Anchor Capital: Essential market review, 10 March

South African markets closed lower yesterday, amid weakness in mining sector stocks. Gold Fields, Harmony Gold and AngloGold Ashanti declined 7.7%, 7.3% and 5.1%, respectively. Kumba Iron Ore, Assore and BHP Billiton lost 7.3%, 4.2% and 3.3%, respectively. Platinum mining stocks, Lonmin, Aquarius Platinum and Anglo American Platinum dropped 5.2%, 4.0% and 3.2%, respectively. Truworths International and Mr Price Group declined 5.9% and 4.1%, respectively. The consumer products company, AVIfell 0.8%, after it reported a drop in its diluted basic EPS in 1H15. SABMiller was down 0.2%. However, Sasol rose 1.0%, after it showed that its turnover was up 1.6% in 1H15, despite declining oil prices. The JSE All Share Index fell 1.4% to close at 52,614.08.

UK markets finished lower yesterday, weighed down by fresh concerns over Greece. CRH dropped 3.9%, on the back of reports that the merger between its rivals, Holcim and Lafarge, could fall apart. Post the tie-up, the companies had earlier decided to sell its assets to CRH for EUR6.50bn. Property sector stocks, Land Securities Group and Intu Properties fell 2.1% and 1.4%, respectively. On the brighter side, Standard Chartered climbed 2.0%, after stating that it did not plan on moving its headquarters to Asia. WPP rose 1.2%, amid an increase in its FY14 earnings and after the company boosted its dividend. The FTSE 100 Index declined 0.5% to close at 6,876.47.

US markets ended higher yesterday. General Motors gained 2.2%, after announcing a $5.00bn share repurchase programme. Urban Outfitters advanced 1.6%, on the back of better-than-expected 4Q15 earnings. EBay rose 1.6%, amid reports that its PayPal unit would take over the Israeli cyber security company, CyActive, for around $60.00mn. Apple added 0.4%, after the company unveiled new products and services, including a smartwatch. However, Alcoa dropped 5.4%, after the company agreed to acquire RTI International Metals for about $1.30bn. Yahoo! declined 1.1%. The S&P 500 Index rose 0.4% to settle at 2,079.43, while the DJIA Index gained 0.8% to close at 17,995.72. The NASDAQ Index added 0.3% to finish at 4,942.44.

Asian markets are trading weaker this morning, after data showed that China’s producer price index declined further in February. In Japan, McDonald’s Holdings Co. Japan fell 0.6%, after it posted a significant decline in its February same-store sales. Yahoo Japan retreated 0.2%, amid reports that an activist fund urged Yahoo Inc. to spin off its Japanese business. In Hong Kong, Cnooc and China Petroleum & Chemical Corp. dropped 1.8% and 0.7%, respectively. In South Korea, Asiana Airlines lost 3.3%, amid news that its parent company, Kumho Asiana Group, is acquiring intercity bus transportation unit, Kumho Buslines. The Nikkei 225 Index is trading 0.4% lower at 18,722.10, while the Kospi Index is trading 0.2% lower at 1,988.32. The Hang Seng Index is trading 0.4% in the red at 24,015.60.

At 06:00 SAST today, Brent crude oil remained almost unchanged to trade at $58.13/bl. Yesterday, Brent crude oil fell 2.0% to settle at $58.14/bl. On Sunday, the Organization of the Petroleum Exporting Countries (OPEC) General Secretary, Abdalla El-Badri, at the Middle East Oil and Gas conference in Bahrain, stated that members of the OPEC should not lower production to subsidize higher cost.Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 1.0% to $3.62/bushel.At 06:00 SAST today, gold prices dropped 0.5% to trade at $1,161.85/oz. Yesterday, gold declined marginally to close at $1,167.21/oz.Yesterday, copper rose 2.2% to close at $5,894.00/mt. Aluminium closed 0.2% lower at $1,765.75/mt.

Yesterday, the South African rand weakened against the US dollar, amid heightened expectations of an imminent interest rate hike in the US following Friday’s strong US jobs data. Later today, traders will keep a tab on South African business confidence data for further direction.

The yield on benchmark government bonds were mixed yesterday. The yield on 2015 bond advanced to 6.19% while that for the longer-dated 2026 issue fell to 7.95%.At 06:00 SAST, the US dollar is trading 0.6% higher against the South African rand at R12.1628, while the euro is trading 0.2% higher at R13.1408. At 06:00 SAST, the British pound has gained 0.3% against the South African rand to trade at R18.3457.

Yesterday, the euro advanced against the South African rand, while it remained relatively stable against the US dollar. The European Central Bank initiated its highly-anticipated EUR60.00bn a month bond buying programme.

