Market Update & Important Indicators
Technology shares led stocks higher Friday, boosted by a jump in Apple after the tech giant delivered its best quarterly growth in two years. Friday's rise helped all three major U.S. indexes notch gains over a week in which investors faced a string of potentially market-moving announcements, from the House Republicans' plans for tax overhaul, to a Federal Reserve meeting to the October jobs report. The tech-heavy Nasdaq Composite gained 0.7%, outpacing gains in the S&P 500 and Dow Jones Industrial Average, which were up 0.3% and 0.1%, respectively. Earlier this week, the Nasdaq closed at its 62nd record of the year, tying 1980 for the most closing highs in a calendar year. Apple shares jumped 2.6% on Friday, putting its year-to-date gain at nearly 50%. Global technology shares mostly moved higher in concert, also supported by upbeat results from Alibaba and other U.S.-listed tech giants earlier this week. The U.S. gold price traded lower overnight, slipping 0.5% to finish at 1,269.40 US$/oz.
European stocks finished with modest gains Friday, as German and British benchmarks logged record highs, but a clutch of corporate earnings reports and developments limited the advance for the region's benchmark. The Stoxx Europe 600 index was up 0.3% to end at 396.06. Germany's DAX 30 index rose 0.3% to close at 13,478.86, nabbing a new all-time closing high. Also scoring a record was the U.K.'s FTSE 100 as it rose 0.1% to end at 7,560.35. France's CAC 40 added 0.1% to 5,517.97, while Spain's IBEX 35 dropped 1% to 10,357.80.
Asia-Pacific equities struggled for direction Friday, as investors sought new drivers after an October to remember and awaited the next U.S. jobs report. Rising metals helped Korean steel producers, with Posco climbing 0.5%. But Korea's Kospi was down 0.2% as index heavyweight Samsung sank 2%. Japan markets were closed for a holiday. Chinese stocks ended their morning session down in a possible bout of profit-taking. The Nasdaq-like ChiNext in Shenzhen was off 0.6% – after earlier rising as much as 0.5% – matched by the Shenzhen Composite. The Shanghai Composite slid 0.7%.
Australia's stock benchmark notched a 2 1/2-year closing high on the back of broad gains, outpacing much of the region's performance Friday. That following the local market's October rebound, which has put the S&P/ASX 200 in line to reach 6000 for the first time since early 2008. It finished up 0.5% at 5959.9, putting the week's gain at 1%. Today, miners again led amid a rebound in Chinese iron-ore futures. Rio Tinto rose 1.1% to hit a 6-year high. Most banks notched gains, although NAB continued a post-FY slide and Macquarie eased 0.2% after hitting a fresh record Thursday.
The London Metal Exchange’s 3-month copper contract traded lower overnight, losing 0.5% to finish at $6,895/t. The other base metals finished mixed. Aluminium prices gained 0.5% to close at 2,166/t, whilst Zinc prices lost 1.4% to 3,251/t. Lead prices rose 0.9% to 2,458/t, while Tin prices fell 0.5% to close at 19,682/t. Nickel prices rebounded 0.9% to close at 12,682/t.
In this issue
Botanix (BOT) | Pipeline Starting to Flow | SPEC BUY
Market Cap $25m | Current Price 4.6c | Target Price 9.5c
BOT has maintained a strict development timeline, with results from its Phase 1b BTX 1503 acne study expected in early CY2018. In addition, BOT now has ethics approval to commence a Phase 1b patient study for its dermatitis treatment (BTX 1204) whilst other products for the treatment of acne (BTX 1701) and psoriasis (BTX 1308) remain in the pipeline. A diversified pipeline de-risks BOT’s portfolio and adds value, underpinning our SPEC BUY call on a revised 9.5c valuation (previously 8.0c).
Gold Road Resources (GOR) | Cracking the regional code | BUY
Market Cap $596m | Current Price $0.68 | Target Price $1.00
Gold Road (GOR) released its September Quarterly report with updates on the Gruyere Gold Project. Construction has commenced on the 50:50 Gruyere JV with mining set to commence within 12 months and first gold production in Q1 2019. Running in parallel GOR, is conducting an aggressive $24-26mpa exploration program on the Yamarna projects with the focus on additional mill feed for the JV or a potential new stand-alone project owned 100% by GOR. The majority of this expenditure is focussing on the North Yamarna tenements. We argue the market is not adequately valuing the exploration portfolio and that the geological understanding is now at a point that successes in regional exploration could translate to meaningful development plays either for mill feed for the JV or as standalone operations.
Resource Services | Where’s the value?
Recent performance and commentary confirms resource services businesses are recovering strongly. Given sector leverage, earnings growth expectations are high and it is understandable investors are prepared to pay up for exposure. In our view there is a limit to how far share prices can be driven by multiple expansion. Earnings need to catch-up. The resource services sector is trading on a blended forward P/E multiple ~50% higher than the average sector P/E over the last decade.
Recent Contacts & Presentations
Gold Road Resources Ltd (GOR), Apollo Consolidated Ltd (AOP), De Grey Mining Ltd (DEG), Triton Minerals Ltd (TON), Evolution Mining Ltd (EVN), Silver Mines Ltd (SVL), NTM Gold Ltd (NTM), Gascoyne Resources Ltd (GCY), Southern Cross Electrical Ltd (SXE), MOD Resources Ltd (MOD), Meteoric Resources NL (MEI), Emmerson Resources Ltd (ERM), Gage Roads Brewing Ltd (GRB), Otto Energy Ltd (OEL), Whitebark Energy Ltd (WBE)
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