Market Update & Important Indicators
The Nasdaq Composite rose to its biggest weekly gain of the year, boosted by signs of strength in the U.S. economy and a rise in biotechnology companies. In the past week, investors navigated the damage caused by Hurricane Harvey and renewed tensions between the U.S. and North Korea, while also focusing on upbeat data on personal spending as well as steady job creation and low unemployment. On Friday, stocks edged higher following a roughly-in-line jobs report. The pace of hiring slowed and the U.S. unemployment rate rose slightly last month, according to the Labor Department, but wages ticked up less than expected. This is said to be good for stock prices, as wages are rising enough to spur more consumer spending but not at a fast-enough pace to compel the Federal Reserve to raise interest rates. In August, average hourly earnings ticked up 0.1% from the prior month, according to the Labor Department. The Dow Jones Industrial Average rose 0.2% to 21987.56 on Friday, putting its weekly gain at 0.8%. The S&P 500 added 0.2% to 2476.55, putting its weekly gain at 1.4% — its biggest since July. The Nasdaq Composite added 0.1% to 6435.33. The Nasdaq Composite finished the week up 2.7%, lifted by a 8% rise in the Nasdaq Biotechnology Index in the period. The U.S. gold price traded higher overnight, adding 0.3% to close at 1,324.40 US$/oz.
European stocks closed higher for a third straight session, boosted by a news report saying the European Central Bank will likely wait until December to unveil a plan to taper its asset purchases. Softer-than-expected U.S. jobs data also helped spur a positive mood on the stock markets, as they were seen as weakening the case for the Federal Reserve to raise interest rates again this year. The Stoxx Europe 600 index ended 0.6% higher at 376.14, giving it a 0.6% rise for the week. The pan-European benchmark still ended down 1.1% for August, marking a third straight month of declines.
Asian shares mostly inched higher, with China gaining slightly after a private gauge of Chinese factory activity rose for the third straight month in August. The Shanghai Composite Index closed up 0.2% at its highest level since December 2015 as coal and steel stocks advanced. Stocks in Shenzhen added 0.6%. Japan's Nikkei Stock Average added 0.2% amid gains in energy companies. The index ended a six-week losing streak, its longest since early 2014, with its biggest weekly gain since June. Markets in Singapore, Indonesia, Malaysia and the Philippines were closed Friday for a holiday.
Australian stocks fell for a second-straight week even amid a late-week rebound as earnings season wrapped up. After a choppy session Friday, the S&P/ASX 200 settled up 0.2%. Resource stocks led Friday's gains after overnight strength in metals and oil, aided by a weaker U.S. dollar. It was another solid week for the materials sector, which has risen nine of the past 10 weeks. Meanwhile, CSL led the health-care space Friday, rising 1.9%. Most banks also gained, though CBA shed another 0.4% as it continues to falter in the wake of regulatory investigations and a government civil suit alleging compliance failings.
The London Metal Exchange’s 3-month copper contract traded higher overnight, gaining 0.7% to finish at $6,835/t. The other base metals finished mostly higher. Nickel prices added 2.0% to 11,973/t, and aluminium prices gained by 0.8% to close at 2,116/t. Lead prices traded flat at 2,368/t, whilst Zinc prices jumped 1.4% to 3,185/t. Tin prices bucked the trend, falling 0.2% to finish at 20,830/t.
In this issue
Austin Engineering (ANG) | Miners spending again | BUY
Market Cap $130m | Current Price $0.225 | Valuation $0.260
Echoing comments from peers ANG noted a significant improvement in market conditions in 2H17 as a pick-up in replacement capex from major miners drove a sharp rebound in performance. After a breakeven result in the 1H ANG delivered full year underlying EBITDA of $14.3m, towards the top end of the $11-15m guidance range. Australia was the key driver, as the Perth operations in particular benefited from a jump in orders. We are encouraged by 1H18 EBITDA guidance of $11-12m based largely on committed work, and expect the positive recovery trend to continue in future periods. Reflective of investors looking at significant growth potential in the mining services sector beyond FY18, our valuation increases to $0.26 (prior $0.22). Buy maintained.
Gage Roads (GRB) | According to plan | BUY
Market Cap $46m | Current Price $0.053 | Valuation $0.066
The $10m capital raising during the year has given GRB the ownership structure and financial strength to execute strategy by promoting proprietary brands through all channels to market. One year into its plans to “return to craft”, the Company has made an encouraging start and comfortably delivered against expectations. We maintain a positive view, a valuation of $0.066, and a buy call.
Orbital (OEC) | Looking for a 2H18 uplift | SPEC BUY
Market Cap $42m | Current Price $0.54 | Valuation $0.75
The FY17 results were as expected after being well flagged last month, and we continue to see the significant opportunity for growth in the UAVE segment. Our earnings forecasts are now strongly weighted to this sector, although we will likely need to wait until 2H18 to get clearer evidence of potential. The share price, post recent falls, more than factors in the high degree of forecasting risk and we upgrade to speculative buy (prior hold) on an unchanged valuation.
Recent Contacts & Presentations
Fleetwood Corp Ltd (FWD), DTI Group Ltd (DTI), Calima Energy Ltd (CE1), Austal Ltd (ASB), Indoor Skydive Australia (IDZ), OZ Minerals Ltd (OZL), NorWest Energy Ltd (NEW), Berkut Minerals Ltd (BMT), Draig Resources Ltd (DRG), Minotaur Exploration Ltd (MEP), Ausdrill Ltd (ASL), Neometals Ltd (NMT), PNX Metals Ltd (PNX), Northern Minerals Ltd (NTU), New Century Zinc Ltd (NCZ), Metal Bank Ltd (MBK), Rift Valley Resources Ltd (RVY), Panoramic Resources Ltd (PAN), Doray Minerals Ltd (DRM), Wellard Limited (WLD), Bryah Resources Ltd (BYH), Auris Minerals Ltd (AUR), Gage Roads Brewing Co Ltd (GRB), Stavely Minerals Ltd (SVY), Orbital Corporation Ltd (OEC), 4DS Memory Ltd (4DS), Kin Mining NL (KIN)