Market Update & Important Indicators
US stocks have risen strongly for the second straight session ahead of the Federal Reserve's decision on whether to raise interest rates for the first time in nine years. Weighing whether to finally break from its easy money stance dating to the 2008-2009 crisis, the Fed is scheduled to announce its rate decision at 1800 GMT Thursday (0400 on Friday AEST). Michael James, managing director of equity trading at Wedbush Securities, said traders increasingly believe the Fed either will not hike rates, or accompany an increase with dovish commentary suggesting additional increases are not planned anytime soon. Petroleum-linked stocks rallied strongly on a nearly six per cent climb in US oil prices.
European stock markets have risen as investors toasted news that Belgian-Brazilian drinks giant AB InBev is brewing a blockbuster takeover bid for Britain's SABMiller. SABMiller's share price rocketed by a fifth in London, topping the FTSE risers' board, after it revealed that Anheuser-Busch InBev intended to make a bid. The brewer's shares ended the day with a gain of 19.89 per cent to 3,614 pence as investors reacted to the surprise news.
Asian markets have extended a global equities rebound after recent losses while riskier assets and oil prices also ticked up, but dealers remained cautious before the US interest rate decision. Following steep losses in the previous two sessions, Shanghai again saw volatile trading, swinging from negative to positive early on before surging almost five per cent in the final hour. "The market is finely balanced on whether the Fed will move or not. There's been uncertainties about China and global growth, but the US economy looks strong enough to be able to withstand an increase in rates," James Lindsay at Nikko Asset Management NZ in Auckland told Bloomberg News. "Uncertainty will continue until we get the news from the Fed." Experts have warned that a Fed rise in borrowing costs could severely hurt the struggling world economy, and especially damage emerging markets as investors withdraw cash and turn to the US for better and safer returns.
The Australian market looks set to open higher, following strong gains on Wall Street and rises in commodity prices. At 0649 AEST on Thursday, the June share price index futures contract was up 44 points at 5,161. US stocks rose for the second consecutive session ahead of the Federal Reserve's decision on whether to raise its interest rate for the first time in nine years. Crude prices also rallied after a US petroleum supply report showed lower inventories and oil production. Locally, the Reserve Bank releases its quarterly bulletin containing its latest research. In equities news, Oroton releases its full year results. In Australia, the market on Thursday, wait for the much anticipated US Federal Reserve's interest rate decision. The benchmark S&P/ASX200 index was up 80.5 points, or 1.6 per cent, at 5,098.9 points. The broader All Ordinaries index was up 77.0 points, or 1.53 per cent, at 5,123.6 points.
Crude prices have rallied after a US petroleum supply report showed lower inventories and oil production. US benchmark West Texas Intermediate for October delivery on Wednesday jumped $US2.56, or nearly six per cent, to $US47.15 a barrel on the New York Mercantile Exchange. European benchmark Brent oil for November delivery gained $US2.00 to $US49.75 a barrel in London. The weekly petroleum inventory report from the US Department of Energy showed a 2.1 million barrel drop in inventories, including a 1.9 million barrel decline at the closely-watched Cushing, Oklahoma trading hub.
LME metals were generally up with Lead the stand out, up 2.5% to US$1,722/t. Tin was the only exception, down 0.2% to US$15,800/t. Gold rose 1.3% to US$1,119/oz, while Brent rose 4.2% to US$49.75/bbl. The AUD is buying US$0.72.
In This Issue
AWE Limited (AWE) |Significant Value | BUY
The recent sell off, taking AWE to a 10 year low is overdone. Whilst a falling oil price has impacted sector valuations AWE has been disproportionately punished for its asset level connections with Origin Energy (ORG) and Santos (STO). AWE has significant 2P Reserves (~114mmboe), production visibility, strong liquidity position, recent discoveries and Perth Basin assets that warrants a higher stock price.
Whilst we’ve reduced our price target in line with lower long term oil price forecasts and revised Possibility of Success (POS) factors on Ande Ande Lumut (AAL) and Trefoil, AWE remains well funded with $47m cash and $230m undrawn from a $400m debt facility. BUY recommendation retained with price target of $1.64 (previously $2.09).
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), Ironbark Zinc (IBG)
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