Daily Market Overview 5 October 2021

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Local Market Update

– Shares listed on the Johannesburg Stock Exchange (JSE) started the week with gains, as hospitality and mining stocks pulled the main indices higher. The FTSE/JSE All-share index rose by 0.74% to end at 64,129 points and the FTSE/JSE Top-40 companies’ index ended up 0.85% to 57,755 points. Hotel chains City Lodge and Sun International surged by over 13% and 8%, respectively, after a weekend news report said Britain was planning to drop South Africa from its “red list” of countries requiring arrivals to quarantine in a government-designated hotel.

– The rand slumped on Monday, tracking a broader decline in emerging market currencies on concerns over the Chinese economy and rising Treasury yields. At the close of the session, the rand was trading around R15.02 to the dollar, 0.93% softer.

– Gold prices eased this morning as the U.S. dollar edged higher, but lingering inflation concerns kept bullion close to a more than one-week peak hit in the previous session. Oil prices eased on earlier today after climbing to their highest levels in years in the previous session on the decision by OPEC and allied major oil producers to maintain restraint on supply

In Local news

Ascendis falls 4.5% as recapitalisation gets shareholder approval
The share price of embattled health and wellness company Ascendis Health fell just over 4.5% on the JSE on Monday. This was after the debt-laden small-cap announced it had secured majority shareholder approval at its AGM for an urgently needed recapitalisation to get it out of a R7.7 billion debt pile. Despite the stock’s weakening on the back of an expected dilutionary effect of the equity raise on current shareholders, executives talked up the strong support for the move as a ‘vote of confidence’ in a new-fangled firm.

Class action looms over claims Telkom routinely overcharged clients for insurance
A class action suit has been filed in the Gauteng High Court against Telkom and its insurance provider Mutual & Federal Risk Financing, which is part of the Old Mutual group, over claims that Telkom clients were routinely overcharged for insurance. One of the claimants, Nozipho Mkubu, signed up as a Telkom Mobile client in October 2019 and agreed to a monthly charge of R132.45.
When the full policy documents were provided, the insurance amount had been bumped up to R151 a month. When the Telkom invoice arrived, the amount charged was R152.32, a still higher overcharge of nearly R20 a month

International Market Update

– European stocks closed lower on Monday as markets began the first full trading week of October. The pan-European Stoxx 600 provisionally ended 0.4% lower, with tech stocks falling more than 2.1% to lead losses. Euro zone finance ministers met yesterday, to discuss matters including the EU’s recovery plans, banking union and fiscal policy. British supermarket chain Sainsbury gained 3.3% as speculation continued that it could be a takeover target following rival Morrisons’ sale to U.S. private equity firm Clayton, Dubilier & Rice (CD&R).

– The major averages took steep losses to start the week as investors continued their rotation out of technology stocks amid rising bond yields. Large tech shares like Apple, Nvidia, Amazon and Microsoft were lower as investors eyed bond yields. A surge in rates to end September knocked highly valued tech stocks. The 10-year Treasury yield was slightly higher Monday, trading around 1.48%. The 10-year U.S. Treasury yield hit 1.56% last week, its highest point since June, with investors concerned about inflationary pressures and tighter monetary policy.

– Shares in Asia-Pacific fell in early morning trade following overnight losses on Wall Street, with the tech-heavy Nasdaq Composite falling more than 2%. In Japan, the Nikkei 225 dropped 2.77%, as shares of Fast Retailing fell 6.98%. The Topix index also declined 1.75%. This morning’s declines left the Nikkei in correction territory, more than 10% off its mid-September high.

In International news

Ford’s sales improving but still down by 27.4% in the third quarter
Ford Motor’s U.S. vehicle sales showed signs of improvement during the third quarter, but still fell by 27.4% from last year as an ongoing shortage of semiconductor chips interrupted vehicle production. The drastic decline was narrower than auto forecasters expected, but wider than the overall industry that was estimated to be down between 13% and 14% from the same time last year. Cox Automotive expected Ford’s sales to be down by 37.3% during the third quarter, while Edmunds forecast a 29.3% decline.

Global airline industry is expected to cut losses in 2022 by 78%
The global airline industry is expected to lose close to $12 billion next year, cutting its losses from this year by 78% as carriers slowly recover from the Covid-19 pandemic, the International Air Transport Association said in a forecast Monday. The IATA, which represents nearly 300 airlines that operate more than 80% of the world’s air traffic, said industry losses in 2021 will be worse than originally thought, totalling $51.8 billion, widening from a forecast in April of $47.7 billion.