Market Update & Important Indicators
U.S. stocks rose, rebounding from early losses spurred by a weak reading on the manufacturing sector. The Dow Jones Industrial Average gained 68 points, or 0.4%, to 17,545, springing back from a loss of as much as 136 points shortly after the opening bell. The S&P 500 rose 0.5%. Major indexes started the session lower following an unusually weak reading on the New York state manufacturing sector. The data showed business conditions weakening in August to their lowest level since the financial crisis in 2009. With the bulk of second-quarter earnings reports in the rearview mirror, companies in the S&P 500 are on track to report a quarterly decline in profits of 0.8%, according to FactSet, with 465 companies reporting.
In Europe, major indexes finished mixed. The Stoxx Europe 600 index gained 0.3% while Germany's DAX fell 0.4%. France's CAC 40 index gained 0.6%. Investors in Europe drew comfort from progress on a new bailout for Greece after EUR86 billion in loans to Athens were cleared by the eurozone on Friday after markets closed. A majority of European companies in the Stoxx Europe 600 have now published results for the latest quarter. According to FactSet data, more than 58% of those have beat estimates, while 37.8% have missed.
A steadying yuan has sharpened focus on the timing of a rise in U.S. interest rates, renewing pressure on Asian markets Monday, although hopes for stimulus from Japan offset some losses. The Hang Seng Index finished down 0.7% while South Korea's Kospi was down 0.8%. Meanwhile, China's main stock index has remained relatively resilient through the volatility that followed the yuan's devaluation. The Shanghai Composite closed up 0.7% at 3,994 as government funds continued to stabilize that market although the index is still down 23% from its mid-June high. The smaller Shenzhen Composite gained 0.7% to 2,327. In Japan, The Nikkei Stock Average rose 0.5% to 20,620, after disappointing growth sparked hopes of government easing. Earlier Monday, the country reported that second-quarter growth contracted as households crimped spending and demand dwindled for Japanese goods overseas. Gross domestic product shrank 1.6% on an annualized basis in the April to June quarter.
Copper closed 1.0% lower on the LME overnight although nickel eked out a 0.2% gain. Crude oil continues to slide, with Brent down 0.9% to $48.74/bbl and WTI off 1.5% to $41.87/bbl. Iron ore was steady at $56.66/t, while gold added 0.3% to $1,117/oz.
In This Issue
Argonaut Asia Comment | China’s July Gold Reserves Increased 0.6moz to 53.9moz
PBOC announced China’s July Gold Reserves last Friday. It shows that it increased gold reserves by 0.62mn oz or 19.28 tonnes to 53.93mn oz or 1,677.2 tonnes), at an annualized pace of Rmb225 tons. It is the second time China announced its gold reserves in 30 days. Looking ahead, China may announce its gold holdings more frequently amid its bidding to join the IMF’s reserve currency basket.
In terms of central bank gold purchases, we expect PBOC to continue its foreign reserve diversification and may time its purchase in view of the current low prices. China ranks No.6 in the amount of total gold reserves holdings. The top five are US, Germany, IMF, Italy and France. It is worth noting that gold reserves in these countries’ total foreign reserve is 64.7%-73.7%. China’s gold holdings only accounts for 1.6% of its total foreign reserves, showing that there is room for China to optimise its foreign reserve allocations. Russia has been adding gold actively in the past 18 months. Its total gold holdings are 1,275 tonnes, ranked No.7 after China. Its gold holdings are 13.3% of its total foreign reserves as of August 2015. Stock in Focus: Zijin Mining (2899 HK/BUY).
Recent Contacts & Presentations
Dacian (DCN), Evolution (EVN), Austal (ASB), Resolute (RSG), Pacifico (PMY), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Karoon Gas (KAR), Austex Oil (AOK), Central Petroleum (CTP), Senex Energy (SXY), Newmont, Coventry (CYY), Energia (EMX)