Morning Notes

30/10/2017 Argonaut Morning Note

Market Update & Important Indicators
A busy week of robust corporate earnings lifted the S&P 500 and Nasdaq Composite to new highs Friday. More than half of companies in the S&P 500 have reported third-quarter results as of Friday afternoon, and more than three-quarters of those results have surpassed analyst expectations, according to FactSet. Standout corporate results, which ranged from machinery maker Caterpillar to technology stalwart Microsoft, drove broader stock-market gains. Among the best performers during the week were Google's parent Alphabet and Amazon.com, both of which reported strong revenue. Earlier in the week, Twitter shares jumped after the social-media company said it added more new monthly users than analysts expected and boosted its guidance for the fourth quarter. On Friday, shares of Intel climbed $3.05, or 7.4%, to $44.40 after the company lifted its guidance. The strong tech gains propelled the Nasdaq Composite up 144.49, or 2.2%, to 6701.26 and the S&P 500 up 20.67, or 0.8%, to 2581.07 on Friday. Both indexes closed at records, and the Nasdaq hit its 61st fresh high of 2017, a tie for the most records in a year since 1999. The Dow Jones Industrial Average gained 33.33, or 0.1%, to 23434.19. The U.S. gold price traded higher overnight, rebounding 0.6% to finish at 1,273.20 US$/oz.

Europe's broad-market benchmark closed higher on Friday, even as Spanish stocks tumbled as the Catalonia region moved to separate itself from the central government. A continued pullback in the euro and some well-received corporate earnings have helped to sustain buying momentum. In Madrid, the IBEX 35 closed 1.5% lower at 10,197.50, after falling as much as 2%, following reports that the Catalan parliament voted for a resolution to declare independence, although members of anti-independence parties walked out in protest before the vote. The Stoxx Europe 600 index rose 0.6% to 393.43, ending at its highest level since May. For the week, the pan-European benchmark gained 0.9%, marking the index's sixth advance in seven weeks, according to FactSet data. On Friday, Germany's DAX 30 index rose 0.6% to 13,217.54, logging a fresh all-time closing high. In Paris, the CAC 40 moved up 0.7% to 5,494.13, and in London, the FTSE 100 rose 0.3% to close at 7,505.03.

Asian markets Friday caught up with gains in Europe and the U.S. on Thursday and the upbeat results from the U.S. tech sector. Hong Kong's Hang Seng Index rose 0.8% and South Korea's Kospi rose 0.6%. Japan's Nikkei Stock Average climbed 1.2% to a two-decade high, helped by a decline in the yen as global risk appetite improved.

Australian shares by the close recovered only most of the afternoon losses inflicted by a court ruling ousting several lawmakers and costing the government its 1-seat majority. The ruling knocked about 50 points off what had been a flat S&P/ASX 200, but it rebounded well to finish down 0.2% at 5903.2. The index had been tracking to challenge 2017's high with gains the last 3 sessions, but instead it fell 3.8 points for the week. Macquarie rallied 3.9%, finally topping 2007's high, on its strong F1H report, boosted outlook and share-buyback plans.

The London Metal Exchange’s 3-month copper contract traded lower overnight, slipping 0.3% to finish at $6,986/t. The other base metals finished mixed. Aluminium prices added 0.1% to close at 2,176/t, whilst tin prices fell 0.1% to 19,980/t. Zinc prices moved 0.2% higher to 3,274/t, while Lead prices lost 0.2% to 2,476/t. Nickel prices dropped overnight, closing 0.9% lower at 11,716/t.

In this issue
Pacific Energy (PEA) | Newmont going gas | HOLD
Market Cap $229m | Current Price $0.61 | Valuation $0.70

PEA continues to grow organically through contract expansions with existing customers, adding 13MW additional capacity recently. The Company now has record contracted capacity of 293MW locked in for a weighted average term of four years. However, a likely shift to gas at Newmont’s Tanami Desert operations provides likely near-term negative sentiment. Our unchanged $0.70 valuation factors in a 75% chance of PEA losing the Newmont contract. Despite valuation upside to the current share price we maintain a HOLD due to intensifying competition and until more clarity on Newmont materialises.

Recent Contacts & Presentations
De Grey Mining Ltd (DEG), Triton Minerals Ltd (TON), Evolution Mining Ltd (EVN), Silver Mines Ltd (SVL), NTM Gold Ltd (NTM), 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)

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