Meanwhile, German trade data showed that the trade surplus narrowed in January as exports dropped more than expected. Moving ahead, investors will to focus on the eurozone finance ministers meeting today.At 06:00 SAST, the euro fell 0.4% against the US dollar to trade at $1.0805, while it has weakened 0.2% against the British pound to trade at GBP0.7163.

The British Retail Consortium has indicated that, on an annual basis, retail sales across all sectors recorded a rise of 0.2% in February, in the UK, lower than market expectations for an advance of 0.5%.

In the previous month, retail sales across all sectors had registered a similar rise.The seasonally adjusted trade surplus in Germany dropped to EUR15.90bn in January, compared with market expectations of a trade surplus of EUR19.50bn.

Germany had posted a revised trade surplus of EUR18.90bn in the previous month.The non-seasonally adjusted current account surplus in Germany dropped to EUR16.80bn in January, compared with a revised current account surplus of EUR25.60bn in the previous month.

Market anticipations were for the nation to register a current account surplus of EUR16.50bn.The investor confidence index rose to a level of 18.60 in the eurozone, in March, higher than market expectations of a rise to a level of 15.00. The investor confidence index had registered a level of 12.40 in the prior month.

The Federal Reserve Bank of Cleveland President, Loretta Mester, reiterated her belief that the Fed is on the path of a hike in interest rate in near future. Further, she noted that both the rate hike and the direction of monetary policy would be based on the nation’s progress towards the central bank’s target of maximum employment and price stability.

In Canada, the seasonally adjusted housing starts recorded a drop to 156.30k in February, compared with market expectations of a fall to a level of 179.00k. Housing starts had recorded a revised level of 187.00k in the previous month.

The National Bureau of Statistics of China has indicated that, on an annual basis, the producer price index slid 4.8% in China, in February, more than market expectations for a fall of 4.3%. The producer price index had dropped 4.3% in the prior month.

In February, on a monthly basis, the consumer price index climbed 1.2% in China, compared with an advance of 0.3% in the prior month. Market expectations were for the consumer price index to advance 0.8%.In February, on a monthly basis, electronic card retail sales rose 1.0% in New Zealand, compared with a revised drop of 0.3% in the prior month. Market expectations were for electronic card retail sales to climb 0.4%.

South Africa

Sasol Limited: The petrochemicals company, in its 1H15 results, indicated that its turnover was up 1.6% to R99.84bn from the corresponding period of preceding year. Its diluted EPS stood at R31.95, compared with R20.85 reported in the same period a year ago. Meanwhile, the company stated that it has cut 1,500 jobs and would further postpone its $14.00bn gas-to-liquid plant in Louisiana in response to low global oil prices. Furthermore, it confirmed that it plans to cut its dividend by 12.5% to R7.00/share to conserve cash in the face of lower oil prices.

AVI Limited: The consumer products company, in its 1H15 results, stated that its revenue increased 11.1% to R6.00bn from the same period a year ago. However, its diluted basic EPS dropped to R2.48, compared with R2.62 reported in the corresponding period of previous year. The company’s diluted headline EPS was up 10.8% to R2.48 from same period last year.

SABMiller Plc: The company indicated that it anticipates affordable beer and middle class aspirations to drive growth opportunities in Africa.

UK and US

Urban Outfitters: The clothing company, in its 4Q15 results, indicated that its net sales rose to $1.01bn from $0.91bn recorded in the same quarter last year. Its EPS was $0.60, $0.02 better than the market estimate of $0.58.

United Natural Foods: The national distributor of natural, organic, specialty foods and related products company, in its 2Q15 results, indicated that its net sales increased 22.5% to $2.02bn, compared with the corresponding period preceding year. However, its net diluted EPS stood at $0.55, compared with $0.56 reported in the same period a year ago. For FY15, the company expects non-GAAP diluted EPS in the range of $2.90 to $2.99.

Casey’s General Stores: The convenience stores company, in its 3Q15 results, indicated that total revenue dropped 6.6% to $1.67bn from the corresponding period of previous year. However, its diluted EPS increased to $1.01, compared with $0.33 recorded in the same period of the prior year.

iKang Healthcare Group: The healthcare company, in its 3Q15 results, indicated that net revenue was up 43.5% to $108.58mn, compared with the same period a year ago. Its diluted EPS rose to $0.50 from $0.27 posted in the corresponding period of the previous year. For FY15, the company confirmed its guidance of net revenue to be between $283.00mn and $290.00mn, representing a year-on-year increase between 40.0% and 43.4%.

21Vianet Group Inc.: The internet data centre services company, in its FY14 results, indicated that total net revenue grew 46.3% to RMB2.88bn from the last year. It incurred a diluted loss of $0.87/share, compared with a diluted loss of $0.13/share posted in the previous year. For 1Q15, the company expects net revenue to be in the range of RMB0.88bn to RMB0.93bn, representing approximately 54.0% growth annually at the mid point.

