Market Update & Important Indicators:
Shares of Cisco Systems, an index heavyweight that had been a major contributor to the S&P 500 this year, were punished after the networking giant offered earnings guidance late Wednesday that wasn't much better than analysts' expectations, despite the strong IT spending backdrop. Cisco has been having bigger impact on the market-cap weighted S&P 500 this year due to its size and because its stock has been among the best performers of the year. Prior to Thursday, the tech company had contributed more than 6% of the broad index's small gain for the year, according to S&P Dow Jones Indices. Shares fell 3.5% Thursday and dragged down shares of other communications equipment providers on a day when other popular tech stocks like Apple and Google parent Alphabet also edged lower. The Dow Jones Industrial Average fell 0.2%, while the S&P 500 slipped 0.1% and the Nasdaq Composite lost 0.2%. Meanwhile, energy companies spiked higher, but not enough to overcome the broader market's weakness. Energy companies in the S&P 500 have added 16% since the end of March, outperforming the 10 other sectors in the broad index, including shares of technology companies, which are up 4.5% over the same time. Energy stocks in the S&P 500 are yielding about 2.8% via dividends, up from 2.5% in 2016 and better than the 1.9% for the broader S&P 500, according to S&P Dow Jones Indices. The US gold price remained unchanged at 1,290.20 (US$/oz).
The Stoxx Europe 600 rose 2.53 points to 395.74 after the price of a barrel of Brent crude topped $80 in response to news that energy company Total could leave Iran in the wake of fresh U.S. sanctions. Royal Dutch Shell A-shares gained 1.9%. "The FTSE 100 and DAX have set new multi month highs, while the CAC 40 has hit a level not seen since 2008," said David Madden at CMC Markets. The DAX closed up 0.9% and the CAC 40 ended the session nearly 1% ahead.
In Asia, Japan's Nikkei rose 0.5%, supported by a recent decline the yen, which tends to boost earnings of multinationals translating earnings from abroad. The dollar was last up 0.3% against the yen for the day and up 1.2% against the Japanese currency for the week. Shares elsewhere mostly moved lower, with soft economic data contributing to the downbeat tone. Hong Kong's Hang Seng fell 0.5% despite a rebound in shares of Tencent Holdings, Asia's most valuable company. Shares of the Chinese tech giant rose 3.7% after its quarterly results, released Wednesday evening, beat expectations with a 61% increase in net profit.
Australian stocks struggled throughout today's trading, pushed down by a 3.7% drop in Westpac as it traded ex-dividend. Helped by an end-of-session adjustment higher, the S&P/ASX 200 fell 0.2% to 6094.3 after having risen in 18 of the prior 23 days. The biggest decliner was Treasury Wine, which skidded 6.2% after the company said its wares are also among those being held up at Chinese import spots. Meanwhile, materials hit fresh near-7-year highs as Rio Tinto and BHP Billiton each rose more than 1% to hit their own multiyear peaks
The London Metal Exchange’s 3-month copper contract gained 0.9% to 6,857/t. The other base metals were mainly up overnight. Lead prices gained 1.5% to 2,357/t, whilst zinc prices increased 0.9% to 3,093/t. Aluminium finished 1.4% lower at 2,303/t. The Nickle price gained only 0.9% to 14,529/t. Tin Prices fell 0.4% to record 20,715/t.
In this issue:
Kidman Resources (KDR) | Tesla Offtake Agreement | BUY
Market Cap $758m | Current Price $2.22 | Target Price $2.50
Kidman Resources has entered into a binding offtake agreement with Tesla Inc. for the supply of lithium hydroxide (LiOH). The agreement is a fixed price take-or-pay contract with an initial 3-year term with two 3-year term options thereafter. The contract will equate to <25% of KDR’s portion of the initial nameplate production. Kidman is in a 50:50 JV with Sociedad Quimica y Minera de Chile (SQM) on the Mt Holland Lithium Project. The two companies have a broader JV under Western Australia Lithium (WAL) to produce lithium hydroxide and/or lithium carbonate, with an exclusive option for a leased refinery site in the Kwinana Strategic Industrial Area in Western Australia. Argonaut estimates ~37kt Lithium Carbonate (or 44ktpa LiOH) production from 2020/2021
Recent Contacts & Presentations:
Nzuri Coppoer (NZC) Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4), Golden Mile Resources Ltd (G88), NTM Gold Ltd (NTM), Ausmex Mining Group Ltd (AMG), Matrix C&E Ltd (MCE), Austal Ltd (ASB), Decmil Group Ltd (DCG), Ventnor Resources Ltd, Ausdrill Ltd (ASL), Alice Queen Ltd (AQX), PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SEH)
Please read Argonaut's Important Disclaimers & disclosures