Market Update & Important Indicators:
Investors widely sold risky assets from stocks to commodities as the market continued to weigh whether trade tensions and an emerging-markets rout could slow the global economy. The Dow Jones Industrial Average dropped about 0.5%, while the S&P 500 also slumped about 0.8%. Both indexes were on track for a fifth decline in the past six sessions. The Nasdaq Composite fell 1.6%. Although U.S. stocks have largely shaken off fears of a weaker global economy, investors have recently grown anxious that a currency rout in Turkey and other emerging markets might spread. Adding to worries: Base metals like copper, widely used in construction and manufacturing, have plummeted, a bearish sign to analysts that use them as an economic indicator. On Wednesday, Turkey' President Recep Tayyip Erdogan took another step in the U.S.-Turkey spat, raising tariffs on some U.S. imports in retaliation against U.S. sanctions. The tariffs cover U.S. products including alcoholic beverages, passenger cars, tobacco, cosmetics, rice and coal. The US Gold price decreased 1.6% to 1,174.70 US$/oz.
The Stoxx Europe 600 closed down 1.4% at a six-week closing low of 379.70 as stocks slid due to concerns about global trade tensions and a currency crisis in Turkey, even as the lira recovered. Heavyweight miners and oil stocks were all lower as a stronger dollar caused metals and oil prices to fall. Germany's DAX fell 1.6%, the U.K.'s FTSE 100 lost 1.5%, France's CAC 40 was down 1.8%, and Spain's Ibex 35 dropped 1.3%.
In Asia, tech stocks sold off as shares in Tencent fell to their lowest level in nearly a year after Chinese regulators pulled the license for a recently launched videogame. The tech giant, known for its WeChat social-media messaging app, generates about half its revenue and a higher proportion of profits from videogames. Shares in the company were down 3.6%. Tencent is set to report second-quarter earnings after the market closes Wednesday. Health-care stocks led Hong Kong and mainland Chinese indexes lower. The Shanghai Composite Index fell 2.1% and Hong Kong's Hang Seng dropped 1.7%. Japan's Nikkei was 0.7% lower.
Australia's stock market outperformed as fresh concerns hung over a number of Asian equity markets. But the gains for the S&P/ASX 200 allowed it to set another 10 1/2-year closing best. The index rose 0.5% to 6329, the highest since the opening day of 2008 and the biggest gain in Asia Pacific for the day. The health-care sector rose 4.6%, hitting fresh record highs and putting the year's surge at 33%. Key to that has been drug maker CSL, which jumped 6.4% today following its fiscal-year report to put 2018's surge at 52% and the market cap at A$97 billion ($70 billion). That more than offset the 0.9% drop in materials stocks and modest declines for financials and energy.
Base metal prices were down on the London Metal Exchange. The largest decline was seen in lead that fell 7.3% to 1,901/t, followed by zinc that lost 6.3% to 2,284/t. Nickel declined 4.3%, as the 3-month copper contract contracted 4.2%. Aluminium closed at 1,998/t, having fallen 2.3% in the day.
In this issue:
Australian Gold Sector | June Q and Diggers wrap
The ASX gold sector finished the June Q with a strong performance thanks to continued gains in AUD gold prices. In the June Q, the weighted average all in sustaining cost (AISC) was $1,055/oz (vs $1,064/oz in March Q, -1%) versus a gold price of $1,726/oz ($1,691/oz in Mar Q +2% Q-o-Q). The gold price reached a high in AUD terms of A$1,769/oz (US$1,314) in May, its highest since September 2016. Argonaut’s gold coverage universe trades at ~1x P/NAV (vs 1.2x in early Sep Q). Production and costs bounced back following rain related impacts in the March Q. The mid-tiers continue to trade on premium metrics vs our NAV despite little or no production growth forecasts in FY19-20. We continue to believe the smaller producers and emerging miners offer value and upside against their mid-tier peer group having been left behind in the recent surge in top end valuations.
Recent Contacts & Presentations:
Melbana Energy (MAY), Botanix Pharmaceuticals Ltd (BOT), Novo Litio (NLI), Classic Minerals (CLZ), OZ Minerals (OZL), Saturn Metals (STN), Antipa Minerals (AZY), SRG Ltd (SRG) Bowen Coking Coal (BCB), Birimian (BGS), Breaker Resources (BRB), Galena Mining (G1A), Valmec (VMX),Bryah Resources (BYH), Calima Energy (CE1) Genesis Minerals (GMD), Agrimin (AMN), Magnetic Resources (MAU), Core Exploration (CXO), Marindi Metals (MZN), MOD Resources (MOD), Santos (STO), Adriatic Metals (ADT) 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), Salt Lake Potash Ltd (SO4)
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