Grindrod Bank Morning Report 30 July 2010
2010/07/30
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Quote of the day:
“Advice is what we ask for when we already know the answer but wish we didn’t.”
Erica Jong
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EQUITIES
Equity markets lacked conviction in either direction yesterday, the top 40 ended the day 0.69% higher at 25409.97. The gains on the equity market seemed to be spread across the board with financials, industrials and resources all gaining a little over 0.5% on the day. Anglo American released earnings this morning, H1 EPS was released at $1.84 vs analyst expectations of $1.79, interim dividend will be $0.25/share, Net income was $2.1bn, operating profit was $4.4bn and revenue rose 35% to $15.02bn. Anglo also commented that they are very bullish about Chinese demand for Copper and are positive about the turnaround in De Beers as sales volumes increase.
Asian markets fell overnight for the first time in six days after a surprise drop in Japan’s industrial production and an increase in unemployment signalled the world’s second largest economy may slow. The Nikkei ended the day 1.64% lower at 9537.30 and is expected to set the tone for markets this morning. Global markets will have to digest important US GDP figures, consensus expectations are for GDP to grow 2.6% q-o-q seasonally adjusted. This is roughly in line with the first quarter rate of 2.7%.
DATA
Today we have a smorges board of data in the local and international arenas. We start off with SA Trade Balance figures, expectations are for a deficit of R1.6bn. In the US, we look forward to 2Q10 GDP figures, personal consumption, employment cost index, Chicago PMI and the University of Michigan consumer confidence index for July.
In Europe there is the release of unemployment and CPI Estimate for July.
Yesterday saw South African PPI figures for June increase by 9.4% y-o-y –this was well above market estimates of 7.4%. Large price increases for electricity and base metals were the main factors as analysts pointed out some anomalies encountered in their surveys for these two. Lower readings for petroleum products; chemicals; and electrical machinery were recorded but could not counter the above mentioned increases. Private Sector Credit increased 0.92% y-o-y in June, missing expectations of 1%. M3 Money supply increased 2.41% y-o-y (2.3% expected).
RAND
The rand tested levels below R7.30/$, trading in the mid R7.28’s in intraday trade, these levels were short lived as demand for USD from local firms pushed the rand above R7.30/$. This morning the rand is trading at R7.37/$. Sentiment is expected to be dictated by US GDP, Chicago PMI, University of Michigan Confidence and personal consumption figures later today. Resistance is expected at R7.38/$ failing that the rand is expected to push out to R7.47/$. Support is expected at the R7.30/$ level a considerable break below R7.28/30 will open the door for the rand to test R7.20/$.
BONDS
Higher than expected PPI figures eased expectations of a repo rate cut in the near future, Bond yields ticked higher over the day with the R157 trading 3.5bps higher at 7.615%. The US 10-year note was unchanged at 3% once again – despite investors shifting sentiment away from equities and into safe haven government debt.
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