Overseas Market Report – U.S. Stocks Mixed as Oil Drops, Manufacturing Slumps
U.S. stocks closed mixed on Monday following a fresh drop in oil prices and weak U.S. manufacturing data which showed signs of contraction for a fourth straight month.
Oil futures headed lower as hopes faded that Russia and OPEC were going to cooperate on output cuts.
The closely-watched ISM index, which tracks the strength of the U.S. manufacturing sector, rose slightly to 48.2 in January from 48 in December. Any reading below 50 indicated a contraction in the sector.
Personal spending was flat in December from the previous month, according to a report from the Commerce Department. Incomes were up 0.3% in the month. Economists had expected a 0.1% rise in spending and a 0.3% gain in incomes.
The PCE price index, which is the Fed's preferred inflation gauge, was off 0.1% in the month. Prices were up only 0.6% year over year. Excluding food and energy, prices were 1.4% higher year over year.
At the close, the Dow was down 0.1%, the S&P 500 was flat and the NASDAQ was up 0.1%.
Shares of Sysco (SYY) were up after the firm reported better-than-expected results. The food distributor said it earned 48 cents per share in the quarter, up from 27 cents in the year-ago quarter and well above the 41 cents expected by analysts.
Abbott Labs (ABT) announced it has agreed to buy diagnostic test firm Alere (ALR) for US$5.8 billion. The purchase price represents a more than 50% premium to where Alere shares were trading on Friday. Abbot shares fell on the news.
For Australian ADRs listed on the NYSE, BHP Billiton slipped 18 cents (0.82%) to $21.73, ResMed gained 53 cents (0.93%) to $57.23, Telstra Corporation added 20 cents (1.00%) to $20.13, Spark New Zealand gained 13 cents (1.20%) to $10.98 and Westpac added 2 cents (0.09%) to $21.97.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 1.96% and the 5-year yield was 1.38%.
European markets were lower on Monday.
The FTSE 100, Germany's DAX and the French CAC 40 were down 0.4%, 0.4% and 0.6%, respectively.
Asian shares were mixed on the day.
The Shanghai Composite dropped 1.8%, while the Hang Seng was off 0.4% and the Nikkei 225 was up 2%. India's Sensex closed 0.2% lower.
Australian Market Report – Local Market Expected To Open Flat
Ahead of the local open, SPI futures were unchanged at 5,002.
Monday 01 February – close. The local market opened higher today on the back of gains on Wall Street. Stocks had a choppy session with mixed results from the big four banks and falls in resource stocks but still managed to stay above the red line. There were positive results from the sectors with health care gaining most. The Australian dollar gained against the greenback but had mixed results against other major currencies.
The All Ordinaries rose 37.70 points (0.75%) to 5,094.30 while the S&P/ASX 200 rose 38.10 points (0.76%) to 5,043.60.
In This Issue
Downer EDI Limited (DOW)
Downer EDI responded to an ASX price query stating that it is not aware of any information which, if known, could be an explanation for the recent trading in its securities. The company confirmed that it is in compliance with the ASX listing rules. DOW added 8 cents to $3.19.
CIMIC Group Limited (CIM)
CIMIC Group announced that its Group's companies Pacific Partnership and CPB Contractors, as part of the Canberra Metro consortium, have been selected by the Australian Capital Territory (ACT) government as the preferred proponent to deliver the first stage of Capital Metro, Canberra's light rail project. Revenue to the Group companies will finalised at contract execution expected in coming months. The Canberra Metro consortium comprises Pacific Partnerships, CPB Contractors, John Holland, Mitsubishi Corporation, Aberdeen infrastructure investments, Deutsche Bahn International, CAF and the bank of Tokyo – Mitsubishi UFJ. The Project's construction phase is scheduled to start in coming months and Capital metro is expected to be operational from late 2018. CIM added 66 cents to $24.73.
Charter Hall Group (CHC)
Charter Hall Group announced that David Harrison has been appointed CEO and MD of the Group, with David Southon electing to step down as Joint MD (JMD) following the Board and JMDs' decision to move to a single CEO and MD structure. The Group Chair, David Clarke, confirmed the Board and JMDs have been working towards transitioning to a single CEO and MD structure over the past 9 months as part of their focus on succession planning and building a strong leadership team for the Group. David Harrison will assume the CEO and MD role immediately, with founder David Southon to be available to the business for up to 12 months to facilitate a smooth handover and assist with the transition to the CEO and MD structure. CHC added 5 cents to $4.49.
Argonaut Research| Finders Resources (FND)
Argonaut conducted a site visit to Finders Resources (FND) Wetar Project located on Wetar Island, Indonesia. The Company had forecast commissioning of the 25ktpa plant in the current quarter, however we believe this will likely creep in to early Q2 CY16. Once commissioned, FND will shift focus to numerous value accretive opportunities including drilling of the nearby Meron prospect, optimising production from the Lerokis mine and improving heap recovery and efficiency. FND provides an attractive alternative to ASX listed copper producers with 28ktpa production (including a 3ktpa demonstration plant) at an all-in sustaining cost of <US$1.50/lb.
Industrials | Picks & previews
We expect 2016 will be another unpredictable year. What may be different though, in our view, is a loss of confidence in Central Banks. While their recent policies have helped assets and markets, they have arguably had little impact on investment and growth. So if we can’t rely on them giving us a “rising tide”, this will be a year for bottom-up stock selection and a focus on the management and balance sheet strength that will allow companies to negotiate a tough 12 months.
Recent Contacts & Presentations
Troy Resources (TRY), Northern Star Resources (NST), Regis Resources (RRL), Medusa Mining (MML), Doray Minerals (DRM), Beadell Resources (BDR), Red 5 (RED), Kingsgate Consolidated (KCN), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), TFS Corporation (TFC), Paragon Care (PGC), Austal (ASB), Orbital Corporation (OEC),Energia Minerals (EMX), Berkeley Energia (BKY) & Finders Resources (FND)