British American Tobacco: Smoking Hot

British American Tobacco surged 2.99% yesterday after it released its half-year results on Wednesday. Having seen its pre-tax profits increase by 34% to £3.5bn, the JSE’s largest share by market capitalization has now returned just less than 14% over the past 12 months. Currently trading at R740.00, BTI, the world’s 2nd largest cigarette maker, has benefited markedly from the weakening rand, which has deteriorated from R12.15/$ to R12.70/$ in July alone.
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Facebook Inc: Market not quite ‘Liking’ the results

After adding 1.78% during the regular session on Wednesday, Facebook fell about 5% in after-hours trading following its 2nd quarter results release. However, Facebook did pare some of the losses as traders digested the numbers, which in fact showed that the company had beaten analyst estimates on almost every metric. For the period, earnings came in $0.50, versus expectations of $0.47, while revenues increased to $4.04bn, above forecasts of $3.99bn. In addition, the company saw monthly active users of 1.49bn, while daily average users came in at 968mn, above expectations of 1.48bn and 960mn respectively. Lastly, average revenue per user grew to $2.76, more than forecasts of an increase to $2.70.

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Telecommunications Index: A Weak Connection

Yesterday, the Telecoms index (J560) slumped 5.17%, taking it back to its lowest levels since late-March. This, following a disappointing trading update by MTN, which sent the share crashing 5.98%. MTN identified the translational effect of fluctuating exchange rates as the main cause of the the below expectations earnings. As a result, the J560 has now lost close to 12% since the start of July, mainly due to MTN’s weak performance over the last month. After kicking the month off at R231.59, MTN now trades at R200.30, its lowest level since the 14th of January, a loss of 13.5% in the month of July.

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S&P 500 Index: Relatively Pricey?

Yesterday, the S&P 500 chalked up its 5th consecutive decline, its longest losing streak in 6 months, as the index fell 0.58%. With 2nd quarter reports well under way, earnings have been mixed. Going into the season, analysts expected that overall earnings of S&P 500 companies were to dip 0.3% and revenue to decline by 3.9%. As it stands, around 75% of companies have beat analysts’ profit expectations, while only 50% have surpassed revenue expectation. While, by no means a bad season, it does beg the question as to whether the index is fully valued, as it already sits on a forward PE of 16.9, slightly higher than the 10-year median of 14.7.

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Lonmin: Mining gone wrong

On Friday, the world’s 3rd largest platinum producer plunged 18.84% to R11.93, a new 22-year low, after announcing that it planned to cut up to 6,000 jobs. Lonmin is looking to close its Hossy and Newman shafts and idle 3 others, in an attempt to reduce its output by 100,000 ounces and stem growing losses. This decrease in profitability is mainly due to fall in the platinum price, which has fallen to its lowest level in 6 years and has shed 45% in 2015 alone. As it stands, Lonmin is trading at a PE ratio of 2.03 and a dividend yield of 10.23%, but has yet to announce results, which is certain to have a major impact on the above ratios.

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Unexpected profit makes Amazon the largest US retailer

Amazon, which just turned 20, surprised investors with a late birthday present, after it announced a surprise 2nd-quarter profit which saw the stock shoot up 18% during after-hours trade. In the 3 months ended 30 June, Amazon’s net income was $92mn, or 19 cents per share, compared with a loss of $126mn a year ago. The results surpassed expectations, with analysts expecting a loss of 15 cents per share. Additionally, revenues increase by 20% to $23.2bn, also beating expectations of $22.3bn. When factoring in the aftermarket surge, Amazon should be worth around $265bn, or $30bn more than Wal-Mart, which is the world’s largest retailer by sales volume.

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Apple: Good Results vs Massive Expectations

Yesterday, Apple Inc’s 4.23% fall had repercussions that were felt across the world. The move, which wiped off $32bn in market value, was partly due to iPhone sales which came in slightly lower than expectations, at 47.5mn vs 48.8mn. In addition, Apple also announced a revenue forecast that missed expectations, with the company predicting revenue of $49-51bn, compared to estimates of R51.1bn. Despite the disappointments, Apple still recorded a net income on $10.7bn, or $1.85 a share, in its fiscal 3rd quarter, topping analysts’ forecasts of a profit of $1.81 per share. To a certain degree, Apple has become a victim of its own success.

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Microsoft: Not operating smoothly

Yesterday evening, after the close of the market, Microsoft released its results for the 4th quarter of its fiscal year, at the same time dropping a bombshell on the market. In its results, Microsoft announced its largest ever loss, following a $7.5bn write-down stemming from the company’s troubled acquisition of Nokia’s cellphone business. For the quarter, MSFT recorded a net loss of $3.2bn, or 40 cents a share, which sent the company’s stock down more than 4% during after-hours trading. Despite the loss, the group still recorded full year profits of $12.19bn, or $1.48 a share, down from $22.07bn, or $2.63 a share, during the previous year.

Asian markets were broadly lower this morning, as they joined their global peers in the red, following declines on Wall Street. Mainland markets traded lower, with the Shanghai Composite’s 0.42% decline marginally outperforming the 1% fall on the Hang Seng. In Japan, the Nikkei led the losses in the region, with the index down 1.2%. This comes after the Nikkei hit its highest level since the 25th of June in the previous session. Lastly, the ASX opened sharply lower, down 0.93%, with the index set to end its 6 session winning streak. Banks and miners led the losses, with BHP Billiton down 1% after its latest production report.

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Gold: The not-so-safe haven

Yesterday, spot gold slid more than 4% to a 5 year low of $1,086.18, following a flash-crash which saw 3.3 million lots of metal traded in a matter of minutes. As a result, the Gold Mining Index (J150) suffered a massive sell-off which sent it more than 10% lower at one stage. This was mainly due to large declines in Sibanye (-10.62%), AngloGold Ashanti (-9.7%), Gold Fields (-9.32%) and Harmony (-9.16%), with all of them reaching new 52-week lows. Less than 4 years ago, gold reached a record high of $1,920.30/oz, but a combination of a rampant dollar and the threat of interest rate increases have seen the precious metal lose its shimmer in recent years.

After a mixed opening this morning, Asian markets were mostly higher as traders kept a wary eye on commodity prices. In China, the Shanghai Composite opened more than 1% lower, before erasing losses to trade 0.26% in the black. The Hang Seng followed a similar route, before gaining to trade 0.41% higher. In Japan, the Nikkei gained 0.48% to a near 4 week high on its first trading day following an extended weekend, thanks to the yen trading at a near 1 month low against the dollar. Lastly, the ASX gained 0.34% to its highest level since June 24, on course to extend a 5 session winning streak.

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