Market Update & Important Indicators:
Stocks were calmer Wednesday as investors shook off three sessions of volatility and awaited direction from central banks. Markets turned choppy late last week, with both stocks and long-dated government debt dropping amid questions about coming decisions from policy makers. The S&P 500 fell 2.5% Friday, rose 1.5% Monday and fell 1.5% Tuesday. Stocks flipped between losses and gains Wednesday, but the moves were small compared with the past few days. Energy shares, the year's top performing sector heading into this week, fell again along with oil prices. Weekly inventory data from the Energy Information Administration showed an unexpected decline in U.S. crude-oil inventories but an increase in stockpiles of refined products. Energy companies in the S&P 500 fell 1.2%, and U.S. crude oil was recently down 2.7% at $43.70 a barrel. If the Fed raises rates faster than expected, stocks could fall in the short term, said David Lafferty, chief market strategist at Natixis Global Asset Management, noting the S&P 500 has already risen for some time without much support from earnings. Others were looking further ahead. In European markets, the Stoxx Europe 600 fell 0.1%, its fifth straight session of declines.
Asian shares were broadly mixed Wednesday on weakness in U.S. equities and continued worries that global central banks will soon reverse their easing schemes. Japan's Nikkei Stock Average was down 0.4%, taking its week-to-date loss to 1.8%. The Shanghai Composite Index was 0.6% lower, but the Hang Seng Index was up 0.1%. Overnight, the main U.S. indexes closed lower as investors focused on possible action by the Federal Reserve at its meeting next week. According to the Chicago Mercantile Exchange's FedWatch tool, the market believes there is a 15% chance of a rise in interest rates in September, but the probability of an increase in December has risen to 56.5%. In Japan, banks were particularly hard hit Wednesday on speculation that the Bank of Japan will reduce its purchases of super long bonds to steepen the yield curve, while maintaining the negative rate on excess reserves. Bank stocks in the country were hurt by speculation that the BOJ will announce an interest-rate cut at next week's policy meeting, taking rates deeper into the negative territory. Markets in Korea are shut Wednesday through Friday, Chinese markets are closed Thursday and Friday, while Hong Kong, Taiwan and Malaysia are shut on Friday.
Gains by major banks helped lift the Australian equities market Wednesday after four straight sessions in decline. Each of the "Big Four" banks notched up gains, recovering some of the ground lost of late as investors have focused on a possible end to central bank easy-money policies. The gains offset losses among resources stocks after a sharp fall in oil prices overnight. The S&P/ASX 200 finished 19.9 points, or 0.4%, higher at 5227.7. The four largest banks collectively added more than 11 points to the index, while the energy sector fell 1.4% and the basket of materials stocks slipped 0.6%.
The London Metal Exchange's three-month copper contract closed up 2.6% at $4,771.50/t. Most other base metals gained on Wednesday as well. Aluminium rose 1.4%, to $1,569/t, zinc rose 1.8%, to $2,261/t, tin rose 0.8%, to $19,233/t, lead rose 3.7%, to $1,953/t and nickel fell 0.2%, to $9,788/t.
In this Issue:
Berkeley Energia (BKY) | Zona 7 continues at depth | BUY
MKT Cap $156m | Current Price $0.78 | Target price $2.05
Berkeley Energia (BKY) released results for further drilling at its 100% owned Zona 7 deposit, part of the Salamanca Project in Spain. The drilling confirmed continuity of mineralisation at depth with best results including 14m @ 1,776ppm U3O8 from 207m and 26m @ 1,103ppm U3O8 from 43m. These intercepts highlight the potential to extend the mine life of Zona 7 and delay capital required to develop the next schedule mine at Alameda. BKY has commenced minor site works at Salamanca with major development expected to commence H1 2017. We believe ongoing exploration at Salamanca will generate steady news flow as the project progresses through the current off-take and financing stages. BUY maintained with a $2.05 price target.
Gold Road Resources (GOR) | Gruyere matures with depth | BUY
MKT Cap $543m | Current Price $0.62 | Target price $0.93
Gold Road Resources (GOR) has announced the results of deep diamond drilling to test the extension of the interpreted southerly plunging high grade zone at Gruyere. High grade intercepts of 88m @ 1.7g/t and 85m @ 1.53g/t Au were returned which show mineralisation extends ~200m below the base of existing resources. This paves the way for further mining studies in Q4CY16 to determine the viability of an underground bulk mining scenario. Maintain BUY and target price of A$0.93ps.
Recent Contacts & Presentations:
Orecorp Limited (ORR), Dimerix Limited (DXB), Genesis Minerals Ltd (GMD), Dakota Minerals Ltd (DKO), Breaker Resources NL (BRB), Bard1 Life Sciences Ltd (BD1), Alto Metals Ltd (AME), Birimian Limited (BGS), Antipa Minerals Ltd (AZY), Vault Intelligence Ltd (VLT), Noxopharm Ltd (NOX), Gage Roads Brewing Co. (GRB), West African Resources (WAF), Cedar Woods Properties Ltd (CWP), Sino Gas & Energy Holdings Ltd (SEH), Salt Lake Potash Ltd (SO4), Kalina Power Ltd (KPO), Austal Limited (ASB), Agrimin Ltd (AMN), Stavely Minerals Ltd (SVY), MGC Pharmaceuticals Ltd (MXC), Vital Metals Ltd (VML), Tox Free Solutions Ltd (TOX), Swick Mining Services Ltd (SWK), Davenport Resources Ltd (DAV)