Market Update & Important Indicators:
The Nasdaq Composite rallied Monday, while the Dow Jones Industrial Average was narrowly on track for a fresh record. Quarterly earnings and acquisition announcements drove some of Monday's biggest moves in individual stocks. Overall, U.S. shares have enjoyed a bump in recent weeks as second-quarter reports have largely beaten expectations so far. The Nasdaq Composite rose 0.5% as gains in health-care companies helped the index outperform its peers. The Dow Jones Industrial Average added less than 0.1% at 22,118 after Friday's solid jobs report helped sent it to its eighth straight record close. The S&P 500 rose 0.2%, with declines in energy shares chipping away at gains by consumer-staples companies. The U.S. gold price dipped slightly overnight, finishing 0.1% lower at 1,257.30 US$/oz.
European stocks largely closed flat to lower Monday after the prior week's sizable rally, limited by a downbeat reading on German industrial output and tumbles for Paddy Power Betfair and PostNL. The Stoxx Europe 600 edged down by 0.1% to finish at 382.01. That's after the benchmark on Friday gained 1% for its biggest percentage rise in three weeks, with analysts pinning the jump on an encouraging U.S. jobs report. The gauge tacked on 1.1% last week. On Monday, industrial output in Europe's largest economy surprisingly fell at the end of the second quarter, data from Germany's Economics Ministry showed. Mining stocks were among the day's notable gainers, helped by a rally in iron ore prices. Futures for iron-ore and other base metals rose in Asia trading on Monday.
Stocks extended gains in Asia following Friday's better-than-expected U.S. jobs report, although volumes continued to be modest in a number of markets with many traders on vacation. Friday's gains in the dollar and government bond yields helped Japanese export and financial stocks. The Nikkei was 0.5% higher on Monday, also supported by steep gains in car makers. South Korea's Kospi rose 0.1% Monday, continuing a rebound from a selloff last week stoked by the potential for tax increases there. In Hong Kong, the Hang Seng Index rose 0.5% as it continued to march toward a high it last hit in 2015.
Australian stocks led today's Asia Pacific gains, rebounding after 3 days of declines. The S&P/ASX 200 rose 0.9% to 5773.6, 1/4 of that gain thanks to the country's four major banks. The quartet's advance was largely in line with the broader markets and followed Friday's slide in CBA following a government lawsuit. Meanwhile, BHP Billiton, Rio Tinto and Fortescue each rallied strongly amid another jump in Chinese iron-ore futures. Utilities were the only sector to finish in the red.
The London Metal Exchange's three-month copper contract closed higher overnight, finishing up 0.66% at $6,414/t. The other base metals were mainly higher. Aluminium prices jumped 3.0% to 1,946/t. This was the largest daily increase in aluminium prices since September 2016, largely on the back of bets that China will begin tightening its supply. Tin prices rose 0.4% at 20,705/t. Nickel prices rose 1.5% overnight to 10,361/t, whilst zinc prices jumped 1.6% to finish at 2,848/t. Lead prices declined for the day, shedding 0.1% at 2,340/t.
In this Issue:
Orbital (OEC) | Drones to provide the lift | HOLD
Market Cap $52m | Current Price $0.67 | Valuation $0.75
Preliminary FY17 results are disappointing and below expectations, although the value in the business relates to significant opportunity for growth in the UAVe segment. Earnings forecasts are strongly weighted to this sector. Gains have taken the share price closer to our revised valuation of $0.75 (prior $0.90). Forecasting risk is elevated and we reduce to hold (prior buy) in the near term as realisation of the UAVe potential will take time.
Paragon Care (PGC) | Strong vital signs | BUY
Market Cap $149m | Current Price $0.90 | Valuation $1.12
A strong 2H17 meant PGC met or exceeded guidance and expectations for the full year. Vital signs are good; revenue growth, margin expansion, and strong operating cash flow are a healthy combination. Evidence suggests the strategy to consolidate a fragmented industry is well considered. Businesses are being successfully integrated onto the growing platform, synergies extracted, and cross-selling opportunities targeted. We have upped our valuation to $1.12 (prior $1.05) on the back of a solid FY17 and believe there is both organic and acquisitive growth upside. Buy maintained.
Recent Contacts & Presentations:
Rift Valley Resources Ltd (RVY), Panoramic Resources Ltd (PAN), Doray Minerals Ltd (DRM), Wellard Limited (WLD), Bryah Resources Ltd (BYH), Auris Minerals Ltd (AUR), Gage Roads Brewing Co Ltd (GRB), Stavely Minerals Ltd (SVY), Orbital Corporation Ltd (OEC), 4Ds Memory Ltd (4DS), Kin Mining NL (KIN), Pharmaust Limited (PAA), Botanix Pharmaceuticals Ltd (BOT), Dimerix Ltd (DXB), Metro Mining Ltd (MMI), Paringa Resources Ltd (PNL), Independence Group NL (IGO), MZI Resources Ltd (MZI), Transerv Energy Ltd (TSV), Emmerson Resources Ltd (ERM), Antipa Minerals Ltd (AZY), Echo Resources Ltd (EAR), Sovereign Metals Ltd (SVM)
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