Market Update & Important Indicators
U.S. stocks rebounded Friday, shaving away much of the S&P 500 and Dow Jones Industrial Average's midweek losses but leaving both indexes down for a second consecutive week. Friday's moves allowed the stock market to end on a high note following a rocky stretch that included lukewarm earnings reports and economic data. Recent reports have pointed to a slowdown in growth across much of the U.S. economy in April, smaller-than-expected job creation and still-sluggish wage growth, which has renewed questions among investors about whether the economy's momentum is slowing. Still, many investors say they remain relatively optimistic about stocks, citing broadly strong earnings results, as well as signs that central banks will stick to a slow and steady course of interest-rate increases. The Dow Jones Industrial Average rose 332 points, or 1.4%, to 24263, erasing declines after falling as many as 151 points earlier in the session. The S&P 500 added 34 points, or 1.3%, to 2663, while the Nasdaq Composite climbed 121.47 points, or 1.7%, to 7209.62, lifted by a rally in Apple shares. The U.S. gold price gained 0.3% overnight to record 1315.0 US$/Oz.
The Stoxx Europe 600 index closed up 0.6% at 387 as investors reacted positively to solid U.S. jobs data. Ferrari was up 7.7% after positive analyst ratings, while Pearson jumped 7.7% after solid 1Q earnings. Germany's DAX ended up 1%, France's CAC 40 up 0.3% and the U.K.'s FTSE 100 up 0.9%. Italy's FTSE MIB ended up 1.1% and Spain's Ibex 35 up 0.6%.
In Asian trading Friday, equities closed broadly lower for a second day. This followed a lackluster day for Wall Street Thursday, after data showed a slowdown in growth across much of the U.S. economy in April. Investors have been on edge this year after a sudden bout of volatility triggered sharp selloffs in February. Since then, they have increasingly focused on geopolitical risks and concerns about a potential trade war. On Friday, money managers kept a close eye on U.S.-China trade talks in Beijing, where the U.S. said it would impose additional tariffs on China unless it cut its bilateral trade surplus by $200 billion by 2020.
While seeing a 5-day winning streak end today, Australian stocks rose for a 5th-straight week, the first such run since December, as utilities weighed Friday. The S&P/ASX 200 fell 0.6% to 6063, cutting the week's advance to 1.8%. Those gains were fueled by a rebound in banks, which pulled back today amid weakness for the sector across Asia Pacific. Also, weak to end the week in Australia was utilities, sliding 1.3%. Macquarie was a bright spot, rising 0.2% after posting a record annual profit, while AMP gained 0.5% after naming former CBA CEO David Murray as chairman-elect.
Base metal prices were mostly positive overnight. The London Metal Exchange’s lead price gained 2.6% to 2,315/t, while the zinc price gained 1.9% to 3,046/t. Nickel prices gained 1.8% to 13,974/t, and the price of tin remained steady at 21,345/t. The largest mover overnight was aluminium that gained 4.4% to finish at 2,370/t. This has been caused by US announcements of tariffs on imported aluminium and sanctions on Russian aluminium company Rusal.
In This Issue
Australian Gold Sector | March Q wrap – Going down the curve
Gold prices have risen by 10% in AUD terms and 7% in USD terms in FY18YTD. Funds flow has been predominantly into mid-tier producers with the ASX Gold Index (XGD) up +17% FY18YTD. Emerging plays have fared well, evident from the surge of the ASX Small Resources (XSR) index which has risen by 48% FY18 YTD. Equity valuations of the mid-tier producers now look stretched and we struggle to identify significant value upside. We speculate this is due to increased North American investment in the ASX Golds versus the US gold producers which have largely underperformed in FY18. Emerging developers have recorded only incremental gains and we argue that in the near-term, investors will look come down the curve into the emerging developer space for value. Our key picks include Dacian Gold (DCN), Gascoyne Resources (GCY) and Gold Road (GOR). We now also identify the next tier of potential development plays including Explaurum (EXU) and Genesis Minerals (GMD) with advanced studies looking to make the transition into production.
Recent Contacts & Presentations
Genesis Minerals (GMD), 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)