Sasfin : Alphabet to lay off 12,000 people

MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks traded lower on Friday, as the Top 40 index and All-Share index shed 0.19% and 0.3% to close at 73,192 and 79,269 points, respectively. Clothing retailer, Mr Price (MRP) dropped 7.28% as the company reported a surge in third-quarter sales, which was mostly helped along by a recent acquisition. In other news, loadshedding continues to dominate headlines after Eskom said power cuts were reduced to Stage 3 and Stage 2 over the past weekend.

EUROPEAN MARKET COMMENTARY

Friday saw European markets trade higher, while monetary policy remained in focus. The European blue-chip index added 0.35%, as travel and leisure stocks added 1.2% while most sectors and markets closed in the black. In an interview with CNBC on Friday, the French finance minister said that European Union does not agree with the US when it comes to opposing China, stating "China cannot be out, China must be in." The United States' approach, particularly in the technology sector, has been seen as confrontational.

US MARKET COMMENTARY

In the US, stocks rallied on Friday to finish the week off strong. Earnings reports and tech shares continued to boost the markets. Streaming service, Netflix, added around 8.5% after it beat expectations on new subscribers. Meanwhile, Alphabet said it was going to lay-off around 12,000 employees. The stock added more than 5% by the close. In other news, Federal Reserve Governor Christopher Waller said on Friday that he would tolerate a soft recession if it meant bringing inflation down.

ASIA MARKET COMMENTARY

Markets in Australia were higher this morning as tech stocks built on the momentum from Wall Street's close on Friday. Financials stocks added 0.2% this morning, while technology stocks jumped 1.1%. Trading volumes in the region is on the lower side while some major markets remain closed today for holidays

COMMODITY MARKET COMMENTARY

Gold edged higher this morning, boosted by a softer greenback and hopes that the US Federal Reserve would slow its rate hikes. Meanwhile, oil prices coasted lower earlier today as lower trading volumes weighed on the commodity. Fatih Birol, the head of the International Energy Agency, said on Friday that energy markets could be set to tighten this year should the Chinese economy recover from its zero-Covid restrictions.

LOCAL COMPANIES

ATTACQ LIMITED (ATT) -2.5%

Total turnover increased from 2021 by 12.6% and 15.0% for the months of November 2022 and December 2022 respectively. Mall of Africa's saw an increase in the following categories in December 2022, Unisex wear (19.7%), Department stores (18.4%), Restaurants (45.0%), Cosmetics and Perfume (125.5%) and Shoes (29.0%). These increases, plus the increases in November 2022, lead to a total client turnover exceeding R1.3 billion for the two months combined. Mall of Africa's foot count in November 2022 and December 2022 increased year-on-year by 10.8% and 15.5% respectively. Lynnwood Bridge Retail's turnover growth of 24.4% and 28.3% during November 2022 and December 2022 respectively. Waterfall Corner had a positive increase in turnover in November 2022 and December 2022.

MR PRICE GROUP LIMITED (MRP) -7.3%

During the third quarter from 2 October 2022 to 31 December 2022 (the Period) of the financial year ending 1 April 2023 (FY2023), the group recorded growth in retail sales and other income (RSOI)of 34.0% to R12.4bn. Retail sales grew 36.5% to R12.0bn and on a 2-year CAGR basis grew 26.4%. Comparable store sales decreased 3.9%. South African retail sales grew 36.8% (excluding S88: 1.5%) to R11.2bn while non-South African corporate-owned store sales increased 32.5% (excluding S88: -3.3%) to R816m. Total store sales increased 38.0% (excluding S88: 1.8%). Online sales decreased 3.1% (excluding S88: -6.1%, off a strong growth of 51.8% in the prior period), as the sector trend of customers returning to physical stores post COVID-19 restrictions, continued. Total unit sales increased 3.9% (excluding S88: -4.8%). Group retail selling price inflation of 28.9% was elevated by the higher average retail selling price of S88 merchandise. Excluding S88, inflation of 6.2% was below CPI and continues to be managed prudently as the group strives to reinforce its value positioning. The store footprint increased by 103 new stores and the group's total footprint expanded to 2 670. Cash sales which constitute 89.8% of total retail sales grew 41.2%. Other income decreased 16.6% to R360m due to the base effect of the insurance claim received in Q3 FY2022 in relation to the civil unrest. The global growth outlook is likely to remain pedestrian despite inflation across most markets appearing to have peaked. Interest rates should start to decline which will bring some relief to household disposable income which is currently highly constrained. Loadshedding levels are anticipated to worsen in Q4 FY2023 which will continue to burden business effectiveness. The challenging consumer environment is expected to continue into FY2024 and while the short term will be challenging, management remains focused on the execution of its long-term vision.

INTERNATIONAL COMPANIES

Twitter

According the internal records viewed by CNBC, Twitters full-time staff has dropped to around 1,300 employees. This includes less than 550 full-time engineers. According the records, the group's trust and safety team is down to around 20 employees. Around 1.400 employees continue to be paid, but are not currently expected to fulfil their responsibilities within the group. Many of these non-working employees resigned after Elon Musk sent out a "pledge" to commit to "hardcore" work.

Alphabet (GOOGL) +5.3%

Google's parent company Alphabet will cut 12,000 jobs. The cuts will affect 6% of Alphabet's workforce worldwide, in teams including recruitment and engineering. The web search and video sharing giant will offer U.S.-based employees 16 weeks of severance pay plus two weeks for each additional year they've worked at Google. The company said that the cuts were because of concerns about a broader economic slowdown, after a hiring spree during the pandemic. Alphabet, which is based in Mountain View, Calif., had nearly 187,000 employees at the end of September, up from about 150,000 a year earlier. The company believe they expanded too rapidly during the pandemic, when demand for digital services boomed, and must refocus on products and technology core to its future, like artificial intelligence. Alphabet, which is based on Mountain View California, increased its workforce throughout the pandemic by nearly a third. Shares in the company rose 4% on Friday, this after it had fallen by nearly 30% in the last 12 months, in line with a 24% decrease in the broader tech industry.

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