

Transport Minister Blade Nzimande has appointed Prasanth Mohan as non-executive director of the Sanral's board, according to a shareholder notice issued on Monday.

Mohan's appointment came into effect on April 1. He is currently the chief director of road infrastructure and industry development at the transport department.

He succeeds Chris Hlabisa, a representative of the department, on the board.

Oil rebounds from five-week low as US issues warning to Iran

US crude pared losses from tumbling to almost $60 a barrel after President Donald Trump threw trade talks between the world’s two largest economies into disarray with a threat to raise tariffs on Chinese imports.

Washington said it’s sending warships to the Middle East in a warning to Iran.West Texas Intermediate crude futures rose after plunging as much as 3.1% in New York to the lowest level in five weeks.

China was said to be considering delaying a trip by its top trade negotiators to Washington this week after Trump threatened on Sunday to raise tariffs on $200bn of Chinese imports to 25% from 10%.

Brent crude has retreated around 7% since late April on signs the global supply outlook may not be as tight as feared. The possibility that the world’s two largest economies won’t reach a trade deal threatens to weaken prices.

Famous Brands expects lower shareholder earnings

Famous Brands, which owns Debonairs Pizza and Steers - among others, anticipates earnings for shareholders to be much lower than last year.

According to a shareholder notice issued on Monday, the food franchisor expects a loss per share of between 432c and 528c for the financial year ending February 28, 2019.

Last year earnings per share was recorded at 22c. Famous Brands has attributed the decrease in earnings per share to an impairment of R873.9m, before tax, relating to a UK business.

Other contributors include once-off costs of R17.2m for professional fees, redundancy costs related to a company voluntary arrangement completed in the UK and an impairment of R25.5m in a company of which the group has a minority stake.

Headline earnings per share is expected to be between 265c and 329c per share, compared to 393c reported in 2018. The group will release its annual results on May 29, 2019.

The group expects operating profit to be higher £4.6m (about R87m), compared to £3.7m (about R70m) reported in 2018.

The share price which opened at R83.98 on Monday, was trading at R84 at 12:50, ahead of the notice's release. The share price briefly dipped to R83.46 at 12:55. By 13:50, the share was trading at R83.60.

Business activity 

South African business activity improved slightly in April, according to the latest Purchasing Manager's Index by IHS Markit. 

The PMI measures private sector business performance. It considers indicators such as new orders, output, employment, stocks of purchases and suppliers' delivery times. Figures above 50 reflect an improvement.

Global stocks tumble on fresh trade worries; oil declines

Todd White, Bloomberg

Global equities slumped and Treasury futures climbed with other haven assets after President Donald Trump’s threat to increase tariffs on Chinese imports called into question the chances of a resolution to the trade war.

The yen rose while crude oil slid.

Futures on the S&P 500 index sank as much as 2.2 percent, signaling a punishing start to the week on Wall Street after Trump tweeted a plan to hike tariffs this coming Friday.

The VIX gauge of US stock volatility headed for its biggest increase in 2019. European equities slid and the benchmark index in Shanghai tumbled 5.6 percent, even after Chinese state-backed funds were said to have been active in an effort to limit the sell-off.

With cash market for Treasuries closed due to holidays in Tokyo and London, futures on the world’s benchmark bond jumped the most in more than one month.

Seeking to ramp up pressure on China for more concessions, Trump threatened in two tweets to more than double tariffs on $200 billion of Chinese goods and impose a fresh round of duties on top of that.

Talks to resolve the year-long trade standoff appeared to be on life-support Monday, with Beijing struggling to fully respond to the tweets. China’s foreign ministry said that officials were still planning to travel to the US for the next round of talks, but it was unable to confirm when amid signs that a delay is now being considered.

“It’s making the outcomes more binary, with everybody focused on the Friday deadline - there doesn’t seem to be much leeway now to much go past that,” Joyce Chang, chair of global research at JPMorgan Chase, said on Bloomberg Television.

“It’s going to mean that investors will be very focused on the trade issues even beyond China,” with a review of US auto-import tariffs still pending, she said.

Adding to the mix, North Korea carried out a weapons test that potentially included its first ballistic missile launch since 2017, challenging Trump’s bottom line in nuclear talks. In commodities markets, West Texas Intermediate crude futures declined as much as 3.1 percent before paring the drop to 1.7 percent.

Saudi Arabia cut June pricing for all crude grades to the US in a move that appeared to be aimed at easing concern over supplies. Elsewhere, Turkey’s lira weakened past six per US dollar, touching its lowest level in almost seven months as authorities considered holding a new contest for the Istanbul mayor’s seat amid fraud allegations over the March election.

ANC wants banks to be forced to fund SA coal mines

South Africa’s banks should be forced to invest in new coal mines in the country, the ANC’s head of economic transformation has said.

Nedbank and Standard Bank have said “they are not going to put money in coal any more,” Enoch Godongwana said in an interview on Carte Blanche.

“To me, that’s an invitation for prescribed assets,” he said in a reference to the party’s investigation of whether to force pension funds to invest in developmental projects.

SA economy may have shrunk in first quarter - NKC African Economics

South Africa's economy may have contracted in the first quarter of the year, according to a report by NKC African Economics.

The economy fell into a technical recession in 2018, before gaining pace in the second half of the year.

According to NKC African Economics, a provider of economic research, 2019 may be shaping up to follow suit. 

Stocks tumble with oil on renewed trade-war worry

Andreea Papuc and Todd White, Bloomberg

Global equities tumbled and Treasury futures climbed after President Donald Trump’s threat to increase tariffs on Chinese imports called into question whether the next round of trade talks this week will be delayed. The yuan slumped alongside crude oil.

Futures on the S&P 500 Index sank as much as 2.2 percent, signaling a punishing start to the week on Wall Street, while European stocks slid and Chinese equities plunged on Trump’s plan to hike tariffs on Friday and following news that China is considering delaying the upcoming talks.

The benchmark index in Shanghai tumbled as much as 6.6 percent, with the government in Beijing said to have called on its “National Team” of state investors to prepare to stabilise the market if needed.

The yen rallied and the Aussie dropped. The cash market for Treasuries was closed due to holidays in Tokyo and London.

Seeking to ramp up pressure on China for more concessions, Trump threatened to more than double tariffs on $200 billion of Chinese goods, and impose a fresh round of duties on top of that.

Chinese Vice-Premier Liu He was scheduled to arrive in Washington Wednesday with a delegation of about 100, but now China is considering delaying that trip, according to people familiar with the matter.

The South China Morning Post said a cancellation is also possible.

“It’s making the outcomes more binary, with everybody focused on the Friday deadline - there doesn’t seem to be much leeway now to much go past that,” Joyce Chang, chair of global research at JPMorgan Chase, said on Bloomberg Television.

“It’s going to mean that investors will be very focused on the trade issues even beyond China,” with a review of US auto-import tariffs still pending, she said.

Adding to the mix, North Korea carried out a weapons test that potentially included its first ballistic missile launch since 2017, challenging Trump’s bottom line in nuclear talks.

In commodities markets, West Texas Intermediate crude futures declined as much as 3.1 percent. Saudi Arabia cut June pricing for all crude grades to the U.S. in a move that appeared to be aimed at easing concern over supplies. Elsewhere, the lira weakened past six per U.S. dollar, touching its lowest level in seven months.