Market Update & Important Indicators
U.S. stocks fell Tuesday, as the Federal Reserve kicked off a policy meeting where the central bank is expected to signal that tighter monetary policy is on the horizon. The Dow declined 128 points, or 0.7%, to 17849. The S&P 500 dropped seven points, or 0.3%, to 2074. Meanwhile, the Fed kicks off its two-day policy meeting Tuesday. Investors are looking for clues from the central bank on the timing of interest-rate increases, including the possibility that it removes its promise to be "patient" before raising interest rates. Stocks have seen wider swings this month after strong gains in February, as investors grapple with the Fed's course of action and the strong rally in the U.S. dollar, which is expected to hurt the earnings of U.S. multinational companies. The Dow is down nearly 3% from its March 2 record. At the same time, recent weak economic data, such as Monday's decline in manufacturing output, also have raised questions about the path of the Fed's monetary policy.
European stocks fell Tuesday, with losses holding following disappointment over a key sentiment reading from Germany, Europe's biggest economy. European equities started on weaker footing after Monday's rally, as the market has been awash in liquidity linked to European Central Bank's asset-buying program. The Stoxx Europe 600 on Tuesday fell 0.7% to 397.33, with only oil-and-gas and utility shares notching gains. Stocks stayed lower after the release of the closely watched German ZEW economic sentiment figure. The reading for March rose to 54.8, and although that is the highest value since February last year, analysts polled by FactSet had expected an even more-optimistic reading of 60.
Stocks in Asia mostly rose Tuesday with investors unfazed by upcoming commentary from the U.S. central bank on its outlook for interest rates. The Nikkei Stock Average ended up 1.0% at 19,437.00, its highest closing mark since April 14, 2000, following a rally in Wall Street overnight and a steady dollar. The Shanghai Composite Index rose 1.6% to 2502.85, marking a fresh high since May 2008. The index is up 8.3% this year, extending a rally from last year, on expectations of further stimulus from Beijing. The Hang Seng Index finished down 0.2% at 23901.49. Tencent fell 1.2% to HK$134, ahead of its earnings report Wednesday.
Copper prices fell on the London Metal Exchange on Tuesday ahead of the U.S. Federal Reserve's meeting. Global oil prices showed renewed weakness on fresh concerns about a global glut of the commodity. Gold sank to a four-month low on Tuesday (-0.4%), succumbing to expectations for higher interest rates in the U.S. The AUD is buying US$0.72.
In This Issue
Paringa Resources (PNL) | SPEC BUY
Paringa Resources (PNL) released a Pre-Feasibility Study (PFS) for the Buck Creek thermal coal project in the Illinois Basin, U.S. In comparison to the Scoping Study, the PFS has 12% higher production, 18% higher capex and 9% lower opex, culmination in a $4mpa steady state EBITDA increase (US$81mpa). The report dispels concerns of the impact of cheap gas to the Company’s target market by highlighting the delivered cost advantage of coal over gas (US$2.29/mmbtu vs US$5.64/mmbtu). The U.S. energy coal sector was also buoyed by the 50% acquisition of Illinois Basin major Foresight Energy (NYSE:FELP) for US$1.4b with an implied EV/EBITDA of 10x. Argonaut maintains a SPEC BUY recommendation with a $0.85 target price.
MZI Resources (MZI) | SPEC BUY
MZI Resources (MZI) has commenced construction of its 100% owned Keysbrook mineral sands project in Southwest Australia. The low complexity, relatively low risk project development is forecast to be completed late CY15, with first sales in Q1 CY16. Argonaut foresees near-term Reserve expansion with likely increases of the Environmental Protection Authority’s (EPA) approved area. In addition, we understand MZI is commencing early studies into production expansion. MZI offers low risk, high margin mineral sands exposure and Argonaut maintains a SPEC BUY recommendation with a target price of $0.70.
Recent Contacts & Presentations
Beadell (BDR), Pacifico (PMY), Fertoz (FTZ), Atrum (ATU), Doray (DRM), Helix Resources (HLX), Rift Valley Resources (RVY), West African Resources (WAF), Commodities Group (COZ), Pioneer Credit (PNC), Matrix (MCE), Austal (ASB), Ausdrill (ASL), TFS Corporation (TFC), Gage Roads (GRB), Austin Engineering (ANG), Buru Energy (BRU)