Overseas Market Report – U.S. Stocks Plunge as Investors Seek Safe Havens
U.S. stocks followed global markets lower Thursday as the financial sector fell on continued concerns about growth, lower oil prices and its impact on the banking system.
Oil futures continued to move lower, with prices falling below US$27 a barrel in New York.
Yields on U.S. Treasuries fell to the lowest levels since August 2012 as global investors searched for safe havens.
Initial U.S. unemployment claims dropped by 16,000 to 269,000 last week. The less volatile four-week moving average of claims was down 3,500 to 281,250 in the month.
At the close, the Dow, S&P 500 and NASDAQ were down 1.6%, 1.2% and 0.4%, respectively.
Cisco (CSCO) posted expectedly weak fiscal second-quarter results. The company noted a challenging macroeconomic environment, with a higher level of conservative behaviour among IT purchasing managers. Total revenue came in at US$11.9 billion, flat year over year and down 3.7% sequentially. Revenue was lower sequentially across all segments with the exception of routing (up 2.9%), where several large orders shifted from the previous quarter. Shares were up as the results were ahead of expectations.
Twitter's (TWTR) woes continued in the fourth quarter after the firm reported flat user growth from the previous quarter and provided lower-than-expected earnings guidance. Shares dropped on the news and are down over 35% so far in 2016.
Tesla (TSLA) reported fourth-quarter 2015 results that badly missed EPS consensus (actual was a loss of US$0.87 versus consensus of a US$0.10 profit) but Morningstar is leaving its moat and fair value estimate in place. Morningstar continues to believe the true value in Tesla's stock is based on what the company can achieve next decade rather than what it can do in the next couple of years. The company said it expects to be profitable on an adjusted basis for the full-year 2016 and profitable on a GAAP basis in the fourth quarter this year.
For Australian ADRs listed on the NYSE, BHP Billiton slipped 46 cents (2.12%) to $21.19, ResMed lost 62 cents (1.07%) to $57.12, Telstra Corporation added 23 cents (1.22%) to $19.55, Spark New Zealand slipped 15 cents (1.39%) to $10.67 and Westpac declined 13 cents (0.64%) to $20.13.
At 8:00 AM (AEDT), the 10-year Treasury note yield was 1.64% and the 5-year yield was 1.11%.
European markets moved sharply lower Thursday.
The FTSE 100, French CAC 40 and Germany's DAX were down 2.4%, 4.0% and 2.9%, respectively.
The Japanese and mainland Chinese share markets were closed Thursday. The Hang Seng was down 3.9%, while India's Sensex slipped 3.4%.
Australian Market Report – Local Market Expected To Open Lower
Ahead of the local open, SPI futures were 36 points lower at 4,731.
Thursday 11 February – close. The Australian market recouped nearly half of losses incurred on last two trading sessions, ending above the 4,800-point mark. The index heavyweight Cochlear posted solid gains as its outstanding earnings result boosted investor confidence, while big miners were still under pressure, with BHP and RIO leading the falls. There were mixed results from sectors; health care gained most significantly while utilities lagged behind the rest. The Australian dollar fell against the greenback but experienced mixed results against other major currencies.
The All Ordinaries rose 44.40 points to 4,870.90 while the S&P/ASX 200 gained 45.40 points to 4,821.10.
In This Issue
Argonaut Research| Dacian (DCN) | SPEC BUY
Dacian Gold (DCN) released the first batch of in-fill drilling at Morgans Underground. The results form ~13% of the planned drilling at Westralia and reaffirmed the high grades with an average grade of ~8.5g/t. Completion of this 50m x 50m in-fill program will lift confidence on the Resource (Resource updated expected in the September Q). In addition, this should allow the higher grade material to be fed in the earlier years, catapulting ounces produced to ~280koz pa and thereby improving the project NPV with a shorter payback period. DCN remains one of Argonaut’s preferred emerging gold producers given AUD denominated costs, exploration upside and proven management. Given scalable inventory, proximity to infrastructure and high margins, DCN will also attract corporate attention. The Company is catalyst rich and well-funded with A$24m cash and nine rigs drilling. SPEC BUY maintained.
Cochlear (COH)
Cochlear provided HY16 Result Presentation reporting that sales revenue up 32%, (up 16% in constant currency) delivered across developed and emerging markets. The Company reported that net profit up 32% to $94.0m. The Company paid interim dividend which is up 22% to 110.0cps. The Company continues to target a dividend payout ratio of around 70% of net profit. EBIT increased 30% with ongoing investment in market growth initiatives and R&D. Reduction in net debt of $132.9m. Full year net profit guidance range adjusted to $180-190m, up 23-30% on FY15. COH soared $12.87 to $104.05.
Dexus Property Group (DXS)
Dexus Property Group announced with DEXUS Wholesale Property Fund (DWPF) that they have jointly entered into an agreement to each acquire a 50% interest in 90 and 100 Mount Street in North Sydney for an initial acquisition price of $41.0m. A new premium office tower will be developed at the site by the Company and the project will be completed at a time when tight supply fundamentals are expected in the Sydney office market. The Company and DWPF have also entered into a fixed price Design and Construction contract with Laing O'Rourke Australia for the demolition of the two existing buildings and the construction of a DA approved 41,163sqm premium office tower. It will fund its share of the initial acquisition price through debt facilities. DXS added 11 cents to $7.26.
Recent Contacts & Presentations
Troy Resources (TRY), Northern Star Resources (NST), Regis Resources (RRL), Medusa Mining (MML), Doray Minerals (DRM), Beadell Resources (BDR), Red 5 (RED), Kingsgate Consolidated (KCN), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), TFS Corporation (TFC), Paragon Care (PGC), Austal (ASB), Orbital Corporation (OEC),Energia Minerals (EMX), Berkeley Energia (BKY) , Finders Resources (FND), 4DS Memory Ltd (4DS) , Bionomics Ltd (BNO)
