Market Update & Important Indicators
Rising oil prices buoyed stocks Friday, but major U.S. indexes still ended a rocky week in the red. Stocks around the globe declined this week, as worries resurfaced about the ability of central bankers to lift a sluggish global economy after years of easy monetary policy. It marks the second week of declines in three weeks for major U.S. stock indexes. The choppiness in the markets follows a rally that started in mid-February, when stocks posted gains of at least 1% every week for more than a month.
As of March 31, first-quarter earnings for S&P 500 companies are forecast to contract 8.5% from the same period last year, which would mark a fourth consecutive quarterly decline, according to FactSet. Analysts expect quarterly earnings to rise in the second half of the year. The Dow Jones Industrial Average added 35 points, or 0.2%, after earlier rising as much as 153 points. The S&P 500 rose 0.3%.
The world's major oil producers, both inside and outside of the Organisation of Petroleum Exporting Countries, are to meet on April 17 in Doha, Qatar, to discuss stabilising the price of the commodity.
Stocks in Europe rose on Friday, taking a cue from higher oil prices and a moderate recovery for the U.S. dollar. The Stoxx Europe 600 gained 1.2%, led by shares of banks and energy companies. Europe's banking sector also climbed after UniCredit's chief executive confirmed institutions are working on a privately funded solution for Italian banks 'capital and loans issues. Shares in the lender rose more than 8%. The Stoxx Europe 600 still logged a 0.4% weekly loss, marking the fourth-straight losing week.
Shares in Asia were mixed Friday amid worries that the Japanese yen's strong run threatens efforts to boost the world's third-largest economy. The Hang Seng Index ended up 0.5%, and the Shanghai Composite Index ended down 0.8%. The Nikkei Stock Average ended up 0.5% and South Korea's Kospi lost 0.1%. Investors in the region have been worried about the ability of central bankers to boost growth when the global economy remains sluggish. That has been highlighted recently by the Bank of Japan's inability to guide the yen weaker through monetary easing. Weakness emerged as well in Chinese stocks, which had been rallying recently alongside brighter data points on the Chinese economy. The Shanghai Composite Index lost 0.8% this week, after three weeks of trading up.
Australian shares posted a third straight week of losses, falling again Friday amid renewed investor worries over the health of the global economy. Faltering bank shares, which have a large weighting in Australia, contributed to broad weakness for the day, as did continued volatility in energy stocks after oil prices retreated from gains earlier in the week. Snapping a run higher in the previous two sessions, the S&P/ASX 200 fell 26.5 points, or 0.5%, to finish at 4937.6.
Copper prices closed nearly flat in Europe on Friday following a sharp selloff the previous day. The London Metal Exchange's three-month copper contract was down 0.01% at $4,650 a metric ton at the PM kerb close. Elsewhere, aluminum closed up 1.30% at $1,504 a ton, zinc was up 0.2% at $1,745 a ton, nickel was up 1.9% at $8,511 a ton, lead was down 0.1% at $1,694 a ton, and tin was up 1.30% at $16,911 a ton.
Thought of the Day
Pilbara Energises Lithium Sector
Pilbara Minerals Raises $100m
Pilbara Minerals Limited (ASX:PLS) embarked on an $80m equity raise last week (including $20m oversubscription capacity) to develop its Pilgangoora Lithium-Tantalite Project in WA’s Pilbara region. High demand resulted in an upscaling of the raise to $100m. The raising will significantly strengthen the company’s balance sheet, putting it in a very strong position to rapidly advance its flagship project into production to take advantage of strong market conditions and increasing demand. While it is a good result for Pilbara, it clearly demonstrates the strong appetite in the market for exposure to the rapidly growing lithium sector. Specifically, hard-rock lithium deposits in the Pilgangoora region, in Western Australia.
Lithium sector energised
The Pilbara raise was proceeded by an announcement by battery and electric car producer Tesla Motors (TSLA: NASDAQ) that it had received 276,000 pre-orders for its Model 3 electric car. The car uses a lithium-ion battery, which along with the highly anticipated Powerwall home battery (used to store energy from solar panels), will be built in Tesla’s Gigafactory in Nevada. The announcement by Tesla and the appetite for the Pilbara raise buoyed the lithium sector. Developers and producers including Pilbara, Altura Mining (ASX:AJM), General Mining (ASX:GMM) and Galaxy Resources (ASX:GXY) have risen an average 730% financial year-to-date, including 41% last week.
Lithium price
Share price accretion has been driven by lithium prices which have been on an exponential increase from Q3 2015. Prices have been spurred by growing demand for battery consumables and a ~7% year-on-year increase in consumption. 2015 demand was estimated at 160kt with upside potential of ~500ktpa by 2025. The market is being driven by increasing demand for electric vehicles and battery products, premised by a global shift to clean energy.
Dakota Minerals commenced drilling
Of the junior lithium explorers, Dakota Minerals (ASX:DKO) is the only one to be currently drilling, having commenced an RC drilling programme on the 7th April at its 100% owned Lynas Find Lithium project, within the highly prospective Pilgangoora region of Western Australia. The company is targeting areas of high grade spodumene mineralisation at the Central Lynas Find prospect, which is averaging 1.7% Li2O and up to 5.1% Li2O from a comprehensive surface sampling completed in early 2016. Importantly, the project is along the same trend of extensive lithium-tantalum bearing pegmatite dykes as the Pilbara and Altura projects. Pilbara has identified a total Indicated and Inferred resource of 80.2Mt @ 1.26% Li2O and 32.9Mt @ 0.022% Ta2O5 with Altura reporting an Indicated and Inferred resource of 35.7Mt @ 1.05% Li2O. Following recent exploration activity, the Pilgangoora area has been confirmed to contain one of the world’s largest hard-rock lithium deposits, mostly in the form of the mineral spodumene.
Important Disclosure
Argonaut acted as Lead Manager to the Placement that raised $3.6M in December 2015 and received fees commensurate with this service.
Argonaut currently owns and/or controls 6.25M Options exercisable at $0.035 on or before 31 Dec. 2017, 12.5M Options exercisable at $0.06 on or before 31 Dec. 2017; and
6.25M Options exercisable at $0.09 on or before 31 Dec. 2017
Information Disclosure
Each research analyst of this material certifies that the views expressed in this research material accurately reflect the analyst's personal views about the subject securities and listed corporations. None of the listed corporations reviewed or any third party has provided or agreed to provide any compensation or other benefits in connection with this material to any of the analyst(s).
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