Market Update & Important Indicators:
U.S. stock indexes wavered intraday as investors assessed a mixed batch of corporate earnings. The Dow Jones Industrial Average added 8 points, or less than 0.1%, to 20922 intraday. The S&P 500 and the Nasdaq Composite both fell 0.1%. Major stock indexes have mostly climbed over the past two weeks, supported by reports pointing to corporate strength. With more than two-thirds of S&P 500 companies having reported results, firms are on track to post their best results since the third quarter of 2011, according to FactSet. Still, some investors caution that stocks in the U.S. look expensive relative to their historical averages, making them vulnerable to a pullback.
European stocks closed firmly higher, getting a lift after Greece signed a deal to release the next tranche of bailout aid and after data showed Eurozone manufacturing output on the rise. The Stoxx Europe 600 index ended 0.8% higher at 389.53, for its highest close since August 2015. On Monday, trading in most European markets was closed for the May Day holiday.
Stocks in Asia broadly rose, with tech firms getting a shot in the arm from strong earnings from their U.S. counterparts overnight. Additionally, investors sought to reposition themselves as many local markets returned from the Labor Day holiday. Japan's Nikkei Stock Average rose 0.7% as the yen softened, while Korea's Kospi was up 0.8% –after earlier just missing the intraday high reached in 2011. Taiwan tech stocks rose 1.3% as the Taiex overall gained 0.7%, moving back toward what would be 17-year highs. In Hong Kong, the Hang Seng Index hit a 21-month high with a 0.3% gain, getting a lift from another strong month in gambling-revenue growth from Macau. Manufacturing data from China also pressured upbeat sentiment. Caixin's purchasing-managers index fell to a seven-month low in April, causing some fresh worry about whether that economy's start-of-year strength can be maintained. After a four-session rebound, the Shanghai and Shenzhen composite indexes each fell around 0.1%.
Earnings disappointment weighed heavily on Australia's big banks and helped pull the stock market back from a two-year high. Still, the market ended well off its lows of the session after the central bank left its benchmark cash rate unchanged for a ninth-straight month and made no substantive changes to its policy statement. After climbing in each of the last seven sessions, the S&P/ASX 200 fell 6.1 points, or 0.1%, to settle at 5950.4. Financials, which had helped buoy the market of late, fell 0.8%. Australia & New Zealand Banking was a big drag after its first-half earnings report punctured investor optimism that had lifted the bank's shares almost 6% in recent days. The other banks followed in its wake, ahead of their own earnings reports due in coming days. The banks offset a recovery in energy stocks and buying interest in industrials, healthcare and consumer shares. The broader market steadily recovered after the Reserve Bank of Australia's widely anticipated rate decision, which supported views the central bank will remain sidelined until 2018 at the earliest by record household debt and a weak job market.
The London Metal Exchange's three-month copper contract closed up 1.54% at $5,802/t. The other base metals finished mixed on Tuesday. Nickel prices rose 0.6% at 9,463/t, tin prices rose 0.1% at 20,015/t whilst zinc prices added 1.2% finishing at 2,650/t. Aluminium prices bucked the trend falling 0.4% to 1,922/t whilst lead prices also dropped 0.8%, closing at 2,262/t.
In this Issue:
Orbital (OEC) | Price falls overdone | SPEC BUY
Market Cap $36m | Current Price $0.46 | Valuation $0.90
Share price falls (down 47% YTD) are overdone in our view; an EV of $20m is undemanding for a Company with attractive technologies validated by global clients. We have a degree of confidence in UAV forecasts given a 3-year deal with Insitu worth at least US$33m and, despite considerable forecasting uncertainty for REMSAFE, we believe the technology is compelling (sales have been made to the iron ore majors in the Pilbara and Anglo in South Africa). It could be argued the UAV business alone underpins the current share price and accordingly we upgrade from a hold call to speculative buy.
Paringa Resources (PNL) Funded and commencing development | BUY
Market Cap $259m | Current Price $0.50 | Target Price $1.66
Paringa Resources (PNL) has successfully raised US$20m debt (A$27m) and $53m through an institutional placement (102m shares at $0.52/sh). The Company is now fully funded to commence development of the Poplar Grave mine at the Buck Creek thermal coal complex, Kentucky, USA. More recently, PNL has begun excising options to acquire surface property for the mine and river barge load out facility ahead of development. Construction is due to commence July 2017 with first coal production in mid-2018. BUY maintained.
Recent Contacts & Presentations:
Sino Gas & Energy Holdings Ltd (SEH), Orecorp Limited (ORR) Doray Minerals Limited (DRM), Capricorn Metals Ltd (CMM) Independence Group (IGO), Cardinal Resources Limited (CDV), Metal Bank Ltd (MBK), MOD Resources Ltd (MOD) Quintis Ltd (QIN), Regis Resources Ltd (RRL), Apollo Minerals Ltd (AON), Ironbark Zinc Ltd (IBG), Sovereign Metals Ltd (SVM), Pilbara Minerals Ltd (PLS), Laconia Resources Ltd (LCR), Hazer Group Ltd (HZR), Transerv Energy Ltd (TSV), Ausquest Ltd (AQD), Quintis Ltd (QIN), Paradigm Biopharma Ltd (PAR), Pharmaust Ltd (PAA), Strandline Resources Ltd (STA), PharmaNet Group (PNO), Emerald Resources NL (EMR), Echo Resources (EAR), Investigator Resources Ltd (IVR)
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