May 31, 2010 in Uncategorized
Jozi, Jozi. We started better, slightly better, but then were met with all sorts of obstacles, the one being a holiday looming in the US and UK and the other major obstacle being the anxiety over the Euro. Let’s face it, it is going away until it is. Until markets and their participants start to believe that the Euro zone have the problems under control, then I guess it will be anxiety that will rule the day. Whilst the question marks remain on the PIIGS economies in Europe, the rest of the developed world seems to be recovering and the developing world has again picked up pace. Locally we are alright I guess, growth has resumed at a fairly good click, but remember that the Euro zone is still a big trading partner of ours.
Maude street shakes, moves and grooves. End of session the Jozi all share index closed at 27202, down 247 points or 0.9 percent. Resources down 1.5 percent, general retailers up 1.4 percent, banks down a little, as were financials. Construction stocks up a little, up a third of a percent. But all the majors lower.
Bart says digest these shorts. Everybody loves Illovo, but now for their results. BHP Billiton negotiates a contract that in Eskom’s mind is favourable for them. Spain rained on as their rating is Fitch forked. Tim “the toolman” Geithner goes to Europe to help out, as shock and awe not enough. Indian GDP in-line with expectations and growing strongly at 8.6 percent. Top kill fails after it was touted as a success.
Illovo Sugar out with their full year numbers to March 2010 this morning. A bit mixed in the initial commentary paragraph, they have benefited from better international sugar prices, at 28 year highs inside of the reporting period. But at current prices that would not be the case, the price has come off sharply. An EU pricing in their favour has expired as of 1 October last year. Remember that there was a rights issue last year, so there would be a dilutionary effect on earnings, but has seen them move to a cash positive position, from one of being over borrowed. Malawi and Zambian profit contributions are 60 percent of overall, add in South Africa at 17 percent and there you have your most important geographies.
Overall sugar production exceeded the previous financial year, that is what investors want to see, volume growth. So Africa is where it is at for the group, the planned Zambian expansion is in full swing, with the aim to be at one quarter of current production in due course. Mozambique too, seeing a major ramp up. And Tanzania too. Good for them. Revenue of 8.467 billion Rands. Headline earnings five percent lower at 702 million Rands, per share because of the dilution showing a 19 percent fall to 171 cents. Stock trades at 3048.
Prospects, well you read through and tell me how you feel at the end of all of it: “In the current 2010/11 year, own cane, sugar and downstream production are all anticipated to exceed the levels achieved in the last season, with output in Zambia expected to increase by more than 25%. World sugar prices are extremely volatile and futures prices are currently below last year`s average prices. Although the world sugar market is forecast to remain in deficit, if prices remain at present levels this would be negative for sugar revenues. Domestic market offtake is expected to remain positive. The results for the current year will again be affected by the level of the rand compared to other currencies. In addition, the value of the Euro impacts on downstream sales and sugar export earnings from sales to the European Union. Sugar exports into the European Union are anticipated to grow following increased market access. Whilst this will be of long term benefit to the group, the current financial crisis in the Euro zone and its impact on currency values is likely to have a negative impact on results in the current financial year.”
BHP Billiton And Eskom Sign An Amended Agreement For The Mozal Smelter In Mozambique – Discussions On South African Smelter Contracts Continue. That is what the headline reads and BHP Billiton try and put on a brave face, I heard Andrew Etzinger on the wireless, the brave face of Eskom said that the details of the contract are not for public consumption. But at the same time say that it was in Eskom’s favour. Still, the consumer sucks it up and the municipalities are about to shunt through their increase, as seen in some of their budgets.
Spain. Pain. Spain is a big economy and possibly the most important so far of the PIIGS in the spotlight. Fitch have predicted that the Spanish economy will grow at 0.5 percent in 2011. The Spanish say that this is not the case and it is more likely to be 1.3 percent. The last week in Spain saw fast and furious activity. A few weeks back folks were saying, well the Spanish have done very little so far. Well, last week that changed, the new budget was passed in Spain’s parliament by the narrowest of margins, one whole vote. Friday the fellows over at Fitch downgraded Spain’s debt rating from AAA to AA+. A political fight is boiling: Zapatero Losing Credit as Fitch Strips Spain of AAA Rating
What are the knock on effects of the Euro zone slowing and seemingly scrambling on a weekly basis? In the US it is that rates will stay even lower for longer. This was confirmed on the weekend by Federal Reserve Bank of Chicago President Charles Evans, who is nowhere near the shores of the US. Rather he is in Seoul, the capital city of South Korea. Looks like a rather pretty city, lots of mountains about. Rates have been at near zero since December 2008, and should remain there for this year and into next year. However the same fellow, Evans, said that if inflation did start to rear its head then the Fed would act. I am sure of that, one thing is for sure, forget the blogosphere and their constant attacking of the Fed and Treasury, to me anyhow they have all done very good jobs.
The US Treasury secretary, Tim “the toolman” Geithner went to Europe the end of last week. Probably to catch some French Open. Kidding, he met with all sorts including his new counterpart, George Osborne, in the UK and his German counterpart, Wolfgang Schaeuble. Many have accused the Germans of taking control without consulting their other counterparts in the Euro zone, with the ban on naked shorts seemingly desperate. And they have not achieved the desired outcome, at least for the Euro zone. Check this out, what the Americans are thinking anyhow: Geithner: EU action should calm markets. Meanwhile over in Greece the Finance Minister Defends Austerity Steps.
Indian GDP growth for the first quarter came in at 8.6 percent. From the horse’s mouth, the Indian Economic Times: India’s Q4 GDP grows at 8.6% y-o-y. Check that out, inflation is a bit of a problem in India, much more than it is in China. But still, where would you rather be, in the developing world or developed world?
New York, New York. A really choppy session on Friday, I hate to use that overused word, but hey, that was a good explanation of what happened. Stocks were never going to be up, but at three stages during the session stocks losses were relatively small. At the end into the Memorial day long weekend stocks were bashed, trader types squaring out and taking the known. Because as Donald Rumsfeld put it, it is the unknown unknowns that you really have to be careful of. And nowadays almost anything could happen, tensions in the Korea’s, Chinese market intervention, almost anything chaps.
Wall Street wanders. Session end the Dow closed at 10136, down 122 points. The broader market S&P 500 closed at 1089, down 13.6 points whilst the nerds of NASDAQ fell away 20 points.
Commodities, currencies, Drs. Copper and bushveld. Top kill did not work. That was the BP plan. Check this out, I found it rather interesting from the dudes over at the Business Insider: Why Oil Depletion = Environmental Tragedy. Good points. The oil price last traded at 74.42 Dollars per barrels. The gold price is last at 1214 Dollars per fine ounce, the platinum price is slightly better at 1566 Dollars per fine ounce. The copper price was last at 311 US cents per pound. The Rand is slightly weaker at 11.08 to the Pound Sterling, 7.63 to the US Dollar and 9.39 to the Euro.
Up periscope. Both the US and the UK closed today. A bit of direction lacking could see a day that flip flops a little.