Market Update & Important Indicators:
Stocks charged toward fresh records Tuesday, bringing the Dow Jones Industrial Average the closest it's ever been to 20000. The stock market has rallied since the U.S. election as investors bet that President-elect Donald Trump's proposals to cut corporate taxes and ramp up fiscal stimulus would accelerate growth. The rally has particularly benefited shares of financial and industrial companies, which have lifted the blue-chip index to several highs since Nov. 8. On Tuesday, broad gains in stocks put the Dow industrials roughly 50 points shy of 20000 — a level it has never reached. The gains mark a sharp turnaround from the beginning of 2016, when the Dow industrials suffered their worst-ever five-day start to a year as investors confronted renewed concerns about slowing growth in China. Recent gains in stocks have been accompanied by expectations of higher inflation and growth. Those factors have bolstered the view that the Federal Reserve will raise interest rates Wednesday and possibly pick up the pace of increases in 2017 and 2018. The two-day Federal Open Market Committee meeting will kick off later in the global trading day, when U.S. central bankers will decide whether to raise interest rates.
European stocks jumped to an 11-month high as Italian bank shares strengthened. The Stoxx Europe 600 index added 1.1% to 357.50, its highest close since early January. The index on Monday lost 0.5%, breaking a five-session winning run that had pushed shares to their best levels since the start of the year. The best performing national index was Italy's FTSE MIB, which popped up 2.5% to 18,827.61 with Italian bank shares leaping 5.8% for the day.
Asian shares drifted Tuesday, as investors held fire ahead of the U.S. Federal Reserve's critical rates decision this week. Japan's Nikkei Stock Average closed up 0.5%, moving into positive territory after spending much of the session flat. Korea's Kospi added 0.4% and the Hang Seng Index in Hong Kong closed up 0.1%.
Australian shares fell for the first day in six sessions on Tuesday, weighed by banks and miners. Stocks across the region were fairly subdued ahead of the U.S. Federal Reserve's final policy meeting of the year, which is widely expected to conclude with short-term interest rates being raised. Pulling back from a four-month closing high, the S&P/ASX 200 fell 17.8 points, or 0.3%, to 5545.0. The materials sector was down 1.5% and financials were 0.6% in the red, while the baskets of health care stocks and property trusts both advanced strongly. Crude-oil prices lost steam in Asian trade after surging on Monday following a weekend deal by 11 oil-producing nations to join the Organization of the Petroleum Exporting Countries in reducing output.
Copper for delivery in three months was recently down 1.4% at $5,690/t on the London Metal Exchange. The other base metals were mixed on Tuesday. Lead prices fell 1.3% to 2,310/t, and zinc prices fell 1.0% to 2,687/t. Aluminium prices rose 0.7% at 1,748/t, nickel prices rose 0.8% at 11,337 and tin prices rose 1.4% at 21,450/t.
In this Issue:
Austal (ASB) | Getting defensive | HOLD
Market Cap $575m | Current Price $1.65 | Valuation $1.70
By end November ASB’s share price had climbed 56% since June and 22% since the US elections. It has dropped since, but is still close to our revised valuation of $1.70 (prior $1.55). This is the primary reason for our downgrade to hold (prior Buy), although it is worth noting the positive sentiment surrounding defence stocks following Trump’s victory has faltered with his recent commentary on “out of control” defence costs.
Recent Contacts & Presentations:
Stavely Minerals Ltd (SVY), Australis Oil & Gas Ltd (ATS), Davenport Resources Ltd (DAV), TFS Corporation Limited (TFC), Emmerson Resources Ltd (ERM), Syntonic Ltd (SYT), MZI Resources Ltd (MZI), Resolute Mining Ltd (RSG), Capricorn Metals Ltd (CMM), Eve Investments Ltd (EVE), Australian Mines Ltd (AUZ), Heron Resources Ltd (HRR), St George Mining Ltd (SGQ), Threat Protect Australia Ltd (TPS), Paringa Resources Ltd (PNL), The Gruden Group Ltd (GGL), Primary Gold Ltd (PGO), Vault Intelligence Ltd (VLT), Botanix Pharmaceuticals Ltd (BOT) Orthocell Ltd (OCC), Strandline Resources Ltd (STA) Dragontail Systems Ltd (DTS), ABM Resources Ltd (ABU)