Market Update & Important Indicators
U.S. stocks rose, bouncing back after their biggest weekly decline since February. Consumer discretionary shares were among the biggest gainers in the S&P 500, rising 1.4%. Wynn Resorts climbed 6.6%, Amazon.com rose 3.8% and Newell Brands increased 3.5%. Stock gains have slowed after major U.S. indexes rebounded from February lows, a rally spurred by rising oil prices and the U.S. Federal Reserve's softer stance on raising interest rates.
Institute for Supply Management said its index of manufacturing fell to 50.8 in April from 51.8 in March. A reading above 50 indicates that factory activity is expanding. Meanwhile, a final purchasing managers index for the eurozone's manufacturing sector was revised upward to 51.7 from 51.5, pointing to a modest pickup in activity. The Stoxx Europe 600 inched lower 0.1%. Trading in Europe was quiet, with markets in the U.K. and Ireland closed for a holiday.
Japanese stocks fell sharply, leading smaller declines in the rest of Asia, on the yen's surge to a one-and-a-half-year high against the dollar, weak earnings from several big firms and lingering concern over the Bank of Japan's policy inaction last Thursday. The 3.1% drop in the Nikkei Stock Average followed the BOJ's decision last week to keep its main policy unchanged, despite slowing inflation and expectations for an expansion in its asset-purchase program, particularly in exchange-traded funds. Japanese markets were closed Friday for a national holiday.
Sharp falls in Australian bank shares following lackluster half-year earnings from one of the biggest lenders weighed on the broader equities market Monday. The S&P/ASX 200 fell as much as 1.3% before paring its early losses to close down 9.2 points, or 0.2%, at 5243.0. Westpac fell 3.5% after it reported first-half earnings that were slightly below expectations and it reported a jump in charges for soured loans. Australia & New Zealand Banking, which is set to turn in its first-half earnings before the market opens Tuesday, lost 2.2%, while National Australia Bank and Commonwealth Bank of Australia both slipped 2.1%. Together, the four knocked 31 points off the ASX 200.
Gold producers notched up strong gains as the price for the precious metal neared a 15-month high in Asia trading, with a weaker U.S. dollar helping drive demand for gold. Newcrest Mining climbed 4.6%, OceanaGold advanced 8.9% and Evolution Mining was 9.7% stronger. Mining heavyweights BHP Billiton and Rio Tinto were 1.2% and 1.7% higher, respectively. Among energy stocks, Woodside Petroleum rose 1.4% and Oil Search gained 0.9%, although Santos lost 1.7% and Origin Energy shed 1.5% as crude-oil prices lost ground Monday. Telecommunications company Telstra added 2.8% after it said it planned to return at least 1.5 billion Australian dollars ($1.1 billion) to shareholders in the first half of the 2017 financial year. Tuesday will be a big day on the macroeconomic front, with the Reserve Bank of Australia's monthly policy meeting and the scheduled release of the federal government's budget.
Copper prices closed lower, weighed down by weak manufacturing data out of China, the industrial metal's largest consumer. Copper prices tend to be influenced by economic health in China, since the Asian country accounts for 45% of copper demand. George Gero, managing director at RBC Wealth Management, said additional economic uncertainty in the U.S. and Eurozone has kept investors from betting on improving demand for copper. Lower oil prices also weighed on copper, as the U.S. oil benchmark fell 2.6% to $44.70 a barrel on Monday. Trading volume in copper markets stayed low on Monday, as markets in London and Asia are closed for national holidays.
In This Issue
CTI Logistics (CLX) | Downgrade | HOLD
Market Cap $303.7m | Current Price $0.80 | Valuation $1.20
We had assumed weak performance from WA, but CLX’s trading update indicates it’s considerably worse than expected. Group EBITDA for the first 9 months of FY16 is 18% down on the corresponding period last year and we have cut our numbers accordingly. Although we like the east coast diversification strategy and continue to believe there is significant longer term value, we downgrade to hold (prior buy) as we expect investors to focus on the uncertain WA economy and its impact on near term earnings.
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