Market Update & Important Indicators:
The stock market was subdued intraday ahead of key decisions from central banks in the U.S. and Europe that are expected to further unwind stimulative policies that fuelled an economic rebound over the past decade. Investors appeared to avoid making major moves before announcements from the Federal Reserve and European Central Bank this week that could shape the next leg of the global economic recovery that began in the wake of the financial crisis 10 years earlier. While several market participants said they expect both central banks to proceed with plans that have been well-choreographed to the market, investors worry about a potential policy misstep, such as raising interest rates too aggressively, that could cause an economic stumble. The Dow Jones Industrial Average slipped less than 0.1%, to 25,321 in recent trading, while the S&P 500 added 0.2%. The Nasdaq Composite gained 0.6%. The US gold price decreased 0.37% to 1295.20 US$/oz.
The broader Stoxx Europe 600 Index ended 0.1% lower at 387.53, after rising as much as 0.4% early in the session. The oil-and-gas groups and basic-materials sector led decliners, but the utility and consumer-services shares closed higher. On Monday, the index rose 0.7%, the first rise in five sessions. France's CAC 40 index reversed course and fell 0.4% to close at 5,453.37. Germany's DAX 30 index turned lower and ended with a small loss of less than 1 point at 12,842.30. In London, the FTSE 100 fell 0.4% to 7,704, also giving up early gains. But Spanish and Italian stocks advanced. Spain's IBEX 35 picked up 0.2% to finish at 9,914.40, and Italy's FTSE MIB index rose 0.2% to 22,119.76. That extended Monday's 3.4% leap, seen after Italy's economy minister said the country's new coalition government is committed to eurozone membership.
Stocks mostly edged higher in Asia, although stocks in South Korea, which generate roughly half their revenues abroad, edged down 0.1%, while Japan's Nikkei rose 0.3%. The moves followed a mostly upbeat session in the U.S. on Monday, as the S&P 500 drifted higher, led by shares of consumer staples companies. The Nikkei faded some into the close but still finished with a 0.3% gain, closing at 22878.35 with help from overnight weakness in the yen that was extended for a time in Asian action before being reversed. Undian shares rose as gains in healthcare and bank stocks helped. The S&P BSE Sensex ended 0.6% higher at 35692.52. Pharmaceutical stocks have been on a gaining streak on hopes that the U.S. regulator would possibly relax some restrictions imposed on India's largest drug firm Sun Pharmaceutical Industries. The focus later this week is expected to turn to meetings of the Federal Reserve, European Central Bank and Bank of Japan for more clarity on the policy outlook.
Australian stocks rose modestly following a long weekend, finishing in the middle of the day's modest range. After an end-of-week-drop, the S&P/ASX 200 rose 0.2% to 6054.4, with IT performing best. Solid gains were also seen by energy and industrial stocks. But further losses by the major banks and weakness in major miners held the broader market back as gains lagged most others in the region.
Base metal prices had mixed performance on the London Metal Exchange. The 3-month copper contact declined 0.6% to 7,210/t whilst tin fell 0.2% to 21,215/t. The price of aluminium gained 0.1% to 2,305/t while nickel lost 0.6% to 15,136/t. Zinc fell 0.1% to 3,230/t.
In this issue:
Ausdrill (ASL) | Project update | BUY
Market Cap $688m | Current Price $1.90 | Valuation $2.40
In our view the extent of the market reaction to today’s projects update is unwarranted and we upgrade to BUY (prior HOLD). We have captured the financial impact based on the announced specifics, and additionally reduced our FY19 African growth expectations given the lack of pipeline conversion to date. The opportunities remain however and, with a revised blended valuation of $2.40 (prior $2.75), we see upside from here.
Sandfire Resources (SFR) | Consolidating Monty | HOLD
Market Cap $1,505m | Current Price $9.95 | Target Price $8.85
Sandfire Resources (SFR) has reached an in-principle agreement with Talisman Mining (TLM) to acquire TLM’s 30% interest in the Springfield Joint Venture (JV) for $72m cash and a 1% net smelter return (NSR) royalty. Springfield incorporates the Monty deposit which is currently under development and due to contribute ore to the DeGrussa processing plant from Q2 FY19. Argonaut believes the price paid for TLM’s 30% of the JV is fair relative to our valuation of $250-300m for the Monty Project. Argonaut upgrades SFR to HOLD from SELL.
Recent Contacts & Presentations:
Bio–Gene Technology (BGT), Walkabout Resources (WKT), Triton Minerals (TON), Calima Energy (CE1), Peel Mining (PEX), Catalyst Metals (CYL), Vault Intelligence (VLT), Doray Minerals (DRM), Nzuri Coppoer (NZC), Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4), Golden Mile Resources Ltd (G88), NTM Gold Ltd (NTM), Ausmex Mining Group Ltd (AMG), Matrix C&E Ltd (MCE), Austal Ltd (ASB), Decmil Group Ltd (DCG), Ventnor Resources Ltd, Ausdrill Ltd (ASL), Alice Queen Ltd (AQX), PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SEH)