Market Update & Important Indicators:
U.S. stocks fell Wednesday, dragged down by energy shares as oil prices slumped. Stock markets have traded in a narrow range for the last month, something that is likely to continue with few major economic data releases expected in the coming days, said Brad McMillan, chief investment officer at Commonwealth Financial Network. U.S. crude oil fell 2.5% to $41.71 a barrel after the Energy Information Administration said inventories of the commodity rose by 1.06 million barrels in the latest week. Some investors are skeptical that an informal meeting of the Organization of the Petroleum Exporting Countries in September will yield an agreement to address low prices, as recent talks about potential production freezes fell apart. Investors have been weighing upbeat U.S. labor market data against the prospect of higher interest rates and a decline in oil prices, said Bjoern Jesch, chief investment officer at Union Investment.
European stocks finished slightly lower, with energy shares among those pulling the region's key benchmark away from its post-Brexit high. The Stoxx Europe 600 slipped 0.2% to end at 343.98. The pan-European index suffered its first daily drop after five straight sessions of gains. The index on Tuesday closed up 0.9% at 344.67, its highest finish since June 23, the day the U.K. voted to leave the European Union in the Brexit referendum. Oil stocks were among those struggling the most Wednesday as crude prices dropped. West Texas Intermediate futures and Brent crude futures were each down more than 1%.
Stocks in Asia were mixed on Wednesday, in a largely muted reaction to a record high in U.S. stocks, while a stronger yen put pressure on Japan's Nikkei Stock Average. The Nikkei closed down 0.2% after having edged higher in afternoon trade, as the yen strengthened around 0.5% against the U.S. dollar, raising the hurdle for local exporters. A strong yen erased some Yen492.2 billion ($4.85 billion) in earnings at Japan's seven major auto makers in the April-June quarter, according to Nomura Securities analyst Masataka Kunugimoto. Elsewhere in Asia, Hong Kong's Hang Seng Index shed gains to decline 0.1%, while the Shanghai Composite Index fell 0.1%. South Korea's Kospi ended the day flat. While China stocks fell, investors were piling into the country's domestic bond market on expectations of monetary easing this year. This sent 10-year government bond yields to below 2.7% earlier in the session, a historic low, according to Commerzbank.
Australian shares snapped a four-session run higher Wednesday, with energy and banking stocks surrendering the previous day's gains after oil prices retreated and as earnings season rolled on. Despite starting the day in positive territory, the S&P/ASX 200 finished 8.8 points, or 0.2%, lower at 5543.7. The energy subindex sank 1%, dented by an overnight drop in crude prices as U.S. government forecasters raised their outlook for domestic production and traders cast doubts on earlier hopes Organization of the Petroleum Exporting Countries would consider capping output next month.
Copper prices gained as the benefit of a weaker dollar outweighed sluggish demand in China, the world's top copper consumer. Copper for September delivery settled up 1% at $2.1710 a pound on the Comex division of the New York Mercantile Exchange. Other base metals were mixed. Aluminium was up 0.2% at $1,634/t, zinc was up 0.5% at $2,284/t, nickel was up 0.7% at $10,815/t, lead was up 0.9% at $1,810/t, and tin was up 0.7% at $18,530/t.
In this Issue:
OZ Minerals (OZL) | H1 Financials – At a glance | HOLD
Market cap $1,933m | Current Price $6.24 | Valuation $6.15
OZ Minerals (OZL) delivered H1 2016 financial results with revenue of $398m, underlying EBITDA of $178m and underlying NPAT of $55m, down 19%, 37% and 30% respectively H-on-H. Non-underlying items, primarily legal costs associated with the Zinifex class action, were $26m resulting in a reported NPAT of $30m. Top line revenue was impacted by a 7% decrease in the LME copper price and a 26% decrease in concentrate sales, partially offset by a 9% increase in the gold price. Year-to-date, the Company has delivered $25m in cost savings across the business, with further saving expected within 2016. Head office costs declined 20% to $12m. OZL maintains lowest quartile costs resulting in a strong 45% EBITDA margin. At 30 June, OZL had $564m cash, up $12m on the H2 2015, after a $43m dividend payment and $7m share buy-back. HOLD recommendation maintained with a $6.15 target price.
Recent Contacts & Presentations:
Sandfire Resources (SFR), Gold Fields Australia (NYSE: GFI), Heron Resources (HRR), Gascoyne Resources (GCY), Vimy Resources (VMY), West African Resources (WAF), Dacian Gold (DCN), Pilbara Minerals (PLS), Independence Group (IGO), Rio Tinto (RIO), Silver Lake Resources (SLR), Lynas Corporation (LYC), Evolution Mining (EVN), Regis Resources (RRL), Xanadu Mines (XAM), Mincor Resources NL (MCR) , Carbine Resources Ltd (CRB), Antipa Minerals (AZY), Energia Minerals Ltd (EMX), Pantoro Limited (PNR), Boss Resources Ltd (BOE), Metro Mining Ltd (MMI), Metal Bank Ltd (MBK), Actinogen Medical (ACW) ), St. George Mining Ltd (SGQ), Resapp Health Ltd (RAP)