Market Update & Important Indicators:
U.S. stocks kicked off the second quarter with declines Monday. Investors have been wagering on a stronger U.S. economy and have dialled back on some popular postelection trades recently. Shares of financial companies were among Monday's biggest decliners, with the KBW Nasdaq Bank Index of large U.S. commercial lenders shedding 1.3%. Jumping again overnight was the U.S. gold price which gained 0.3% at 1,253 US$/oz. Investors are likely to continue focusing on the outlook for U.S. policy, including a potential tax overhaul and a summit later this week between U.S. President Donald Trump and his Chinese counterpart Xi Jinping that could shed light on prospects for trade. The week is set to include monthly U.S. jobs figures and minutes from the Federal Reserve's March meeting, where officials voted to raise interest rates for the third time since the end of the financial crisis. On Friday, Mr. Trump signed executive orders meant to curb what he calls unfair trade practices.
Stocks across Europe closed with losses Monday, as they start a new quarter with a heavy week of data, including from the European Central Bank. The Stoxx Europe 600 index fell 0.5% to end at 379.29, as U.S. markets also retreated at the second quarter's kick-off. Germany's DAX 30 index shed 0.5% to finish at 12,257.20. The benchmark had climbed and briefly traded as high as 12,375.58, above its record close of 12,374.73 hit in April 2015, but it wasn't able to maintain that altitude.
Asian markets closed with gains. Japan's Nikkei Stock Average rose 0.4%, led by companies driven by domestic demand. The main index measuring large Japanese manufacturers' confidence rose to plus 12 in the January-March period from plus 10 in the previous quarter. Hong Kong's Hang Seng Index added 0.5%, reversing most of Friday's decline. India's Sensex index increased 1% to a record close, while mainland Chinese markets were closed.
A recovery by bank stocks helped drive the Australian equity market higher Monday, joining modest gains across much of the region. Despite falling by as much as 0.4% early in the session, the S&P/ASX 200 staged a late recovery that left it up 7.8 points, or 0.1%, for the day at 5872.7. The four largest banks collectively added almost 7 points to the index as financial stocks recovered from losses on Friday, while telecommunications stocks and property trusts added to the positive finish for the market. The gains countered weakness in the materials sector after falls in iron-ore and copper prices. Banks are in the spotlight, as regulators take aim at riskier property home loans amid worries about soaring prices in major cities and rising household debt. On Monday, the Australian Securities and Investments Commission warned banks and brokers of targeted surveillance to determine if they are pushing home buyers toward expensive interest-only home loans favoured by property speculators. The measures could prompt banks to again raise rates on some new mortgages, which would benefit earnings.
The London Metal Exchange's three-month copper contract closed down 1.45% at $5,753/t. All other base metals finished lower on Monday. Aluminium prices fell 0.6% at 1,940/t, zinc prices fell 2.5% at 2,681/t, lead prices fell 2.3% at 2,276/t, nickel prices finished 1.8% lower at 9,785/t whilst tin prices fell 0.7% at 20,084/t.
In this Issue:
Tox Free Solutions (TOX) | Diversified base | BUY
Market Cap $439m | Current Price $2.26 | Valuation $2.50
TOX made a final deferred payment for Daniels at the end of March, concluding a highly acquisitive period. This has been necessary to diversify away from resource exposure in WA, but has made it difficult to gauge underlying business performance. Organic growth may be constrained in the near term by top-line and margin pressure, however we believe TOX now has a solid, diversified base for growth in an industry with attractive fundamentals. Opportunity for improved longer-term returns underpins our buy call.
Recent Contacts & Presentations:
Rift Valley Resources Ltd (RVY), Botanix Pharmaceuticals Ltd (BOT), Thundelarra Ltd (THX), DTI Group Ltd (DTI) OpenDNA Limited (OPN), Metro Mining Ltd (MMI), Tox Free Solutions Ltd (TOX), St George Mining Ltd (SGQ), Venturex Resources Ltd (VXR), Creso Pharma Limited (CPH), 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)
Please read Argonaut's Important Disclaimers & disclosures