Morning Notes

19/10/2017 Argonaut Morning Note

Market Update & Important Indicators
The Dow Jones Industrial Average rallied Wednesday and was back on course to close above 23000 for the first time. A close above that level would be the blue-chip index's fourth thousand-point milestone in this year's largely uninterrupted stock-market rally. No other year has seen more than two such round-number marks. Despite concerns that stocks are too pricey and U.S. economic growth remains tepid, the blue-chip index is up 17% this year and on track for its 51st closing record. Robust earnings growth around the world has continued to underpin a bull market now in its ninth year. With the world's major economies growing in sync for the first time in a decade, many analysts and investors say conditions are favourable for stocks to continue to rise. The Dow industrials rose 0.6%. The S&P 500 climbed 0.1% and the Nasdaq Composite advanced 0.2%. Third-quarter earnings season has gotten off to a strong start, investors say. Of the S&P 500 companies that have reported third-quarter earnings so far, more than 80% have beat analyst expectations, compared with the five-year average of 69%, according to FactSet. The U.S. gold price traded lower overnight, falling 0.3% to finish at 1,280.50 US$/oz.

European stocks finished with gains Wednesday, as falls in the euro and the pound helped exporters and offset disappointing financial updates from companies. The Stoxx Europe 600 index posted a 0.3% rise to end at 391.56. On Tuesday, the pan-European benchmark fell 0.3%. Indexes across Europe in part keyed off a surge of more than 100 points for the Dow Jones Industrial Average. Germany's DAX 30 index picked up 0.4% to end at 13,043.03, a new all-time closing high above the prior record set Monday. In London, the FTSE 100 rose 0.4% to finish at 7,542.87, not far from its record close achieved last week.

In Asian trading Wednesday, many investors stuck to the sidelines in stocks and currency markets, awaiting news from China's 19th Communist Party Congress that lays out key political and economic policies for the coming years. Chinese President Xi Jinping on Wednesday urged the government to play a greater role in the economy, while reiterating the market's "decisive" role. "We should endeavour to develop an economy with more effective market mechanisms, dynamic micro-entities, and sound macro-regulation," Mr. Xi said. Still, Mr. Xi offered no major surprises or policy details in his hour long speech. The Shanghai Composite Index inched up 0.3% while Hong Kong's Hang Seng Index edged up 0.1%.

The Australian Equity market’s push higher paused Wednesday, tracking modest moves across the region. After briefly breaking above the 5900 level, the S&P/ASX 200 fell back to finish up just 0.9 point at 5890.5. Though lacklustre, it marked a 6th straight positive session, the longest consecutive run higher since late April as the index targets the 2017 high hit early May. Major banks were mixed and big miners came under some pressure. CSL was one of the biggest moving stocks, gaining 1.8% as it held its annual shareholder meeting.

The London Metal Exchange’s 3-month copper contract traded lower overnight, falling 0.5% to finish at $6,990/t. The other base metals finished mixed. Aluminium prices lost 0.7% to close at 2,102/t, whilst tin prices dropped 1.3% to 20,160/t. Zinc prices rebounded 2.2% to 3,179/t, while Lead prices added 1.3% to 2,507/t. Nickel prices slipped overnight, closing 1% lower at 11,586/t.

In this issue
GR Engineering (GNG) | Thunderbird(s) Are Go | BUY
Market Cap $198m | Current Price $1.29 | Valuation $1.55

GNG has been appointed as preferred tenderer for Sheffield Resources Thunderbird Mineral Sands Project, possibly adding upwards of A$270m revenue and A$25m EBITDA over the next two years. Whilst progression of the project remains contingent on equity funding and a native title appeal in the Full Federal Court, it potentially represents GNG’s largest ever EPC undertaking. The project is not expected to impact our FY18 forecasts, but encouragingly would start to backfill FY19’s order book and underpin the Company’s minerals division for the next two years. BUY maintained.

Recent Contacts & Presentations
Gascoyne Resources Ltd (GCY), Southern Cross Electrical Ltd (SXE), MOD Resources Ltd (MOD), Meteoric Resources NL (MEI), Emmerson Resources Ltd (ERM), Gage Roads Brewing Ltd (GRB), 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)

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