AcelRx Pharmaceuticals: The specialty pharmaceutical company, in its FY14 results, indicated that total revenue dropped sharply to $5.22mn from $29.50mn reported in the previous year. It reported a diluted net loss of $0.91/share, compared with a loss of $0.59/share recorded in the prior year.

Westport Innovations: The company, in its FY14 results, indicated that revenue was down 20.4% to $130.60mn, compared with the preceding year. It incurred a net loss of $2.37/share, compared with a loss of $3.22/share reported in the previous year. For FY15, the company expects revenue from its operations to be between $110.00mn and $125.00mn, primarily due to currency fluctuations, volatility in US gasoline prices and continued economic uncertainty in Europe, offset by opportunities in new markets.

Apple Inc.: The technology company announced that that Apple Watch, its most personal device yet and the newest innovative addition to its ecosystem, would be available on 24 April 2015 to customers in Australia, Canada, China, France, Germany, Hong Kong, Japan, the UK and the US. Furthermore, it indicated a new offering that HBO now service would become available on Apple TV, iPhones, and iPads called HBO Now; and its new MacBook, shipping on 10 April, will be the lightest and thinnest in the company’s history.

Rosetta Resources: The exploration and production company announced that it intends to commence an underwritten public offering of 12.00mn shares of its common stock. It stated that net proceeds from this offering would be used to repay outstanding borrowings under its revolving credit facility and for general corporate purposes.

Resonant Inc.: The innovation company announced that it has engaged with a second customer for the design of an RF filter utilising its Infinite Synthesized Networks, or ISN technology.

WPP Plc: The advertising and public relations company, in its FY14 preliminary results, indicated that net sales were down 0.1% to GBP10.06bn, compared with the preceding year. Its diluted EPS stood at 80.50p, compared with 69.60p posted a year ago. For FY15, the company expects its like-for-like revenue and net sales to grow over 3.0%.

Hansteen Holdings: The industrial REIT, in its FY14 results, revealed that revenue was up 6.1% to GBP88.10mn, compared with the last year. Its diluted EPS was 17.00p, compared with 9.00p reported in the previous year. The board proposed a special dividend of 3.00p/share, which will be paid in addition to the ongoing interim dividend also of 3.00p/share, payable on 21 May 2015.

Vodafone Group: The telecommunications company announced the launch of its first international M-Pesa payments between Tanzania and Kenya.

Antofagasta Plc: The mining company stated that copper production at its Los Pelambres Mine in Chilehas so far been reduced by about 5.00kt due to ongoing protests that are causing limited disruption at the site.

UBM Plc: The marketing services and communications company announced that Tim Cobbold has resumed his role as Chief Executive with immediate effect.

Telecity Group: The company along with Interxion Holding announced that they have entered into a definitive agreement where the former would acquire all the issued and to be issued share capital of Interxionto create a leading data centre services platform that would be well-positioned to address global markets.

Balfour Beatty: The infrastructure company announced that it has been appointed as the civil contractor for an integrated team that would deliver the ten-year Thames Estuary asset management programme for CH2M Hill, on behalf of the Environment agency, and anticipated to be worth up to GBP250.00mn.

Financial Times: Thiam lined up to head Credit Suisse: Tidjane Thiam, the current Chief Executive of Britain’s Prudential insurance group, has been lined up to replace Brady Dougan at the helm of Credit Suisse, according to people briefed on the plan.

FirstGroup seeks to compete with Virgin on East Coast main line: FirstGroup is squaring up to Virgin Trains with a plan to run services on the East Coast main line that would be cheaper and faster than the incumbent’s existing operations.

Decay of UK investment banking leaves smaller clients exposed: Last week it emerged that state-controlled Royal Bank of Scotland was planning to cut 14,000 of the 18,000 jobs in its investment bank. On the same day, Barclays promised to increase its own cull if performance did not improve.

PizzaExpress in fresh Chinese push: PizzaExpress’s new Chinese private equity owner is eyeing a buyout of the chain’s Hong Kong-based franchise partner as the chain beloved of the British middle classes expands across Asia.

Bookmakers fear havoc on Cheltenham Festival’s opening day: Willie Mullins, the most successful Irish trainer in the history of the Cheltenham Festival, could wreak havoc on the bookies on Tuesday as the event kicks off under the shadow of tightening gambling regulation.

Treasury sells further 1.0% of Lloyds Bank holding: The UK government has taken advantage of a recent jump in the share price of Lloyds Banking Group to sell a further GBP500.00mn of its stake, after the lender announced it was restarting its dividend for the first time since the financial crisis.

WPP warns UK election will hurt business: The UK election is likely to hurt business regardless of the outcome, WPP has warned.

ICG set to expand direct lending operations with EUR3.00bn fund: Intermediate Capital Group has raised a second, EUR3.00bn fund for lending money directly to small or midsized companies, almost double the size of its first, in a sign of investors and corporate borrowers getting used to banks’ retreat from the sector.

