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WHAT HAPPENED OVERNIGHT IN THE US:
- US markets dropped mid-session on trade deal ‘snag’, according to Reuters.
- Report of deal delay beyond end-2019 followed Bberg on Tues also flagging hold-ups.
- Fed minutes later showed committee had limited concerns that weak business sentiment was “spilling over”, but did see “elevated” risks.
- Treasury curve flattened again – if so far still holding most of its post-Aug steepening in 2’s & 10. USD remained subdued; Gold held steady at $1470.
SOUTH AFRICAN NEWS:
• SARB rate decision due 3pm with outcome finely balanced between cut and on hold, according to FRAs. We are backing the cut (-25bps to 6.25%) – not necessarily related to yday’s soft inflation data but that does serve to underline weak growth (we expect Q3 +0.1% q/q sar). The main argument against the cut is looming downgrade from Moody’s – though we argue it’s already discounted, and we don’t see any adverse risk to the cut, nor for it to affect SARB credibility.
• MRP: H1 dil norm hEPS -7.2% (to 447.5c) still hurt by MrPrice Apparel where sales and margin contracted. Group GP margin -260bps was almost entirely all from this division where sales also remained weak – H1 MrpRPice Apparel comp sales -4.3% (vs 4mths -5.3%) still showing few signs of significant improvement. Statement insists remedial action from new mgmt. team is in place but due to retail cycle times, action taken is only likely to “positively impact trading from the high summer period”. This is esp disappointing since guidance at 4mth update had been of “early signs of a performance recovery into spring”. (Nb, Short interest is currently around 4.3% ie 9m shs).
- LHC: FY norm EBITDA +3.5% to R5.7bn – bang in line with mid guidance. Rest had also been well guided in some detail, including reasons for EBITDA margin decline, but revenue growth of 9.3% in PET-CT in UK might go some way to mitigate costs associated with “operational challenges” in delivery of radio-isotopes, and Southern Africa also decent top-line +7.1% (positive PPDs). Outlook guides “flat” acute PPDs, and ongoing roll-out of PET-CT; sees H1’20 EPS up “more than” 20%, “primarily” due to mark-to-market loss in prior period.
- MMI: Q1 dil norm hEPS +13% y/y (to R0.9bn) driven by life & investment businesses, but new business vol -24% y/y (& new business margin 0.8% down from 1.1% in Q1 2019) – weak across retail and non-life. Africa growing with new business of R5m but co. disposing of entire stake in Nigeria.
- Week ahead: today INP (H1), 3pm SARB announces rates; Fri NPN (H1).
TODAYS KEY DATA POINTS:
- 3.30pm: US initial jobless
- 5pm: US Oct Existing Homes Sales
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