Market Update & Important Indicators:
U.S. stocks reversed early losses and edged higher Tuesday. Gains in telecom and utilities shares helped offset declines in financials. The energy sector also lifted the broader market, rising 1.6% in the S&P 500.The S&P 500's financial sector shed 0.4%. The group has fluctuated recently with investors' expectations about when the Federal Reserve might raise interest rates. Profits at banks and financial firms are squeezed when rates are low. A gauge of service-sector activity fell last month, according to data released Tuesday, following Friday's employment report that U.S. job growth cooled in August. Fed funds futures show investors and traders believe there is an 18% chance the Fed will raise rates this month, down from more than 20% earlier Tuesday, according to data from CME Group.
European stocks ended in the red after disappointing U.S. services data reignited worries about economic growth in the world's largest economy. The Stoxx Europe 600 index ended down 0.3% at 349.46. The pan-European benchmark wobbled between small gains and losses for most of the day, after a mixed bag of corporate news. But in the afternoon, data from the Institute for Supply Management sucked the air out of markets in both Europe and the U.S. The report showed growth in U.S. services sector slowed to the weakest pace in six years as new orders plunged.
Asian shares were broadly higher Tuesday, with export names buoyed by the U.S. dollar's strength. The Nikkei Stock Average closed up 0.3%, hitting a fresh three-month high, and building on last week's 3.5% gain. Singapore's Straits Times Index added 1.6% on rising oil prices, while Hong Kong's Hang Seng Index gained 0.5%. Meanwhile, the Japanese yen was recently flat against the U.S. dollar after trading down for much of the day, with the greenback holding firm. Japanese banking stocks also drove gains on the Nikkei amid expectations that the Bank of Japan may cut back on longer-term bond buying at its next meeting, thus boosting bond yields. Japanese banks have been some of the biggest victims of the BOJ's monetary easing and negative-rates policy. They claim that their profits were suffering amid very low yields on all government bonds.
Australian shares faltered Tuesday, tipped deeper into the red following an as-expected decision by the central bank to hold interest rate steady. The fall eats into Monday's rally in the wake of softer-than-anticipated U.S. jobs data that suggested the Federal Reserve will hold off from lifting U.S. rates this month. The S&P/ASX 200 finished 16 points, or 0.3%, lower at 5413.6. That narrows the advance so far this week to 0.8%. Most industry sectors were lower for the day, although the mining and energy subindexes managed modest gains. The Reserve Bank of Australia opted to keep its cash rate steady at a record-low 1.5% and signalled it would remain unchanged for the time being, after cutting at its May and August policy meetings.
Copper prices rose along with other base metals on the back of a falling U.S. dollar. Copper for December delivery settled up 0.7% at $2.0890 a pound on the Comex division of the New York Mercantile Exchange. Other base metals were mixed on Tuesday. Aluminium closed up 0.6% at $1,573/t, zinc closed down 1.8% to $2,318/t, tin closed up 1.4% to $19,700/t, nickel closed up 0.4% to $10,058/t, and lead closed down 1.3% to $1,936/t.
Thought of the day:
Argonaut Metals & Mining:
Zinc has been the best performing base metal for 2016 year-to-date, rising 49% on the LME. Despite this rapid price increase, Argonaut still regards zinc as our highest conviction metal for 2016-2017. Mine closures from key listed producers through 2015-2016 and increasing environmental restrictions in China have reduced mined output resulting in tightening concentrate supply. While ASX exposure to zinc pure plays is limited, we see value in emerging developers such as Heron Resources (HRR), Red River Resources (RVR), Energia Minerals (EMX) and Marindi Metals (MZN).
Recent Contacts & Presentations:
Metal Bank Ltd (MBK), Actinogen Medical (ACW), St. George Mining Ltd (SGQ), Resapp Health Ltd (RAP), Orecorp Limited (ORR), Dimerix Limited (DXB), Genesis Minerals Ltd (GMD), Dakota Minerals Ltd (DKO), Breaker Resources NL (BRB), Bard1 Life Sciences Ltd (BD1), Alto Metals Ltd (AME), Birimian Limited (BGS), Antipa Minerals Ltd (AZY), Vault Intelligence Ltd (VLT), Noxopharm Ltd (NOX), Gage Roads Brewing Co. (GRB), West African Resources (WAF), Cedar Woods Properties Ltd (CWP), Sino Gas & Energy Holdings Ltd (SEH), Salt Lake Potash Ltd (SO4), Kalina Power Ltd (KPO), Austal Limited (ASB), Agrimin Ltd (AMN), Stavely Minerals Ltd (SVY), MGC Pharmaceuticals Ltd (MXC), Vital Metals Ltd (VML), Tox Free Solutions Ltd (TOX)
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