FirstRand gets more gloomy

Oil prices have taken another tumble, giving back some of last week's recovery. There's mounting concern that soon there will be nowhere to store oil as demand plummets due to Covid-19. While US futures for May delivery bore the brunt last week ahead of the expiry of the contract, oil for delivery in June and July is now under significant pressure. And the price of benchmark Brent crude has also extended its losses, taking its decline this year to almost 70%.

In "What a gas" Ingham Analytics observed that the Brent crude price, natural gas prices and the rand had been heading south. Since then all three are a lot cheaper. What are the earnings ramifications for Sasol? Why is Sasol now forecasting such a large loss at its Lake Charles Chemicals Project? Ingham Analytics have stated previously that they doubted Sasol's guidance on the project. There is a massive 200% negative differential between what Sasol guided only a few weeks ago and now. This latest excuse rubs rather raw. What about the balance sheet? What about debt covenants? Is a gigantic rights issue doable? Do you buy the stock or not? Find out more here.

Meanwhile, eurozone members are squabbling among themselves (yet again) around the economic and financial fallout of coronavirus. South Africa is not alone in having disparities; the eurozone does too. These are economic (relative wealth) and fiscal (discipline versus laxity). And what is happening in the eurozone has lessons for South Africa currently where the coronavirus and the impact of government interventions is resulting in disruption and financial pain. Top trader Andrew Kinsey explains the backdrop to the situation and suggests opportunities that lie in the fixed income, derivatives and currency markets as a consequence of the yawning gap between richer northern European countries (particularly Germany and Holland) and the poorer south at this time of crisis, with asset market implications from the North-South rupture. Follow this link to access Kinsey's latest report.

Also today, if you hold shares in wealth manager Quilter, you may be affected by its odd-lot offer. It set the price for the share buyback on Friday and you can find the details below. And FirstRand has withdrawn its earnings guidance for the year to end-June due to the rapid deterioration in conditions since it released its interim results in March.

Finally, in The Week Ahead Chris Gilmour looks back at some of the news driving last week's market action, including rising US unemployment numbers and volatile oil prices, as well as some of the results to watch out for in the days ahead.

I hope you have a good week.

Stephen Gunnion

Managing Editor, InceConnect

The InceConnect CPD Hub now offers over 50 online courses offering FREE CPD and specialistcontent like:

Upload your certificates from your phone or PC to a CPD SCORECARD, track your hours and share with compliance.

Check out the FREE TRIAL now!