Mexico sweetens tax terms for energy groups developing its oil: Mexico is sweetening the tax terms for energy groups hoping to develop the country’s oil and gas resources, because of government fears that the fall in crude prices could prompt companies to submit low bids.

Hodge and Fairhead clash over HSBC tax scandal: Margaret Hodge urged the head of the BBC Trust to resign on Monday, accusing her of being either “incredibly naive or totally incompetent” in her role at HSBC, the bank at the centre of a Swiss tax evasion scandal.

Investors pull $18.00mn from Gross’s new fund: Investors pulled money from Bill Gross’s new bond fund last month, dealing a blow to hopes that he would quickly draw in billions of dollars of assets for his new employer, Janus Capital.

GM plans $5.00bn buyback in deal with activists: General Motors on Monday announced plans to buy back $5.00bn in shares by the end of next year, in a compromise deal with an activist shareholder group that had been pushing the biggest US carmaker to hand back $8.00bn to its owners.

Alcoa agrees to buy titanium company RTI for $1.50bn: Alcoa, the US aluminium group, is making another acquisition in pursuit of its strategy of developing its components business, unveiling a deal on Monday to buy titanium company RTI International Metals for about $1.50bn including debt.

Wm Morrison: Added 1.1% to 208.20p, ahead of full-year results on Thursday.

Glencore: Rallied 2.6% to 296.90p after a stock overhang cleared.

Credit Suisse: a change will do you good: Tidjane Thiam, the man from the Pru, is likely to replace Brady Dougan at Credit Suisse. The former is an insurance specialist, an emerging markets enthusiast and (if Prudential investors had given him the green light when he bid for AIA in FY10) a fan of M&A. Credit Suisse is a European bank with a struggling business model. It produced a return on equity of just 4.4% last year and is largely sticking with the universal banking model while others retrench. It needs to rethink that model, make tough decisions about its investment bank, and stay away from M&A while all that is going on. In that last point perhaps lies the key to the appointment. Insurance is more and more about savings. With global central banks engaged in some sort of monetary race to the bottom, finding a decent return is as tough for the Pru’s life insurance customers as it is for Credit Suisse’s private bank clients. If Mr. Thiam has been brought in to Credit Suisse to boost the private banking and asset management sides of the business, then so much the better. Many universal banks are still run by investment bankers. Unsurprisingly, they are often slow to cut back their investment banking divisions, even in the face of poor performance. A fresh approach is just what Credit Suisse needs.

Uber: it pays to be first: Sometimes it pays to be biggest – and to be first. This is the obvious lesson from the way Uber has steamrollered across the world, raising $5.00bn from investors and launching in 55 countries in five years. Uber is not the only ride in town though: ride-hailing apps are proliferating, with investment in these start-ups passing $8.00bn. Uber may close soon on another $1.00bn fundraising, while its US competitor Lyft is working on a nine-digit round. There is a catch though: when it comes to calling a car, the network effect is local. The number of countries in which Uber operates has no bearing on whether your Uber car arrives promptly in New York City. There is no great benefit to having the same car service in London and in Barranquilla. So while Uber appears to be doing very well in markets where it was a first mover, it has struggled in more recent markets such as India and China. In India, where Uber temporarily suspended its New Delhi service in December because of concerns about passenger safety, market leader Ola Cabs has bought its smaller rival TaxiForSure, consolidating its leading position. And companies that are not consolidating are retrenching to focus on core markets: Hailo has pulled out of the US, and Easy Taxi has pulled back from Mumbai and Jakarta.

WPP: behind the smiles: True, the advertising group’s 14.0% increase in reported FY14 profit after tax to GBP1.20bn on revenue 5.0% higher at GBP11.50bn was robust enough. And WPP has set a demanding pace this year, with net sales – a measure of its underlying revenue growth – up 4.0% in January from a year ago. That is a faster clip than in its fourth quarter and FY14 as a whole. Trouble is, it is but one month. But beneath all the bluster, WPP made cautious noises about this year, and investors initially marked down the shares. Net sales growth in the final quarter of last year slowed to a pedestrian 2.0%. Although WPP still expects decent growth in the US in FY15, it added a big caveat about the aftermath of quantitative easing. Just as well that it is thrusting into faster-growing markets elsewhere. Nor does WPP’s guidance of like-for-like net sales growth of more than 3.0% this year – or an operating margin improvement of 30 basis points before currency effects – offer reassurance. It is instead redolent of WPP’s caution and a reminder that sector conditions are tough, despite recovery in its units in the US, UK and patches of the eurozone – even as the euro weakens. The advertiser’s shares have risen 16.0% this year and now trade at 17 times forward earnings. But even for groundhog fans there is not enough in Monday’s results – or WPP’s outlook – to justify a sustained run.