Market Update & Important Indicators:
U.S. stocks rebounded Thursday as a rally in financial shares pushed the Dow Jones Industrial Average toward 20,000, a day after the Federal Reserve said it was raising interest rates. Financial shares were among the biggest beneficiaries of the Fed's decision to raise interest rates. The S&P 500 financials sector added 1.2% as investors bet that rising rates would boost profits at banks by widening the gap between what lenders pay on deposits and charge on loans. Investors have flooded into stocks of financial firms since the election, in a wager that a Republican-led government will pursue policies promoting growth and inflation. Since Nov. 8, the S&P 500 financials sector has only posted five days of declines. On Wednesday, the group dropped 0.6% as part of a broad selloff in stocks after the Fed signalled it expected to raise rates three times in 2017.
European stocks closed just shy of a 2016 high as bank shares rallied and the euro sank after the U.S. Federal Reserve signalled a faster pace of interest-rate hikes than previously mapped out. The dollar's jump came partly at the expense of the shared currency, which traded at 14-year lows against the greenback. The Stoxx Europe 600 index climbed 0.9% to end at 358.79, just missing its 2016 closing high of 358.88 set on Jan. 5, according to Dow Jones data. Technology and financial shares led the charge higher, but the basic-materials group was the only sector to end in the red. The Stoxx 600 on Wednesday wrapped up down by 0.5%.
Asian markets were broadly down Thursday after the U.S. Federal Reserve flagged a faster pace of rate rises in 2017 than expected. Overnight, the Fed raised the federal-funds rate by a quarter of a percentage point to between 0.50% and 0.75%. Markets had only expected a 0.50 percentage-point increase in 2017 over two rate rises. Index wise, South Korea's Kospi ended lower, the Shanghai Composite fell 0.7%, and Singapore's Straits Times slid 0.8%. Hong Kong's Hang Seng Index traded down 2%, with property stocks leading declines. The Hong Kong dollar is pegged to its U.S. counterpart, which means Hong Kong rates rise in sync with that of the U.S. Higher rates makes Hong Kong mortgages more expensive, deterring home sales. On Thursday, the Hong Kong Monetary Authority raised its base rate by 0.25 percentage points to 1.0%, matching the overnight interest-rate increase by the Fed.
Australian shares retreated along with markets across the region Thursday after the U.S. central bank adopted a more hawkish tone and signalled further interest-rate increases in the year ahead. Resources stocks weighed heavily as commodity prices were knocked by a rise in the U.S. dollar following the Federal Reserve's first increase in its benchmark rate in a year. News of solid employment growth in Australia appeared to be largely shrugged off by the equity market. Falling for the second session so far this week, the S&P/ASX 200 dropped 46 points, or 0.8%, to finish at 5538.6. The commodities sector was down 3.4%, and the basket of materials stocks was down 1.6%.
The London Metal Exchange's three-month copper contract settled up 0.2% at $5,732/t. Other base metals were mixed on Thursday. Aluminium fell 0.6% to $1,743/t, and nickel closed down 1.0% at $11,250/t. Zinc rose 0.3% to $2,800/t, tin rose 0.6% to $21,360/t and lead rose 1.4% to $2,335/t.
In this Issue:
Troy Resources (TRY) | Another update, another downgrade | Hold
Market Cap $77m | Current Price $0.16 | Target Price $0.25
Troy Resources (TRY) has announced geotechnical issues at its Karouni Project in Guyana. Unstable ground conditions at the Smarts Pit has resulted in a number of slippages which require remediation. As a result, access to higher grade portions of the pit have been restricted which has seen TRY downgrade production for CY16 to 63-65koz. We believe the potential for further cost escalation and downgrades is high. We move to a HOLD (BUY prior) until we gain further clarification of the geotechnical events, their impact to production and costs and the timeframe for remediation.
Independence Group (IGO) | Stripping for a Long Island | HOLD
Market Cap: $2452 | Current Price $4.05 | Target Price $4.15
Independence Group (IGO) has released an update on the optimisation of the Tropicana gold mine (JV: 70% Anglo Gold, 30% IGO). The optimisation follows 40,000m drilling and the ongoing work on the Long Island Project which aims to unlock value from the assets large resource base. Highlights of the announcement include a 58% increase in Reserves to 3.8Moz, a 7% increase in Resources, the resumption of grade streaming (high grading) for a further three years and the potential to increase plant throughput from 7.5Mtpa to 7.7-7.9Mtpa. IGO estimates a 79% increase to Tropicana’s NPV as a result of the improvements. Argonauts valuation for Tropicana increases from $383m to $489m
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)
Please read Argonaut's Important Disclaimers & disclosures
