Morning Notes

14/09/2017 Argonaut Morning Note

Market Update & Important Indicators
The Dow Jones Industrial Average headed toward its fourth straight day of gains Wednesday, boosted by shares of energy companies. Stocks have set fresh records this week as investors have shaken off concerns over tensions between the U.S. and North Korea, and early estimates have suggested damage from Hurricane Irma was less severe than initially expected. While some investors say the largely uninterrupted nature of the stock rally has made them nervous, many say the earnings and economic backdrop for stocks remains favourable heading into the rest of the year. The Dow industrials swung between small gains and losses and was recently up 13 points, or 0.1%, at 22132. The S&P 500 and the Nasdaq Composite edged down less than 0.1%. Energy stocks were among the best performers in the S&P 500 on Wednesday, rising alongside oil prices after the U.S. Energy Information Administration reported a record drop in gasoline inventories. That came following an International Energy Agency report that global oil supplies fell for the first time in four months in August. U.S. crude was recently up 2.2%. The S&P 500 energy sector climbed 1.1%, on track for its ninth day of gains in the past 10 sessions. The U.S. gold price traded lower overnight, falling 0.7% to close at 1,322.50 US$/oz.

Europe's benchmark stock index closed marginally lower on Wednesday, as London-listed shares sold off and Apple suppliers declined a day after the tech giant revealed its new iPhones. The Stoxx Europe 600 index fell 0.08 point to end at 381.34, narrowly breaking a five-session winning streak. On Tuesday, the benchmark rose 0.5%. Stock markets in Europe have been experiencing low volatility as the rally that we saw at the start of the week has lost momentum. The bullish sentiment on the back of Hurricane Irma not being as severe as predicted, and no new tensions in relation to North Korea, has been replaced with a ‘pause for breath’ following the positive run.

In Asia, markets were mixed, with finance stocks in Japan rising while Chinese markets weakened. Hong Kong led the regional declines, with the Hang Seng Index down 0.3% and South Korea's Kospi falling 0.2%. Among the gainers, Japan's Nikkei 225 Index was up 0.5%, after closing at a five-week high. Meanwhile, key Apple Inc. parts suppliers in Taiwan traded lower following Apple's shares pullback Tuesday after the company announced that the much-anticipated iPhone X will be released in November, later than expected.

Big banks and miners failed to hold Australia's equity market in positive territory after afternoon selling took hold of most other sectors. A late tick lower resulted in the S&P/ASX 200 finishing down 2.1 points at 5744.3 after being up by as much as 0.5% at noon. The index rose the prior 2 days, and Commonwealth Bank's recovery continued for a 3rd--leading major lenders as some analysts find value after the slump in recent weeks. Meanwhile, BHP Billiton and Rio Tinto rose some 1% further, helped today by gains in Chinese iron-ore futures.

The London Metal Exchange’s 3-month copper contract traded lower overnight, shedding 1.72% to finish at $6,553/t. The other base metals all finished lower. Nickel prices were weakest, plunging 5.3% to 11,270/t, while aluminium prices shed 1.2% to close at 2,078/t. Lead prices lost 0.9% to close at 2,259/t, whilst Zinc prices fell by 1.1% to 3,022/t. Tin prices dropped 1.0% to finish at 20,603/t.

In this issue
Gold Sector | See Spot Run
Gold prices have run up 5% in AUD terms and 7% in USD terms during August-September. The recipe for an uncertain outlook continues to be fuelled by the push and pull of the North Korean geopolitical risk and uninspiring US economic data which we think will continue to support higher spot gold prices into FY18. We make changes to our coverage universe to factor in spot gold prices for the 1HFY18 in addition to the recent gold royalties increase to 3.75% (from 2.5%) announced by the Western Australian Government.

Recent Contacts & Presentations
Melbana Energy Ltd (MAY), TOX Free Solutions Ltd (TOX), Artemis Resources Ltd (ARV), Apollo Consolidated Ltd (AOP), Vault Intelligence Ltd (VLT), Fleetwood Corp Ltd (FWD), DTI Group Ltd (DTI), Calima Energy Ltd (CE1), Austal Ltd (ASB), Indoor Skydive Australia (IDZ), OZ Minerals Ltd (OZL), NorWest Energy Ltd (NEW), Berkut Minerals Ltd (BMT), Draig Resources Ltd (DRG), Minotaur Exploration Ltd (MEP), Ausdrill Ltd (ASL), Neometals Ltd (NMT), PNX Metals Ltd (PNX), Northern Minerals Ltd (NTU), New Century Zinc Ltd (NCZ), Metal Bank Ltd (MBK), Rift Valley Resources Ltd (RVY), Panoramic Resources Ltd (PAN), Doray Minerals Ltd (DRM), Wellard Limited (WLD), Bryah Resources Ltd (BYH), Auris Minerals Ltd (AUR)

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