Market Update & Important Indicators:
A surge in U.S. technology stocks boosted U.S. markets as the Dow Jones Industrial Average edged higher Wednesday. Some investors and analysts said solid economic data and improved corporate earnings were driving gains, marking a return to fundamentals after concerns about political conflict helped send markets lower in recent sessions. Technology shares were among the biggest gainers in the S&P 500. Tech's gains also boosted the Nasdaq Composite, which has outperformed its peers in 2017 after lagging in 2016. Utility stocks in the S&P 500 pared early-session losses after the Federal Reserve's policy statement left interest rates unchanged and offered little sign of when the central bank might next raise rates.
Stocks across Europe ended higher Wednesday, with a round of better-than-expected earnings reports kicking off trading in February. The Stoxx Europe 600 index rose 0.9% to finish at 363.20. The pan-European index on Tuesday fell 0.7%, ending January down by 0.4% after rising in the two previous months.
The Nikkei Stock Average had opened lower during Asian trading, but rallied during the day. Buying accelerated after the lunch break as the dollar slowly moved higher, helping the Nikkei end up 0.6%. Korea's Kospi closed 0.6% higher amid stronger-than-expected trade figures. Some markets remained closed for the Lunar New Year break, including China. Hong Kong's Hang Seng Index dropped 0.18% in its first session of the week, catching up with weakness in other Asian stocks the previous two days.
Australian shares rose for the first day this week on Wednesday, as resources companies helped drive a broad recovery. Higher base metal and crude oil prices set the tone for a positive session for mining and energy stocks. The major banks added weight to the market's advance, bouncing back from sharp falls the last two days as investors pulled back from stocks that have had attractive strong buying since the U.S. election. Ending near its high of the session, the S&P/ASX 200 rose 32.3 points, or 0.6%, to 5653.2. Only discretionary consumer sector subindex ended in the red. Copper rose to its highest level since 2015 on Tuesday, aided by a weaker U.S. dollar and looming miners' strike in Chile. An overnight rise in oil prices, following data about OPEC production that suggested high compliance with a deal to reduce output, helped buoy energy stocks.
The London Metal Exchange's three-month copper contract closed down 0.8% at $5,945/t. The other base metals were mixed on Wednesday. Zinc prices closed up 0.7% at $2,873/t, tin prices closed up 0.2% at $19,814/t, and nickel prices closed up 3.0% at $10,193/t. Lead prices fell 1.8% to $2,329/t whilst Aluminium prices closed down 0.2% at $1,811/t.
In this Issue:
Fortescue Metals (FMG) | Quarterly Update | SELL
Market Cap $21bn| Current Price $6.66
Fortescue Metals (FMG) reported December Q results with 42.2Mt shipped at US$12.54/wmt C1 vs Sept Q 43.8Mt @ US$13.55/wmt (-7% cost reduction, -4% shipped Q-o-Q). This was above Argonauts forecast of 41Mt. The Company repurchased a further US$1.0bn in debt, reducing net debt to US$4.0bn and net gearing to 30%. 1H production of 86Mt at an average C1 cost of US$13.05/wmt puts FMG in an enviable position to reach/beat the upper end of its stated guidance. We make revisions to our model to account for improved costs, reduced debt and higher short term iron ore prices. We upgrade our price target to $5.18ps ($3.81ps prior), and maintain our SELL recommendation due to share price appreciation.
Recent Contacts & Presentations:
Capricorn Metals Ltd (CMM), Eve Investments Ltd (EVE), Australian Mines Ltd (AUZ), Heron Resources Ltd (HRR), St George Mining Ltd (SGQ), Threat Protect Australia Ltd (TPS), Paringa Resources Ltd (PNL), The Gruden Group Ltd (GGL), Primary Gold Ltd (PGO), Vault Intelligence Ltd (VLT), Botanix Pharmaceuticals Ltd (BOT) Orthocell Ltd (OCC), Strandline Resources Ltd (STA) Dragontail Systems Ltd (DTS), ABM Resources Ltd (ABU), Acacia Coal Ltd (AJC), Troy Resources Ltd (TRY), Hazer Group Ltd (HZR), Berkeley Energia Ltd (BKY), Sino Gas & Energy Holdings Ltd (SEH), Sovereign Metals Ltd (SVM), Kin Mining (KIN), Vital Metals Ltd (VML), Mincor Resources (MCR)