Market Update & Important Indicators:
A late-afternoon slump on Friday dragged the S&P 500 to its ninth-consecutive decline, its longest losing streak in nearly 36 years. October employment data signalling solid momentum in the labour market and a bounce back in biotechnology shares had buoyed stocks for most of Friday's trading session. Ultimately, however, caution prevailed in the final hour of trading. The tight U.S. presidential election has dragged down stocks and pushed up Wall Street's "fear gauge" since early last week. The S&P 500 declined 3.5 points, or 0.2%, to 2085, putting its nine-day decline at roughly 3%. The Dow Jones Industrial Average and the Nasdaq Composite both declined 0.2% on Friday. The CBOE Volatility Index, or VIX, has surged in the past nine trading sessions – its longest-ever stretch of gains — and has risen above its 10-year average.
European stocks finished lower, as politics continued to dominate traders' attention. The Stoxx Europe 600 fell 0.9% on Friday, putting its weekly decline at 3.6%. Investors barely blinked at U.S. nonfarm jobs numbers, which came in slightly shy of economists' expectations. Thursday's U.K. High Court ruling has further clouded investors' already opaque view of Brexit, and the U.S. presidential election looms large.
Asian shares declined Friday, with Japan shrugging off better-than-expected economic data amid persistent concerns around the narrowing race for the U.S. White House. The Nikkei Stock Average closed at its lowest level in two weeks, down 1.3%, as traders digested recent yen strengthening after the market reopened following a public holiday Thursday. Elsewhere, Korea's Kospi closed 0.1% lower. Hong Kong's Hang Seng Index closed off 0.2%, while the Shanghai Composite Index finished 0.1% lower. Early Friday, the Nikkei Japan services purchasing managers index rose to 50.5 in October from 48.2 in September. A reading above 50 indicates expansion. Among key Asian indices, the Nikkei slumped 3.1% for the week, while the Kospi ended the week down 1.9%. The Hang Seng was off 1.4%, while the Shanghai Composite Index edged out a 0.7% weekly gain.
Another day of heavy selling Friday capped a fourth weekly decline for Australian shares, which finished at an 18-week low as investors braced for next week's U.S. election. Energy shares saw a particularly rough session after oil prices dropped to a fresh one-month low overnight, while a slump in National Australia Bank as it traded ex-dividend added to weakness across the financial sector. Falling for a fourth straight day, the S&P/ASX 200 lost 44.8 points, or 0.9%, to 5180.8–its lowest close since June 29. That left it down 2% for the week. Financial shares collectively lost 1.6% and the basket of energy stocks dropped 0.9%. Mining shares also lost ground, with gold producers handing back some of the week's strong run as the precious metal slipped below US$1,300 an ounce despite underlying demand for gold as a perceived safe-haven investment.
The London Metal Exchange's three-month copper contract closed up 0.6%, to $4,991/t. Other base metals were mixed on Friday. Aluminium closed down 0.7% at $1,716/t, zinc closed down 1.6% at $2,435/t and nickel fell 0.2% to $10,419/t. Tin rose 0.8%, to $21,445/t, and lead rose 0.4%, to $2,085/t.
In this Issue:
OBJ Limited (OBJ) | An array of opportunities | Spec Buy
Market Cap $130m | Current Price $0.073
A key takeaway from the recent AGM was the indication that first revenues are expected in the 2nd half of this financial year. We already know there is considerable value in the technology based on the interest from numerous global FMCG and pharma companies, however first income streams from well-known brands in the Procter & Gamble (P&G) stable will enable investors to begin wrapping numbers around the potential. An extensive opportunity pipeline will add to the newsflow. Spec Buy maintained.
Saracen Mineral Holdings (SAR) | Debt facility – prudence and opportunity – At a glance | HOLD
Market Cap $1,041m | Current Price $1.31 | Target price $1.12
Saracen Mineral Holdings (SAR) has secured a $150m senior corporate financing facility from three major international banks (BNP Paribas, Citibank and Westpac). An initial facility of $45m (with a $5m bank guarantee) effectively replaces the $40m undrawn Macquarie facility which expired in September. A further $105m can be attained by SAR under the approval of the lending syndicate. The facility has a three-year term with an option to be extended.
Thought of the day:
September Quarter Review
The ASX gold sector finished the Sept Q strongly with a stellar performance thanks to continued gains in AUD gold prices. In Q1, FY17 the weighted average AISC was A$1,105/oz (vs A$1,084/oz in Jun Q, +2%) versus a gold price of A$1,760/oz (A$1,689/oz in Jun Q +4% q-o-q). The gold price reached a high of US$1,375/oz in July, its highest in three years, but the subsequent weakening over the rest of the quarter saw gold equities pull back by an average 25%. Argonaut’s gold coverage universe trades at ~1.0x p/NPV (vs 1.2x in early Sep Q and 0.9x in late Sep Q). We see some margin erosion in 2QFY17 due to increases in oil price and AUD strength, largely offset by gains in physical gold prices. We continue to prefer the mid-tier players including NST, EVN, RRL and SBM, but we also turn our attention to the relatively small arena of pre-developers including DCN, GOR, WAF and GCY.
Recent Contacts & Presentations:
MGC Pharmaceuticals Ltd (MXC), Vital Metals Ltd (VML), Tox Free Solutions Ltd (TOX), Swick Mining Services Ltd (SWK), Davenport Resources Ltd (DAV), Orthocell Ltd (OCC), BC Iron Limited (BCI), ALT Resources Ltd (ARS), Gascoyne Resources Ltd (GCY), Dacian Gold (DCN), Orocobre Ltd (ORE), Alchemy Resources Ltd (ALY), Acacia Coal Ltd (AJC), Minotaur Exploration Ltd (MEP), Northern Minerals Ltd (NTU), Walkabout Resources Ltd (WKT), Antipa Minerals Ltd (AZY), Noxopharm Limited (NOX), Botanix Pharmaceuticals Ltd (BOT), Emerald Resources NL (EMR), Metals of Africa Ltd (MTA), Stavely Minerals Ltd (SVY)