Morning Notes

20/06/2017 Argonaut Morning Note

Market Update & Important Indicators:

Gains in technology shares propelled U.S. stocks higher Monday. The Dow Jones Industrial Average added 120 points, or 0.6%, to 21505, and the S&P 500 index added 0.7%, on track for fresh records. The Nasdaq Composite climbed 1.3%. Technology shares in the S&P 500 have risen about 19% this year, making tech the index's best-performing sector, but the stocks also have had some recent slumps. Shares of tech companies in the S&P 500 rose 1.6%, headed toward their biggest one-day advance since December. The U.S. gold price settled down at 1,243.60 US$/oz overnight.

Stocks across Europe leapt Monday, with French shares rising by the most in more than a month after French President Emmanuel Macron's upstart party scored a majority in parliamentary elections on Sunday. The Stoxx Europe 600 climbed 0.9% to close at 391.94, scoring its biggest one-day percentage gain since April 24, according to FactSet data. In Paris, the CAC 40 index tacked on 0.9% to 5,310.72, its biggest rise since May 5. The move came after Macron's La République en Marche party and its centrist ally won 350 of the 577 seats in the National Assembly in the final round of voting on Sunday.

In Asia, the Nikkei Stock Average closed up 0.6%, with a softer yen aiding a move back above 20000 points. Hong Kong's Hang Seng Index gained 1.2%, and the Shanghai Composite Index rose 0.7%. Japan's exports jumped 15% for May from a year earlier, the biggest rise since January 2015, marking the sixth consecutive month of increases, the government said Monday. However, the figure came in lower than an 18% increase expected by economists polled by The Wall Street Journal.

The continued recovery by the biggest banks led a day of broad gains for Australian shares. Adding to last week's advance, the S&P/ASX 200 rose 31.2 points, or 0.5%, to end Monday at 5805.2. The four largest banks collectively added almost 16 points to the index, reclaiming some of the ground lost since early May over worries about the effect of a fresh tax on their liabilities and risks in the housing market. Oil-and-gas shares were held back by a decline in oil prices during Asian trading and retailers came under renewed pressure after Amazon, which is poised to launch in Australia, said it would buy Whole Foods Market for US$13.7 billion.

The London Metal Exchange's three-month copper contract closed 1.1% higher on Friday at $5,703/t. The other base metals also finished higher. Lead prices rose 0.8% to 2,107/t, nickel prices rose 0.8% to 8,953/t, aluminium prices jumped 1.0% to 1,875/t whilst zinc prices rose 1.3% to 2,545/t. Tin prices fell 0.6% to 19,675/t.

In this issue
Pacific Energy (PEA) | Contract Slippage | BUY
Market Cap $263m | Current Price $0.71 | Valuation $0.80

A significant rain event and contract delays will impact PEA’s short-term earnings, causing us to peel back our FY17 and FY18 forecasts. However, we believe the Company has strong long-term growth potential, underpinning the investment appeal. PEA has been a stand-out performer among resource services companies and on the back of a large pipeline of opportunities we maintain our positive longer-term view. We have decreased our valuation to $0.80 (previously $0.85), but maintain our BUY call.

Recent Contacts & Presentations
Finders Resources Ltd (FND), Bionomics Ltd (BNO), Threat Protect Australia Ltd (TPS), Ramelius Resources Ltd (RMS), Zenith Energy Ltd (ZEN), Blackham Resources Ltd (BLK), Top End Minerals Ltd (TND), Northern Star Resources Ltd (NST), Xanadu Mines Ltd (XAM), Dacian Gold (DCN), Egan Street Resources Ltd (EGA), Alice Queen Ltd (AQX), Paringa Resources Ltd (PNL), AWE Limited (AWE), Saracen Mineral Holdings Ltd (SAR), Red River Resources Ltd (RVR), Vital Metals Ltd (VML), Prairie Mining Ltd (PDZ), Hotcopper Holdings Ltd (HOT), Resolute Mining Ltd (RSG), Botanix Pharmaceuticals Ltd (BOT), Pantoro Ltd (PNR), Beadell Resources Ltd (BDR), Investigator Resources Ltd (IVR)

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