Market Update & Important Indicators
The rally that sent U.S. indexes to records earlier this week lost momentum Wednesday. The Dow industrials and the S&P 500 broke yearlong droughts to reach new highs this week, a sign that U.S. stocks are relatively appealing even as investors grapple with concerns about the global economy and the shakeout from the U.K.'s vote to exit the European Union. Trading was choppier on Wednesday, as stocks alternated between slight gains and losses before edging lower around midday. For indexes to keep pushing higher, some said they were waiting for a reversal of bets on havens, or signs of improvement in corporate earnings, which are expected to fall for a fifth consecutive quarter, according to FactSet.
The Stoxx Europe 600 fell 0.1% after fluctuating between gains and losses in earlier trade. The Bank of England meets on Thursday and analysts expect it to lower its benchmark lending rate by a quarter of a percentage point to 0.25% to counter the fallout from the Brexit vote. BOE Gov. Mark Carney has already announced that the central bank was on hand with at least GBP250 billion ($331.18 billion) in funding for any banks that needed it. The BOE also loosened bank capital requirements to support lending.
Asian equity markets were all up Wednesday as investors continued to be excited about an impending economic stimulus package from Japan, and after China said it was on course to meet its growth targets. The Nikkei Stock Average closed up 0.8%, holding onto its gains in early trade despite comments from Chief Cabinet Secretary Yoshihide Suga that Japan won't resort to so-called " helicopter money," a radically inflationary measure that would see the central bank directly funding government spending. The Nikkei rose as much as 2.2%, reversing all its losses seen Britain voted to exit the European Union. The Nikkei is up 7.4% for the week. Elsewhere in Asia, Korea's Kospi ended up 0.7% each whilst Hong Kong's Hang Seng Index added 0.4% and China's Shanghai Composite Index closed up 0.4% after a tepid start. China's June trade data showed a 1.3% on-year rise in exports and 2.3% on-year decline in imports, both in yuan terms, showing the effect of a fast depreciating yuan.
Australian shares continued to march higher Wednesday, taking their lead from fresh records scored overnight by U.S. stock indexes and rallying commodity prices. The local market has risen for five straight days, its longest stretch since mid-May. After worrying about the prospect of a sharp slowdown in global activity in the wake of Britain's vote to leave the European Union, investors have begun to predict that governments and central banks will seek to reassure markets and provide stimulus. In Asia, investors are anticipating that Japan may consider some aggressive form of policy easing to kick-start its economy. Ending near its high of the day, the S&P/ASX 200 gained 35.3 points, or 0.7%, to 5338.5.
Copper futures closed higher in London Wednesday after strong import data from top consumer China. The London Metal Exchange's three-month copper contract was up 1.4% at $4,938/t at the PM kerb close, having broken through the key $5,000/t level earlier in the session to hit a near three-month high at $5,032/t. Among the other base metals, aluminium closed down 0.2% at $1,659/t, zinc was down 0.7% at $2,173/t, nickel was down 1.3% at $10,308/t, lead was up 0.6% at $1,874/t, and tin was down 0.1% at $17,951/t.
In this Issue
Austin Engineering (ANG) | Update, ceasing coverage | HOLD
Market Cap $51m | Current Price $0.097 | Valuation $0.130
ANG is a Company in transition. The recent capital raising has reduced the risks around debt levels and covenants, however the change in the guard amongst board and senior management is still underway. Without hard evidence that the business has turned the corner operationally we remain cautious and pencil in another year of weak earnings. Hold maintained.
Note – We will be ceasing coverage of ANG post release of this report.
Recent Contacts & Presentations
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), Gascoyne Resources (GCY), Metro Mining (MMI), Pacific Energy (PEA)