Overseas Market Report – U.S. Stocks End Higher; Rising Oil, Data Eyed
U.S. stocks closed higher Wednesday on the back of new economic data and a rise in oil prices.
The Federal Reserve's January meeting minutes confirmed the majority of Fed officials showed concern about stock-market weakness and advised the central bank to hold off on a further rise in interest rates.
U.S. industrial production rose 0.9% in January, the first increase since July, and well above expectations. The boost was driven by higher utility output (thanks to colder weather) and a 0.5% rise in manufacturing. Capacity utilisation rose 0.7 percentage points to 77.1%.
Housing starts in the U.S. were off 3.8% last month to a seasonally adjusted annual rate of 1.099 million. Building permits were off 0.2% in the month.
The U.S. producer price index rose 0.1% in January, above the 0.2% decline expected by economists. Prices were up 0.4% excluding food and energy. Year over year, the overall index was down 0.2% and core prices were up only 0.6%.
At the closing bell the Dow, S&P 500 and NASDAQ were up 1.6%, 1.7% and 2.2%, respectively.
Shares of Priceline (PCLN) were up almost 11% at the close, after the firm reported a strong fourth quarter. Fourth-quarter international constant-currency bookings grew 29%, an acceleration from the 25% growth reported last quarter, and well ahead of estimates, despite the temporary headwind from the November Paris attack.
For Australian ADRs listed on the NYSE, BHP Billiton jumped 96 cents (4.15%) to $24.12, ResMed gained 22 cents (0.37%) to $59.25, Telstra Corporation rose 20 cents (1.06%) to $19.47, Spark New Zealand was up 16 cents (1.51%) to $10.79 and Westpac jumped 63 cents (3.06%) to $21.23.
At 8:15 AM (AEDT), the 10-year Treasury note yield was 1.81% and the 5-year yield was 1.25%.
European markets ended sharply higher.
The FTSE 100, French CAC 40 and Germany's DAX rose 2.9%, 3.0% and 2.6%, respectively.
Asian shares finished mixed.
The Shanghai Composite was up 1.1%, while the Nikkei 225 fell 1.4% and the Hang Seng was down 1.0%. India's Sensex rose 0.8%.
Australian Market Report – Local Market Expected To Open Higher
Ahead of the local open, SPI futures were 66 points higher at 4,904.00.
Wednesday 17 February – close. The local market opened flat today on the back of gains on Wall Street overnight. Local stocks rose above the flat-line just before 1pm, however this was short lived as stocks continued to trend below the flat-line until close, weighed down by mixed reporting results. Most sectors ended lower with only industrials and consumer discretionary posting gains. The Australian dollar fell against most major currencies.
The All Ordinaries fell 23.20 points (-0.47%) to 4,938.40 while the S&P/ASX 200 dropped 27.90 points to 4,882.10.
In This Issue
Argonaut Research| Doray (DRM) | HOLD
Argonaut’s recent site visit to Doray Minerals’ (DRM) Deflector Project confirms the mine is on schedule for first production in mid-2016. Open pit mining has commenced and the processing plant is largely constructed. When operating under steady-state, the project will double DRM’s production profile to ~140kozpa (~150-160koz Au Eq) and lower group AISC, enhancing the stock’s appeal to a wider investment community. Whilst challenges including more complex processing are acknowledged, they are mitigated by experienced management and contractors (GR Engineering, Maca). With Andy Well transitioning into 100% underground and given the superior mine life and lower costs, Deflector will soon surpass Andy Well and become the ‘flagship’ asset. HOLD and 80c valuation maintained.
Argonaut Research| Paladin Energy (PDN) | HOLD
Paladin Energy (ASX:PDN, TSX:PDN) released H1 FY16 financial results with revenue of US$64.6m and an attributable net loss of US$24.2m (down 59% on December H 2014). The Company continues to improve costs with C1 costs down 11% to US$25/lb in 12 months. Costs benefited from reagent recycling technology reducing processing costs and depreciation of the Namibian dollar (NAD) against the USD. PDN’s balance sheet remains under pressure from the looming US$237m convertible bonds (CBs) due April 2017. The Company estimated funding gap to repay these CBs is US$140-165m. Downgraded from SPEC BUY to HOLD with a $0.21 target price.
Argonaut Research| Matrix (MCE) | HOLD
The announcement that orders have been cancelled confirms the dismal state of the deepwater drilling market. It is unlikely to improve in the next couple of years and we have made significant downward adjustments to forecasts. This will impact investor sentiment although a hold call remains appropriate given the longer term earnings potential, the quality PP&E at Henderson and low gearing levels. Our blended valuation, which is weighted towards short-term earnings, falls to $0.45 (prior $0.85).
Aveo Group (AOG)
Aveo Group announced it has exchanged contracts for the acquisition of 100% of Freedom Aged Care (Freedom). Freedom has been acquired, based on its balance sheet at 30 June 2015, for consideration of $215.5m plus acquisition costs comprising: The issue of $83.5m of scrip in the Company at $2.98 per security and a cash payment of $10m to the vendors; The assumption of $88m in debt owed to lenders; and Deferred payment of $34m in present value terms provided various performance conditions are met post-completion over a 4-year period. The acquisition will positively contribute to the Company's target of growing its return on retirement assets to 8% by FY18 and is accretive to the Group's earnings per security in FY17 and beyond. The Company's forecast underlying EPS growth will be at least 6% for FY17 and FY18. AOG added 5 cents to $2.98.
Sigma Pharmaceuticals (SIP)
Sigma Pharmaceuticals announced the finalisation of a new long term supply contract with the My Chemist / Chemist Warehouse Group. The new arrangements are effective from 1 January 2016. The new agreement cements the existing relationship for a further three years, and provides an option to exclusively negotiate an additional three year extension. The agreement also delivers further reduction in payment terms to better align the agreement with the Company's trading objectives. SIP added 2 cents to $0.80.
Recent Contacts & Presentations
Troy Resources (TRY), Northern Star Resources (NST), Regis Resources (RRL), Medusa Mining (MML), Doray Minerals (DRM), Beadell Resources (BDR), Red 5 (RED), Kingsgate Consolidated (KCN), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), TFS Corporation (TFC), Paragon Care (PGC), Austal (ASB), Orbital Corporation (OEC),Energia Minerals (EMX), Berkeley Energia (BKY) , Finders Resources (FND), 4DS Memory Ltd (4DS) , Bionomics Ltd (BNO)