US job growth in the year through March was likely far less robust than initially estimated, which risks fuelling concerns that the Federal Reserve is falling further behind the curve to lower interest rates. Bloomberg reports that Goldman Sachs (GS-NASQ) and Wells Fargo & Co. (WFC-NASQ) economists expected preliminary benchmark revisions to show payroll growth in the year through March was at least 600,000 weaker than currently estimated. While JPMorgan Chase & Co. (JPM-NASQ) forecasters see a decline of about 360,000, Goldman Sachs indicates it could be as large as 1 million. If the revision is that big, the market will likely start to price larger rate cuts, growth fears will make a comeback, with investors buying defensive and selling growth stocks as risk in general will return.
Hold on rotation from growth to value stocks
According to a Bloomberg report, it is premature to shift away from growth stocks, which has had a better track record than value over time when the Federal Reserve starts cutting rates, even if the overall performance through easing cycles has been mixed. While the gap between the S&P 500 Value Index (SVX) and S&P 500 Growth (SGX) rapidly closed amid a broader market rout for a short time, growth stocks snapped back and are solidly ahead of their value peers for the year. With earnings growth likely peaking in the near term for tech stocks — the largest group in the growth index — it’s tempting to consider moving into historically cheap value stocks. However, data on the relative performance of value versus growth after the Fed starts cutting rates — which is widely expected in September — is limited. However, one analysis shows that, on average, growth stocks have outperformed value on a short-, medium- and long-term horizons after interest rates started to descend following a period of hikes.
New Wukong game kicking down doors on Steam
A Chinese-made game backed by Tencent Holdings Ltd has become the fourth most popular title ever on Steam within hours of its launch, an unusually rapid ascent that may help seal its place in industry lore. Black Myth: Wukong, an action-adventure title based on the antics of the fabled Monkey King, garnered more than 1.4 million concurrent players on Steam shortly after its global debut Tuesday, which bodes well for Prosus (PRX-JSE) and Naspers (NPN-JSE) shares.
UK consumers sending mixed signals
Bloomberg reports that the GfK Major Purchase Index rose in the UK, signalling a greater willingness for households to spend on big ticket items. However, the headline Consumer Confidence Index was unchanged though and expectations worsened, sending mixed signals about consumer sentiment in the UK.
Sasol to review assets
Sasol Ltd. (SOL-JSE) plans to reexamine its operations after the fuel and chemicals producer booked R56.7 billion ($3.2 billion) of impairments on its US and South African operations, triggering its first loss since 2020. “We will review and assess our asset portfolio,” said CEO Simon Baloyi, who took over the role in April on a results call. “We’ll take decisive action on underperforming assets to ensure robust returns.”
SA set to dodge recession on consumer-led rebound
South Africa’s economy probably avoided tipping into a recession in Q2 2024, handing the country’s new coalition government a much-needed base to build on over the rest of the year. Bloomberg reports that stronger readings from manufacturing, retail and wholesale trade sales shows parts of the economy that were a drag in the three months through March have turned positive amid an improvement in national electricity supply. That will aid growth, with analysts polled by Bloomberg predicting a 0.5% gain when Q2 data is published Sept. 3, adding to evidence the country has turned a corner since elections on May 29. Inflation also cooled substantially to 4.6% in July from 5.1% in June, serving as another positive indicator and all but confirms a rate cut in September, with a quarter point fully priced in. An even bigger move is also not out of the question now.
Sibanye-Stillwater updates plans for Sandouville Refinery
Sibanye-Stillwater (SSW-JSE) has reached an agreement to terminate a key commercial supply contract with supply culminating on or before Dec. 31. The agreed cost to terminate the supply agreement is approximately $37m. Refining of inventory and sales will continue into 1Q 2025. Negotiations to terminate other related contracts are ongoing. There will be no changes to the Sandouville refinery’s production guidance for 2024.
PayU partners with Amazon Pay Later on Digital Credit for Indian customers
Prosus’s (PRX-JSE) PayU will partner with Amazon Pay Later to extend instant digital credit access to Indian shoppers, Prosus said in a statement on its website. Amazon Pay Later will be integrated on PayU’s advanced checkout infrastructure, enabling online merchants to offer credit to customers.
Stock focus: Shoprite
The biggest issue facing Shoprite(SHP-JSE) is that it is trading at a ~21x forward multiple, which suggests that investors are optimistic about the company’s future growth prospects. The company continues to execute fantastically, take market share and is positioning the business to be one of the best long-term earnings compounders among SA Inc names. The group will also benefit from the lower load-shedding costs related to diesel (R500m in 1H vs R254m in 2H). The group also provided a sales update, with group sales increasing 12% for the year with consensus forecast of FY24 earnings of R12.73, which is +10.3% increase year-on-year.
Information correct at time of publishing. It is important to conduct thorough research and analysis using a combination of fundamental and technical analysis techniques to make informed trading decisions. Additionally, consider your risk tolerance, investment objectives, and time horizon when assessing company performance for trading.
