Market Update & Important Indicators
A boost in hiring in June catapulted the S&P 500 right near its record closing high and lifted all major U.S. stock indexes back to where they were before the U.K.'s vote to leave the European Union with the S&P 500 rising 1.5% to 2129.90. The Dow Jones Industrial Average climbed 1.4% to 18146.74, and the Nasdaq Composite gained 1.6% 4956.76. U.S. employers added far more jobs than expected in June, providing reassurance that the U.S. economy is growing solidly after a weak report in May. The strong gains could bolster the case for the Federal Reserve to raise interest rates later this year, but many investors brushed off that possibility and instead focused on the economic implications. Nonfarm payrolls rose by 287,000 in June, the strongest month of hiring since October.
European stocks swung higher Friday with added lift from an upbeat U.S. jobs report that helped financial shares advance after their tough week. The Stoxx Europe 600 leapt 1.6% to close at 327.35, trimming its weekly loss to 1.5%. Stocks shot to intraday highs after the U.S. Labor Department said 287,000 new jobs were created in June, outstripping expectations of 165,000 and much stronger than May's revised 11,000 gain. In London, The U.K.'s FTSE 100 on Friday gained 0.9% to 6,590.64, aided by gains among real-estate shares and miners. In Frankfurt, the DAX 30 pushed up 2.2% to 9,629.66 and France's CAC 40 rose 1.8% to 4,190.68.
Asia's stock markets fell broadly Friday, dragged down by unease over lower oil prices and an imminent U.S. jobs report. Japan's Nikkei Stock Average fell 1.1%, Korea's Kospi was down 0.6%, and Hong Kong's Hang Seng Index declined 0.7%. China's Shanghai Composite Index ended down 1%. Chinese stocks fell amid worries of rising risks in the country's banking sector. Nonperforming loans surpassed $299.2 billion at the end of May, which increased banks' bad-loan ratio to 2.15%, said Yu Xuejun, a senior Chinese banking regulator. The loans data swamped the good news that came Thursday about China's foreign-exchange reserves.
In Australia, the S&P ASX/200 was up slightly, finishing at 5230.54 whilst the All Ordinaries also finished up at 5315.55 at Friday’s close. Some degree of political uncertainty was alleviated after Prime Minister Malcolm Turnbull declared victory Sunday, a week after cliffhanger elections were held, leaving his conservatives with a fragile grip on power amid voter angst.
Copper closed higher in London Friday as the U.S. reported healthy jobs growth and the dollar fell. The London Metal Exchange's three-month copper contract was up 0.6% at $4,711 a ton at the PM kerb close. Other base metals climbed. Aluminium closed up 1.5% at $1,654/t, zinc was up 2.2% at $2,139/t, nickel was up 1.4% at $9,840/t, and lead was up 0.1% at $1,811/t.
In this Issue
Paragon Care (PGC) | Acquires Midas software Solutions | BUY
Mkt Cap 114m | Current Price $0.71 | Valuation $0.90
PGC has announced the acquisition of Midas Software Solutions. MIDAS provides a world-first, cloud-based, customisable, interpretive reporting platform for a wide range of diagnostic medical examinations (for example ultrasound, CT and MRI). Clients pay per report or via a licensing model. It is already in use, generating revenue and under trial by others. Additional modules are scheduled for release over the next couple of years. The two founders of Midas have considerable experience and strong technical backgrounds. We like the business model and expect PGC to become a larger integrated supplier to the healthcare industry on the back of ongoing organic and acquisitive growth. Buy maintained.
Sandfire Resources (SFR) | Strong June Q – Free cash flow increasing | BUY
Market cap $839.3m | Current Price $5.34 | Valuation $6.05
Sandfire Resources (SFR) finished off FY16 strongly with 17.8kt copper and 11.2koz gold in concentrate, beating Argonaut’s forecast of 16.6kt copper and 8.7koz gold. Full year production of 68.2kt copper and 37.6koz gold was just above the upper end of guidance for copper (65.1-68.0kt) and within the range for gold (35.0-40.0koz). The Company is net cash positive for the first time since commencing production with $60m cash and $50m drawn debt. With underground development to the C5 orebody largely complete, free cashflow (FCF) is set to increase. Argonaut estimates >$800m FCF out to FY20. BUY recommendation maintained with a $6.05 target price.
Recent Contacts & Presentations
Venturex (VXR), Dacian Gold (DCN), Cudeco (CDU), Resolute Mining (RSG), Echo Resources (EAR), Altech Chemicals (ATC), TFS Corporation Limited (TFC), Noxopharm (NOX), OBJ Limited (OBJ), Kibaran (KNL), Department 13 (D13), Peak Resources (PEK), Fortescue Metals (FMG), Paradigm Biopharma (PAR), Botanix (BOT), Peel Mining (PEX), Ausgold Limited (AUC)