Morning Notes

28/09/2017 Argonaut Morning Note

Market Update & Important Indicators
A surge in shares of financial companies lifted major U.S. stock indexes Wednesday. Stocks had pared gains slightly as Republicans' tax plan was unveiled earlier in the session, but the reaction was fairly muted and the day's moves appeared to be driven largely by interest-rate expectations and corporate news. The Dow Jones Industrial Average was recently up 0.2% after rising nearly 87 points earlier. The S&P 500 rose 0.4% and the tech-heavy Nasdaq Composite climbed 1.2%. The plan proposes to sharply reduce tax rates on businesses and many individuals. Investors have cheered a tax overhaul as a potential boon to corporate profits - in particular for smaller firms that generate more revenue domestically - but some analysts said Republicans' inability to repeal the Affordable Care Act has lowered expectations for tax changes. Rising Treasury yields supported financial stocks, as investors continued to bet on higher U.S. interest rates. Last week, the Federal Reserve reiterated its plans to gradually raise rates, sending bond yields and the dollar higher. Fed Chairwoman Janet Yellen and other central bank officials have defended those projections this week, further supporting bank shares. The S&P 500 financial sector gained 1.6% Wednesday and was on track for its highest close of the year. The U.S. gold price lost further ground overnight, losing 0.9% to close at 1,282.40 US$/oz.

European stocks advanced for a fifth straight session on Wednesday, with banks rising on expectations of higher U.S. interest rates. The Stoxx Europe Index added 0.4% to end at 385.62, marking its highest close since July 17, according to FactSet data. Helping the pan-European benchmark move higher on Wednesday were shares of Alstom, which leapt 4.3%, and Siemens, which climbed by 1.2%. The companies agreed to merge their rail operations, aiming to create a European giant with the scale to fight growing competitive threats from state-backed Chinese rivals.

In Asian trading, Taiwan's stock benchmark rebounded 0.7% from six-week lows amid a recovery in tech stocks, notably those that do business with Apple. Investor worries about iPhone demand appeared to ease after a recovery in U.S. technology shares Tuesday. The Shenzhen Composite rose 0.8%, stocks in Shanghai added 0.1% and Hong Kong's Hang Seng Index edged up 0.5%. Japan's Nikkei lagged behind despite a weaker yen, which typically boosts the index.

Australian stocks fell a bit further today, notching an 8th drop in the past 11 sessions, despite strength in the likes of Rio Tinto. It rose 1.4%, yet the S&P/ASX 200 eased 0.1% today to 5664.3, in the process putting the index down 1.5 points for the year. It's been an underperformer throughout 2017, with banks one reason why. The sector was little changed today, though laggard CBA lagged again today. Meanwhile, insurer QBE slid 2.8%, putting its 2017 slump at 20%.

The London Metal Exchange’s 3-month copper contract gained overnight, rising 0.4% to finish at $6,437/t. The other base metals finished mixed. Nickel prices fell 2.3% to 10,157/t, while aluminium prices added 0.2% to close at 2,106/t. Lead prices slid 1.0% to close at 2,453/t, with Zinc prices shedding 0.6% to 3,150/t. Tin prices were slightly lower overnight, pulling back 0.1% again to finish at 20,890/t.

In this issue
OBJ Limited (OBJ) | Ceasing Coverage | HOLD
Market Cap $75.8m | Current Price $0.042

OBJ has many irons in the fire and is progressing towards “cash-flow neutral”, a key inflection point. We believe the underlying technology has significant value, and the fact that it has been validated by Procter & Gamble highlights the potential for OBJ. But, we are now concerned that the ramp up in cash flows will be slower than initially expected and it will take longer for OBJ to realise its full potential. Further, recent inconsistencies in representations to the market, including the unclear performance rights issue and discrepancies in forecast sales volumes for the recently launched Magnetic Booster, create uncertainty. Until this dissipates, we believe a HOLD call remains appropriate. We are ceasing coverage on issue of this note, as part of an industrial research re-focus.

Recent Contacts & Presentations
Otto Energy Ltd (OEL), Whitebark Energy Ltd (WBE), MZI Resources Ltd (MZI), Gascoyne Resources ltd (GCY), NTM Gold Ltd (NTM), Novo Resources Ltd (NVO:TSX), Alice Queen Ltd (AQX), 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)

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