Market Update & Important Indicators:
The Dow Jones Industrial Average declined intraday as escalating trade rhetoric and downbeat manufacturing readings curbed appetite for risk, though stocks pared some of their earlier losses. The Dow gained 36 points, or 0.1%, to 24307, after earlier declining as much as 194 points. The S&P 500 gained 0.3%, while the Nasdaq Composite turned higher, rising 0.2%. Analysts pointed to continued uncertainty around global trade as a catalyst for the moves. President Donald Trump said he sees his threat to impose global auto tariffs as his biggest weapon to extract concessions from trading partners, as his administration studies a proposal to impose 20% levies on imported vehicles. China, meanwhile, fulfilled a pledge to slash tariffs on imported cars Sunday, but Beijing is preparing to slap an additional 25% tariff on U.S. auto imports this Friday. The US gold price lost 0.9% to 1,241 US$/oz.
The Stoxx Europe 600 dropped 0.8% to 376.75 as worries over global trade and political uncertainty in Germany prompted investors to sell equities. Tesco and Carrefour shares end down 0.2% and 0.9%, respectively, after the two supermarket chains agreed to a tie-up to secure lower prices from suppliers. Meggitt shares are the biggest gainers, up 6.3% after a stronger sales outlook. Germany's DAX ends down 0.6%, France's CAC 40 down 0.9%, the U.K's FTSE 100 down 1.2% and Italy's FTSE MIB down 0.9%.
South Korea's Kospi fell 2.3%, led lower by energy, materials and industrials companies and Japan's Nikkei Stock Average fell 2.2% amid weakness in consumer stocks. Both notched their biggest daily losses since March. Declines in energy and mining companies also weighed down global indexes Monday. China's Shanghai Composite Index fell 2.5% to its lowest close since early 2016, when fears about the Chinese economy led a global selloff in stocks. Shares of the more cyclically-oriented financials and commodity companies were among the biggest decliners.
Despite a positive start to the new month, Australian stocks faded in the afternoon as they were swept along with selling across most of Asia Pacific. Settling just off the day's low, the S&P/ASX 200 dropped 0.3% to 6117.8 while logging its 6th decline in 7 days. The big banks were mostly lower, led by a 1.5% fall in ANZ. Resources stocks also were lower as oil futures retreated some in Asian trading and Chinese iron-ore futures declined.
Base metal prices were down on the London Metal Exchange. The 3-month copper contract lost 1.5% to 6,425/t while tin remained largely steady at 19,825/t. The price of aluminium fell 1.5% to 2,121/t and nickel finished 2.4% lower at 14,465/t. Zinc retreated 1.0% to close at 2,878/t.
In this issue:
Uranium Sector | Emerging from a Nuclear Winter
The uranium price has been suppressed below US$30/lb for over two years, a level at which few producers are profitable. Surplus inventories and a lack of contracting by nuclear utilities have been the primary driver for low pricing. However, we see a confluence of factors which should trigger a uranium price response in the near to medium term. These include; supply cuts by major uranium producers, increased procurement in the spot market, Japanese reactor restarts and ongoing global reactor build programs. The most recent event is a planned UK listing of Yellow Cake PLC, a trading company with a contract with Kazatomprom to purchase 8.1Mlb of U3O8 (~5% of annual global consumption).
Berkeley Energia (BKY): BUY, $1.40 TP – Developing the Salamanca Project in Spain. Salamanca is largely funded and will have lowest quartile costs
Paladin Energy (PDN): BUY, $0.28 TP – Long life, low cost Langer Heinrich mine. Significant production (7Mlbpa) and a pipeline of assets
Pacific Energy (PEA) | Earnings guidance update | BUY
Market Cap $236m | Current Price $0.55 | Valuation $0.76
PEA has confirmed underlying EBITDA guidance of $43-44m (before any contribution from Contract Power), but has also detailed a number of expected one-off costs totalling $14.8m in FY18. On review we have made minor downward adjustments to underlying earnings forecasts, however continue to believe PEA trades on undemanding multiples given the average contract duration >4 years and associated earnings visibility. BUY call maintained on a revised blended valuation of $0.76 (prior $0.80).
Recent Contacts & Presentations:
Core Exploration (CXO), Marindi Metals (MZN), MOD Resources (MOD), Santos (STO), Adriatic Metals (ADT) Bio–Gene Technology (BGT), Walkabout Resources (WKT), Triton Minerals (TON), Calima Energy (CE1), Peel Mining (PEX), Catalyst Metals (CYL), Vault Intelligence (VLT), Doray Minerals (DRM), Nzuri Coppoer (NZC), Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4), Golden Mile Resources Ltd (G88), NTM Gold Ltd (NTM), Ausmex Mining Group Ltd (AMG), Matrix C&E Ltd (MCE), Austal Ltd (ASB), Decmil Group Ltd (DCG), Ventnor Resources Ltd, Ausdrill Ltd (ASL), Alice Queen Ltd (AQX), PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SEH)