Market Update & Important Indicators:
U.S. stocks edged higher Tuesday as financials extended their recent rally. Shares of telecommunications companies also boosted U.S. stocks, helping put the Dow Jones Industrial Average on course for another record after the index closed at a fresh high Monday. Gains in Goldman Sachs Group and Verizon Communications helped lift the blue-chip index. The S&P 500 rose slightly, led by gains in telecom and financial shares. Some investors have cautioned that the president-elect's potential policies – which include cutting taxes and ramping up infrastructure spending — may not pan out as expected.
European stocks moved higher as utility shares gained and banks recovered from the fallout from this weekend's referendum in Italy. The Stoxx Europe 600 index rose 0.9% to close at 344.32, rising for a second straight day. A German court ruled on Tuesday that parts of the government's nuclear phase-out law are unconstitutional, opening the door for utility companies to sue for damages. Italy's FTSE was also a bright spot, rallying 4.2% to 17,757.80 and easily erasing Monday's slip of 0.2%. The Milan benchmark fell as much as 2.1% during that session after Prime Minister Matteo Renzi said he would step down following the rejection of his constitutional reforms by Italian voters on Sunday.
Asian share markets were broadly higher Tuesday, tracking overnight gains on Wall Street, as investors globally brushed off Italian voters' rejection of constitutional changes. Japan's Nikkei Stock Average ended up 0.5%, South Korea's Kospi added 1.4% and Taiwan's Taiex gained 1%. Finance stocks in Asia were among the biggest gainers Tuesday, helped by the calm global reaction to Italy's referendum. Investors continue to bet on the "reflation trade" on hopes that U.S. President-elect Donald Trump will increase fiscal spending, lower corporate taxes, and boost growth and inflation. Those expectations were given a boost by encouraging economic data out of the U.S. and China in recent days, as well as a deal last week by key oil-producing nations to cut global crude-oil output, helping lift prices. Meanwhile, the Hang Seng Index in Hong Kong ended up 0.8%, in the second day of a new trading link between the city's exchange and Shenzhen, home to China's rising tech firms. The agreement also opens the door for Chinese investors to buy into some small-cap stocks. The Shenzhen Composite Index closed up 0.2%, outperforming the Shanghai Composite Index's 0.2% decline.
Australian shares recovered, tracking solid gains on Wall Street as investors largely brushed off Italy's political turmoil. Driven by gains in resources and financial stocks, the S&P/ASX 200 rose 28.3 points, or 0.5%, at 5428.7 after declining in the past two sessions. Still, the index ended off the day's highs, pulling back in the final minutes of trade. In its final policy meeting of the year, the Reserve Bank of Australia opted to leave its benchmark cash rate at 1.5%. Gov. Philip Lowe said in an accompanying statement that year-ended economic expansion was likely to slow but growth was expected to lift through 2017.
Copper for delivery in three months was recently down 1.3% at $5,873/t on the London Metal Exchange. The other base metals were mixed were overnight. Aluminium prices fell 1.4% to $1,712/t, nickel prices fell 0.2% to 11,566/t, and tin fell 0.4% at $21,305/t. Meanwhile lead rose 0.7% at 2,322/t and zinc rose 1.2% at 2,782/t.
In this Issue:
Dacian Gold (DCN) | Equity Raised, but far from enough | BUY
Market Cap: $300m | Current Price $2.21 | Target Price $3.35
Dacian Gold (DCN) has completed an unconvincing $26m equity raising after initially setting out to raise up to $150m. The raise followed the recent Mt Morgans DFS and was designed to be a precursor to debt financing to fund the estimated $220m development capex. Unfortunately, it was ill-timed and poorly executed, having coincided with a downturn in the gold price. While Argonaut still considers the project to be highly bankable, the amount of debt financing and lending terms could be less favourable. It is expected DCN will need to return to the equity markets to complete development funding. At the current share price and given the quality of Mt Morgans, we believe DCN has heightened corporate appeal. BUY maintained with a revised target price of $3.35.
Recent Contacts & Presentations:
Emerald Resources NL (EMR), Metals of Africa Ltd (MTA), Stavely Minerals Ltd (SVY), Australis Oil & Gas Ltd (ATS), Davenport Resources Ltd (DAV), TFS Corporation Limited (TFC), Emmerson Resources Ltd (ERM), Syntonic Ltd (SYT), MZI Resources Ltd (MZI), Resolute Mining Ltd (RSG), Capricorn Metals Ltd (CMM), Eve Investments Ltd (EVE), Australian Mines Ltd (AUZ), Heron Resources Ltd (HRR), St George Mining Ltd (SGQ), Threat Protect Australia Ltd (TPS), Paringa Resources Ltd (PNL), The Gruden Group Ltd (GGL), Primary Gold Ltd (PGO), Vault Intelligence Ltd (VLT), Botanix Pharmaceuticals Ltd (BOT) Orthocell Ltd (OCC), Strandline Resources Ltd (STA)