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Trading Update : 27 August 2024
Watch for US job growth surprise
US job growth in the year through March was likely far less robust than initially estimated, which risks fuelling concerns that the Federal Reserve is falling further behind the curve to lower interest rates. Bloomberg reports that Goldman Sachs (GS-NASQ) and Wells Fargo & Co. (WFC-NASQ) economists expected preliminary benchmark revisions to show payroll growth in the year through March was at least 600,000 weaker than currently estimated. While JPMorgan Chase & Co. (JPM-NASQ) forecasters see a decline of about 360,000, Goldman Sachs indicates it could be as large as 1 million. If the revision is that big, the market will likely start to price larger rate cuts, growth fears will make a comeback, with investors buying defensive and selling growth stocks as risk in general will return.
Hold on rotation from growth to value stocks
According to a Bloomberg report, it is premature to shift away from growth stocks, which has had a better track record than value over time when the Federal Reserve starts cutting rates, even if the overall performance through easing cycles has been mixed. While the gap between the S&P 500 Value Index (SVX) and S&P 500 Growth (SGX) rapidly closed amid a broader market rout for a short time, growth stocks snapped back and are solidly ahead of their value peers for the year. With earnings growth likely peaking in the near term for tech stocks — the largest group in the growth index — it’s tempting to consider moving into historically cheap value stocks. However, data on the relative performance of value versus growth after the Fed starts cutting rates — which is widely expected in September — is limited. However, one analysis shows that, on average, growth stocks have outperformed value on a short-, medium- and long-term horizons after interest rates started to descend following a period of hikes.
New Wukong game kicking down doors on Steam
A Chinese-made game backed by Tencent Holdings Ltd has become the fourth most popular title ever on Steam within hours of its launch, an unusually rapid ascent that may help seal its place in industry lore. Black Myth: Wukong, an action-adventure title based on the antics of the fabled Monkey King, garnered more than 1.4 million concurrent players on Steam shortly after its global debut Tuesday, which bodes well for Prosus (PRX-JSE) and Naspers (NPN-JSE) shares.
UK consumers sending mixed signals
Bloomberg reports that the GfK Major Purchase Index rose in the UK, signalling a greater willingness for households to spend on big ticket items. However, the headline Consumer Confidence Index was unchanged though and expectations worsened, sending mixed signals about consumer sentiment in the UK.
Sasol to review assets
Sasol Ltd. (SOL-JSE) plans to reexamine its operations after the fuel and chemicals producer booked R56.7 billion ($3.2 billion) of impairments on its US and South African operations, triggering its first loss since 2020. “We will review and assess our asset portfolio,” said CEO Simon Baloyi, who took over the role in April on a results call. “We’ll take decisive action on underperforming assets to ensure robust returns.”
SA set to dodge recession on consumer-led rebound
South Africa’s economy probably avoided tipping into a recession in Q2 2024, handing the country’s new coalition government a much-needed base to build on over the rest of the year. Bloomberg reports that stronger readings from manufacturing, retail and wholesale trade sales shows parts of the economy that were a drag in the three months through March have turned positive amid an improvement in national electricity supply. That will aid growth, with analysts polled by Bloomberg predicting a 0.5% gain when Q2 data is published Sept. 3, adding to evidence the country has turned a corner since elections on May 29. Inflation also cooled substantially to 4.6% in July from 5.1% in June, serving as another positive indicator and all but confirms a rate cut in September, with a quarter point fully priced in. An even bigger move is also not out of the question now.
Sibanye-Stillwater updates plans for Sandouville Refinery
Sibanye-Stillwater (SSW-JSE) has reached an agreement to terminate a key commercial supply contract with supply culminating on or before Dec. 31. The agreed cost to terminate the supply agreement is approximately $37m. Refining of inventory and sales will continue into 1Q 2025. Negotiations to terminate other related contracts are ongoing. There will be no changes to the Sandouville refinery’s production guidance for 2024.
PayU partners with Amazon Pay Later on Digital Credit for Indian customers
Prosus’s (PRX-JSE) PayU will partner with Amazon Pay Later to extend instant digital credit access to Indian shoppers, Prosus said in a statement on its website. Amazon Pay Later will be integrated on PayU’s advanced checkout infrastructure, enabling online merchants to offer credit to customers.
Stock focus: Shoprite
The biggest issue facing Shoprite (SHP-JSE) is that it is trading at a ~21x forward multiple, which suggests that investors are optimistic about the company’s future growth prospects. The company continues to execute fantastically, take market share and is positioning the business to be one of the best long-term earnings compounders among SA Inc names. The group will also benefit from the lower load-shedding costs related to diesel (R500m in 1H vs R254m in 2H). The group also provided a sales update, with group sales increasing 12% for the year with consensus forecast of FY24 earnings of R12.73, which is +10.3% increase year-on-year.
Information correct at time of publishing. It is important to conduct thorough research and analysis using a combination of fundamental and technical analysis techniques to make informed trading decisions. Additionally, consider your risk tolerance, investment objectives, and time horizon when assessing company performance for trading.