Home Depot beats Q1 expectations despite softer consumer demand and housing market pressure

Market Performance

South African Market Summary

South African equities weakened yesterday as investors turned cautious ahead of key local data releases and assessed the economic impact of the Middle East war. The JSE All Share index fell 1.1% to 113,654.22 points, while the Top 40 declined 1.17% to 105,895.23 points. Focus now shifts to Wednesday’s April inflation print, with Reuters-polled analysts expecting consumer price growth to accelerate to 3.9% year on year from 3.1% in March. March retail sales are also due, although the data predates the full impact of the conflict. Separately, government has raised import duties on selected steel products to between 10% and 30% to protect local producers from weak demand and rising Chinese-led imports, including ArcelorMittal South Africa and broader sector peers.

European Market Summary

European equities edged higher on Tuesday as investors welcomed news that the US had paused an attack on Iran, while assessing prospects for a potential peace deal and the inflationary implications of the conflict. The pan-European STOXX 600 gained 0.2% to close at 611.34 points, although it remained below pre-war levels and continued to lag global peers due to Europe’s reliance on oil imports and limited exposure to AI hardware leaders. Bond markets steadied after recent selling, but German benchmark yields remained near 15-year highs as traders priced in further ECB rate hikes. Separately, the European Parliament approved revised foreign investment screening rules covering sensitive sectors, including defence, AI, semiconductors, raw materials, infrastructure, finance and electoral systems.

US Market Summary

Wall Street ended lower on Tuesday, with the Nasdaq leading declines, as rising Treasury yields and persistent inflation concerns weighed on risk appetite. The S&P 500 and Nasdaq recorded a third consecutive session of losses as investors took profits following the strong rally since late March. Elevated oil prices and uncertainty over the absence of a US-Iran peace agreement kept inflation expectations under pressure, pushing the 10-year Treasury yield to 4.687%, its highest level since January 2025, before easing to around 4.66%. Markets also reassessed the Federal Reserve outlook, with traders pricing in a higher probability of rate hikes later this year. Attention now turns to the Fed’s latest meeting minutes for guidance on policy direction.

Asian Market Summary

Asia-Pacific markets fell on Wednesday as investors weighed elevated bond yields and renewed geopolitical tensions. Japanese manufacturing sentiment improved only marginally in May, with the Reuters Tankan index rising to plus 8 from plus 7 in April, but remaining well below March’s four-year high of plus 18. The recovery was supported by commodity-linked sectors as materials, chemicals, steel and non-ferrous metals rebounded from April’s war-related weakness, although softness in autos and other industries limited momentum. In China, authorities left benchmark lending rates unchanged for a twelfth consecutive month, in line with expectations, signalling continued policy restraint. Meanwhile, fund managers said Australia’s planned tax overhaul could favour high-dividend blue chips over growth-oriented equities, potentially reshaping regional allocation preferences for investors.

Currency Market Summary

The rand weakened on Tuesday as investors tracked Middle East developments after US President Donald Trump paused a planned attack on Iran, leaving markets sensitive to geopolitical headlines and energy-driven inflation risks. The dollar held near a six-week high on Wednesday, supported by safe-haven demand and growing expectations that the Federal Reserve may need to raise interest rates again if war-related price pressures persist. The dollar index was steady at 99.306 and has gained more than 1% in May. Higher US yields, including the 30-year Treasury reaching its highest level since 2007, added support. The stronger dollar pushed the yen back towards intervention-sensitive levels near 160 per dollar, last trading at 159.03, its weakest since 30 April.

Commodity Market Summary

Gold edged lower on Wednesday as firmer US Treasury yields and a stronger dollar outweighed optimism over a potential US-Iran peace agreement. Oil prices also eased after President Donald Trump said the war with Iran would end “very quickly”, although investors remained cautious given ongoing Middle East supply disruptions and uncertainty around the peace process. Brent and WTI had already fallen nearly US$1 on Tuesday after US Vice President JD Vance said talks had progressed and neither side wanted renewed military action. However, Citi warned that markets may be under-pricing the risk of prolonged disruption, forecasting Brent could reach US$120 per barrel in the near term. US crude inventories reportedly fell for a fifth consecutive week, reinforcing supply-side sensitivity.

Domestic Company News

Vukile Property Fund Limited (VKE) -1.62%

Vukile Property Fund confirmed FY2026 guidance, expecting 9.3% growth in both FFO and dividend per share for the year ended 31 March 2026. For FY2027, the REIT forecasts FFO per share growth of 8% to 10%, while a planned increase in the dividend payout ratio to 85% is expected to support dividend per share growth of 10% to 12%. The outlook is underpinned by strong operational performance, accretive acquisitions and capital deployment across South Africa and Europe. Vukile has completed several Spanish acquisitions, expanded locally through Chatsworth and Botshabelo, and is entering Italy through a €115 million shopping centre transaction. A Spanish tax dispute remains, although management considers any additional liability remote.

Collins Property Group Limited (CPP) 0.00%

Collins Property Group reported a solid full-year performance for the year ended 28 February 2026, supported by strong income growth, high occupancy and disciplined balance-sheet management. Distribution per share increased 17% year on year, while distributable income per ordinary share rose to 123 cents from 109 cents in the prior year. The REIT declared a final distribution of 65 cents per share, comprising a normal dividend of 54 cents and an 11-cent return of capital, with the pay-out ratio increasing to 95%. Portfolio fundamentals remained resilient, with vacancies improving slightly to 1.7% and WALE extending to 4.8 years. Collections remained strong at 99.3%, while the loan-to-value ratio eased to 49.2%, supporting income visibility for investors.

Global Company News

Home Depot Inc. (HD) +0.88%

Home Depot reported first-quarter results slightly ahead of expectations, although management flagged continued pressure on larger remodelling projects as US consumers contend with macroeconomic uncertainty, weak housing activity, elevated mortgage rates and high home prices. Quarterly sales reached US$41.77 billion, ahead of LSEG estimates of US$41.52 billion, while adjusted earnings of US$3.43 per share also beat expectations of US$3.41. Comparable average ticket increased 2.2%, but comparable customer transactions declined 1.3%, signalling softer demand. The company maintained its full-year outlook, expecting comparable sales to range between flat and 2% growth, with adjusted profit between flat and 4% higher. Home Depot continues to invest in its Pro business to offset weaker household demand, while tariff refunds may partly offset higher fuel-related costs.

Chanel Limited (Private)

Chanel returned to growth in 2025 as creative momentum under Matthieu Blazy helped revive demand for the luxury house’s classic handbags, shoes and jackets. Currency-adjusted revenue rose 2% to US$19.3 billion, reversing a 4.3% decline in 2024, while operating profit increased 5% to US$4.7 billion. Demand for new designs, including updated flap bags, two-tone pumps and tweed jackets, attracted first-time Chanel buyers and reportedly exceeded supply. Growth was led by the Americas, where sales rose 7.2%, while Europe increased 2.5% and Asia-Pacific declined 0.8%. Chanel lifted prices by around 3% in 2025 and plans similar increases this year, while continuing its store expansion with 30 planned openings globally in 2026.

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