Overseas Market Report – U.S. Stocks Rise after Earnings, Data
U.S. stocks closed higher on Thursday as earnings season continued, while economic data diminished investors' expectations of a rate hike by the end of the year.
The U.S. consumer price index fell 0.2% in September from the previous month thanks to low oil prices. Core inflation, which excludes volatile food and energy costs, was up 0.2% in the month. On a year-over-year basis, core prices were up 1.9%. The low inflation reading means there will be no cost of living increase in social security benefits next year.
Initial U.S. unemployment claims fell by 7,000 to 255,000 last week, a level that matched a 42-year low. The less volatile four-week moving average also hit a 42-year low of 265,000.
At the close, the Dow, S&P 500 and NASDAQ were up 1.3%, 1.5% and 1.8%, respectively.
For Australian ADRs listed on the NYSE, BHP Billiton slipped 2 cents (0.05%) to $36.65, ResMed gained $1.08 (1.95%) to $56.33, Telstra Corporation lost 4 cents (0.18%) to $19.96, Spark New Zealand lifted 28 cents (2.70%) to $10.65 and Westpac was unchanged at $21.97.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.01% and the 5-year yield was 1.33%.
Netflix (NFLX) posted a mixed third quarter, with strong international subscriber growth (2.74 million net adds, versus guidance of 2.40 million) but weaker-than-expected U.S. growth (0.88 million net adds, versus guidance of 1.15 million). Revenue was in line with Morningstar's projections, but EBIT came in below expectations. Netflix continues to expand its streaming base, ending the quarter with more than 66.0 million global paid subscribers, up from 50.7 million a year ago.
Philip Morris International (PM) posted its third consecutive earnings beat in the third quarter. The net revenue decline of almost 12% was ahead of Morningstar's forecast, despite continued unfavourable currency movements. The business' underlying performance is improving, with currency-neutral revenue growth of 5.9%, a sequential improvement from the 4.6% reported in the second quarter. Encouragingly, three of the business' four geographic segments exceeded Morningstar's expectations, with only Asia lagging.
Shares of Goldman Sachs (GS) were up despite the firm reporting third-quarter results that were below expectations. The firm's profit was off 36% year over year as volatile markets took their toll on many of the firm's large trading businesses. Goldman's return on equity was unchanged at 7%.
European markets were higher.
The FTSE 100, French CAC 40 and Germany's DAX were up 1.1%, 1.4% and 1.5%, respectively.
Asian shares also rose.
The Shanghai Composite jumped 2.3%, while the Hang Seng added 2% and the Nikkei 225 was up 1.2%. India's Sensex was 0.9% higher.
Australian Market Report – Local Market Expected To Open Higher
Ahead of the local open, SPI futures were 40 points higher at 5,247.
Thursday 15 October – close. The Australian market started the day on a high point, despite weak leads from global markets overnight. Local stocks retreated from intraday highs after receiving a soft employment report, but inched higher in afternoon trade, with mining and energy stocks leading the way. There were mixed results from the sectors; materials and energy were the best performers while health care lagged behind the rest. The Australian dollar appreciated against most major currencies with the exception of the Euro.
The All Ordinaries added 35.20 points to 5,265.60 while the S&P/ASX 200 lifted 32.70 points to 5,230.00.
In This Issue
Fortescue Metals (FMG) | SELL
Fortescue Metals (FMG) reported September Q results with 41.9Mt shipped at US$17/wmt C1 vs June Q 42.4Mt @ US$22/wmt. This was in line with Argonaut’s forecast of 42.0Mt @ US$17/wmt. During the Q, the Company repurchased US$384m in secured and unsecured notes, leaving a balance of US$8.8b residual debt and US$2.6b cash. Downgraded to SELL with an unrevised target price of $2.00.
Paladin Energy (PDN) | SPEC BUY
Paladin Energy (ASX:PDN, TSX:PDN) released September Q results with 1.1Mlb U3O8 @ US$28/lb C1 cost compared to June Q of 1.3Mlb @ US$26/lb and Argonaut’s forecast of 1.2Mlb @ US$26/lb. The Company reported a cash balance of US$108m down from US$184m, following low sales and US$18.5m relating to a convertible bond buyback. While PDN maintains considerable debt (US$460m), cash haemorrhaging has been addressed and positive free cash flow is expected for the remaining three quarters of FY16. SPEC BUY recommendation maintained with a $0.30 target price.
Panoramic Resources (PAN) | BUY
Panoramic Resources (PAN) released a preview of the September Q results. Group production was 3.5kt Ni in concentrate/ore, down 15% Q-on-Q and slightly above Argonauts forecast of 3.3kt. Lower production reflects the cessation of mining at Lanfranchi resulting from the completion of the Deacon orebody and low prices which were unable to support mining of the lower grade Jury-Metcalfe orebody.
Sandfire Resources (SFR) | BUY
Sandfire Resources (SFR) reported further drill intercepts from the Monty discovery from hole TLDD0026 (Hole 26). This hole was drilling 45m along strike from mineralised hole TLDD0021 (Hole 21: 7.3m massive sulphides with assays pending). Hole 26 passed through three horizons of mineralisation including 19.9m from 340m downhole.
National Australia Bank (NAB)
National Australia Bank announced that it has entered into a non-binding Memorandum of Understanding with one of the world's leading life insurers, Nippon Life Insurance Company, with a view to entering a long-term partnership in life insurance product manufacturing. Discussions between the Company and Nippon Life are ongoing, however nothing has been decided and any potential future transaction is uncertain and subject to regulatory approvals. The Company's Group CEO Andrew Thorburn said it had been evaluating a number of options to improve returns in the wealth business. NAB added 1 cent to $31.52.
Woodside Petroleum (WPL)
Woodside Petroleum provided third quarter 2015 report for the period ended 30 September 2015. It has completed capacity enhancement activities during the Pluto turnaround, resulting in current production rates exceeding the 4.3 mtpa nameplate capacity by 3%. Plant reliability continues to exceed expectations. During the quarter, it has completed onshore and offshore North West Shelf maintenance turnaround activities, with system availability returned to planned levels 7 days ahead of schedule. The Company entered into the front-end engineering and design phase for the Greater Enfield Development and entered into a conditional agreement to sell its interests in the Laminaria-Corallina JV. It has executed an unsecured US$1.0bn loan facility as part of general refinancing activities. WPL rose 31 cents to $31.17.
Recent Contacts & Presentations
Tox Free Solutions (TOX), AWE Limited (AWE), Ausdrill (ASL), GR Engineering (GNG), Medusa (MML), Resolute (RSG), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), FAR Limited (FAR), Central Petroleum (CTP), Senex Energy (SXY)
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