J200 Market Commentary: Global Rally Fades As Sentiment Sours

23 oct 2018

The biggest one-day rally in three years in Chinese equities on Monday failed to inspire other major global markets to shoot the lights out. This comes as a traders and investors in Europe and the United States face homegrown hurdles that could potentially put the brakes on short term gains. In the US, mid-term elections are sure to bring a fresh bout of volatility while in Europe, concerns over Italy is putting pressure on the region's currency, the Euro, which slipped back below the 1.15 level by the close of trade on Monday.

In Europe, stocks ended in the red with the DAX, FTSE100 and CAC40 closing lower by 0.26%, 0.10% and 0.62% respectively while the broader EuroStoxx 50 shed 0.65%. Leading indices to the downside were shares such as Amsterdam-listed Philips (-8.36%), Ireland's CRH (-3.36%) and Spanish bank BBVA (-2.11%).

On the JSE, the All Share Index closed higher (+0.21%) driven by a rally in Naspers and Pepkor Holdings which gained 3.20% and 2.62% respectively. The Top 40 closed higher (+0.28%), as a rally in the last twenty minutes of trading helped the index close in positive territory.

This morning in Asia, stocks have given up a substantial portion of the gains seen on Monday as the sell-off in the US grips traders in the East. Looming earnings releases, the global interest rate path, Italian budget concerns and geopolitical tensions remains front of mind for traders.

In terms of the risk radar, Gold is softer as the US Dollar trades near a two-month high while gains is being seen in the Japanese Yen as the safe-haven catches a bid. On the JSE, Top 40 Futures have opened lower by 1.6%.

JSE Major Sectors

Resources 10 -1.19%
Industrial 25 +1.25%
Financial 15 -0.09%


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AUDJPY vs Gold: A brief look at relative chart of a risk-on instrument vs a risk-off one.

AUDJPY: Considered the ultimate risk-on pair, the pair tends to rally when markets run and decline when risk off commences. A look at a relative chart vs Gold sees a breakout having occurred during July 2018. We now see a double formation as the price re-tests the breakout level, reflective of the shift to risk off.

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Company News

Howden Africa Holdings Limited - Trading statement for the period ended 31 December 2018

SSubsequent to the update of results on the 19th July 2018, shareholders are advised that Howden Africa Holding Ltd (“HAHL”) is expecting earnings per share ("EPS") and headline earnings per share (“HEPS”) for the period ending 31 December 2018 to be between 222.08 and 307.36 cents and between 222.06 and 307.38 cents respectively, this is a decline of between 28% and 48% in comparison to the previously reported corresponding period.

The deterioration of the results is as a consequence of entering the year with a lower order book across all of the HAHL group of companies’ (“Group”) business segments, but primarily within the power market.

The ongoing financial constraints of customers, subdued economic outlook and general industry uncertainty has created a challenging trading environment for the Group with a decline in annuity revenue and pressure on traditional trading margins.

This financial information has not been reviewed and reported on by the auditors of HAHL.
In light of the intended corporate action and to provide shareholders with all available information to make an informed decision we have decided to release this trading statement before the expected Firm Intention Announcement.

For the Shareholders to understand the operational results an Adjusted EPS (EPS net of tax adjusted interest) is expected to be between 143.53 and 211.86 cents a decline of between 38% and 58% in comparison to the corresponding period Adjusted EPS of 341.65 cents.
All amounts stated for December 2017 relate to the Audited EPS and HEPS amounts in the Annual Report. Restatements relating to IFRS15 have been not been taken into account for this trading statement review.

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Blood On The Streets - But Red Equals Opportunity

This morning the S&P 500 continues to show weakness as it's breaks below the 200dma. If you managed to get into the short and "sold when the sun was shining", you are 209 points in the green by this morning and despite the risk-off sentiment in global markets, traders should be looking to position themselves for rebound opportunities. We may not be there yet but I want to be ready. Technically, support for the S&P500 Futures comes in at 2704, 2691 and 2626.