BP Profit Drops to Almost Four-Year Low Amid Weak Oil Demand

LOCAL MARKET COMMENTARY

On Tuesday, the Johannesburg Stock Exchange's Top 40 and All Share indices declined by 0.34% and 0.39%, closing at 79,133 and 87,301 points, respectively. Investors are anticipating Finance Minister Enoch Godongwana's mid-term budget, expected to outline fiscal strategies for South Africa. Economists anticipate the budget will project a reduced deficit for 2024/25 compared to February's forecast, though fiscal challenges may slow progress. The South African Reserve Bank reported a slight dip in credit growth to 4.63% in September, while M3 money supply growth increased to 7.25%.

EUROPEAN MARKET COMMENTARY

European markets closed lower on Tuesday as traders weighed recent earnings reports and awaited more U.S. corporate results. Companies including Adidas, Lufthansa, Santander, and BP reported earnings, while Germany's GfK survey indicated a slight rise in consumer confidence for November. Meanwhile, investors in the U.K. are preparing for potential tax increases in the Labour government's upcoming budget announcement later today.

US MARKET COMMENTARY

The Nasdaq hit a record high while the S&P 500 also rose on Tuesday, with investors focusing on key corporate earnings, including Google-parent Alphabet's strong revenue report after market close. This week is packed with earnings from top companies in the S&P 500, especially among the "Magnificent Seven" tech giants, whose performance may influence Wall Street's optimism in tech and AI. Meanwhile, labour data showed U.S. job openings were slightly lower than expected in September, while consumer confidence rose above forecasts in October.

ASIA MARKET COMMENTARY

Asia-Pacific markets were mixed this morning as traders evaluated Australia's latest inflation data, which showed a 2.8% rise for the September quarter, slightly below expectations. China is reportedly considering approving a substantial fiscal package of over 10 trillion yuan ($1.4 trillion) to boost its economy, with potential adjustments depending on the U.S. presidential election outcome. Meanwhile, the Bank of Japan began its two-day policy meeting, where it's expected to maintain interest rates at 0.25%.

CURRENCY MARKET COMMENTARY

South Africa's rand remained stable on Tuesday, with investors cautious and refraining from significant trading ahead of the upcoming mid-term budget announcement later this week. The dollar remained near a three-month high this morning as markets anticipated key macroeconomic data releases that could indicate the direction of U.S. monetary policy.

COMMODITY MARKET COMMENTARY

Gold prices reached a record high on Tuesday, driven by uncertainties around the U.S. presidential election, Middle East tensions, and potential Federal Reserve interest rate cuts, which increased gold's appeal as a safe investment. Meanwhile, oil prices steadied this morning after industry data revealed an unexpected drop in U.S. crude and gasoline inventories, following two days of losses amid hopes for easing Middle East hostilities.

Shoprite Holdings Limited (SHP) +5.56%

In the first quarter, Shoprite Group's Supermarkets RSA segment, including Shoprite, Usave, Checkers, and LiquorShop, grew sales by 11.4% with a decline in internal inflation to 2.6%. The segment opened 56 new stores, including various Checkers and LiquorShop locations. Outside South Africa, Supermarkets Non-RSA recorded a 19.7% increase in constant currency, opening four new stores. The Furniture segment saw a 7.6% rise in sales, while other segments, like OK Franchise, grew by 10.2% and added seven new stores. Following Competition Tribunal approval, Shoprite will complete its acquisition of Pingo Delivery in October, and the planned sale of its furniture division to Pepkor is set to finalize by June 2025. The Group has also re-initiated its share buy-back program, repurchasing shares worth R997 million. An interim sales update is expected by February 2025.

Coronation Fund Managers Limited (CML) +1.59%

Following the successful resolution of a tax dispute (the "SARS Matter") and the reversal of a previous provision, projected earnings per share (EPS) for the year ending September 30, 2024, are expected to increase. Excluding the SARS Matter, fund management EPS (FMEPS) is anticipated to rise by up to 10%, from 370.2 cents to between 370.2 and 407.2 cents per share. When including the SARS Matter, FMEPS is expected to grow significantly, increasing by 255% to 275%, or from 165.2 cents to between 586.5 and 619.5 cents per share. Additionally, EPS, headline EPS (HEPS), and diluted HEPS (DHEPS) are forecasted to increase by 225% to 245%, rising from 182.9 cents to between 594.4 and 631.0 cents per share.

Astoria Investment Limited (ARA) -6.36%

The company's financial results show that net asset value per share decreased slightly from ZAR 1 407.67 (US$81.13) in September 2023 to ZAR 1 401.08 (US$74.43) by September 2024. Income increased significantly from ZAR 7.3 million (US$1 319) in September 2023 to ZAR 23 691 (US$395,110) in September 2024. Earnings per share (EPS) and headline earnings per share (HEPS) turned around, moving from a loss of ZAR 7.30 in September 2023 to a profit of ZAR 70.62 per share by September 2024.

BP PLC (BP) -4.67%

BP reported a 30% drop in third-quarter profit to $2.3 billion, its lowest in nearly four years, due to weaker refining margins and oil trading results amid slowing global economic growth and reduced demand, particularly in China. Although profits were slightly better than expected, the decline adds pressure on CEO Murray Auchincloss, who aims to enhance BP's performance and address investor concerns over its energy transition strategy. BP maintained its dividend at 8 cents per share, continued its $1.75 billion share buyback plan, and will update its financial framework in February. Despite a 3% increase in oil and gas production, helping offset weaker refining, net debt rose to $24.3 billion with a gearing ratio increase to 23.3%.

Reddit Inc. Class A (RDDT) +2.59%

Reddit reported its first quarterly profit on Tuesday, driven by AI content licensing deals and strong digital ad spending, which boosted its shares by 22% in after-hours trading. Revenue for the third quarter rose 68% to $348.4 million, surpassing expectations of $312.8 million. Reddit posted a profit of 16 cents per share, compared to an anticipated loss of 7 cents and a 13-cent loss a year prior. The company expects fourth-quarter revenue between $385 million and $400 million, well above the analyst estimate of $357.9 million, as initiatives like language translation continue to attract advertisers and new users.

Chipotle Mexican Grill Inc. (CMG) -0.18%

Chipotle Mexican Grill reported mixed third-quarter results on Tuesday, with earnings per share slightly above expectations at 27 cents but revenue falling short at $2.79 billion, compared to the expected $2.82 billion. Net income rose to $378.4 million, up from $313.2 million the previous year, despite increased food costs following a social media-driven push for larger portions. Same-store sales rose 6%, just under the anticipated 6.3%, and Chipotle reiterated its forecast for mid- to high-single-digit same-store sales growth for the full year. The company plans to open 285 to 315 new locations in 2024 and 315 to 345 in 2025. Shares dipped 3% in after-hours trading.

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