Market Update & Important Indicators
Wall Street stocks have jumped as oil prices rebounded, snapping a five-day losing streak that had left the equity market looking oversold to some investors. The Dow Jones Industrial Average gained 190.86 points (1.10 per cent) on Friday to 17,511.57. The broad-based S&P 500 rose 26.75 (1.34 per cent) to 2,019.42, while the tech-rich Nasdaq Composite Index surged 63.56 (1.39 per cent) to 4,634.38. Investors were reassured by a healthy 5.3 per cent rise in US oil prices as the International Energy Agency declared there were signs "the tide will turn" in the oil market following recent multi-year lows.
European stocks have pushed higher on fresh signals the ECB will launch a bond-buying stimulus program next week, while the euro plunged below $US1.15 for the first time in more than 11 years. Frankfurt's DAX 30 rose 1.35 per cent to a record close of 10,1677 points and hit an intra session record high of 10,207.97, while the CAC 40 in Paris gained 1.31 per cent to 4,379.62. London's benchmark FTSE 100 index rose 0.79 per cent to 6,550.27 points. Meanwhile Switerzerland's SMI tumbled 5.96 per cent, still reeling from the Swiss National Bank (SNB) abruptly ending Thursday its policy to hold down the value of the franc, which saw the currency soar. The SNB came under fire Friday for its surprise withdrawal of the floor of 1.20 francs to the euro, as the sharp rise of the currency threatens causing a slump in the export-dependent economy and has bankrupted several foreign exchange broker firms worldwide.
Tokyo tumbled 1.43 per cent, or 244.54 points, to end at 16,864.16. The index at one point was almost three per cent down but recovered as the yen pared its gains. Seoul closed 1.36 per cent lower, giving up 26.01 points to 1,888.13 and Hong Kong fell 1.02 per cent, or 247.39 points, to end at 24,103.52. However, Shanghai rose 1.20 per cent, or 40.04 points, to 3,376.50. Traders extended a more than three per cent gain on Thursday that was fuelled by bets that the government will unveil new economy-boosting measures.
The Australian market looks set to open higher following gains in oil prices and US and European sharemarkets. The March share price index futures contract was up 76 points at 5,307. The market on Friday fell for a fifth straight day, capping its worst week in 18 months. The benchmark S&P/ASX200 index was down 32.2 points, or 0.61 per cent, at 5,299.2 points. The broader All Ordinaries index was down 31.8 points, or 0.6 per cent, at 5,278.8 points. TD Securities will release its inflation gauge for December.
World oil prices have rebounded after the International Energy Agency declared there were signs "the tide will turn" in the battered market following recent multi-year lows. The US benchmark futures contract, West Texas Intermediate for February, advanced $US2.44 on Friday to close at $US48.69 a barrel on the New York Stock Exchange. Brent North Sea crude for delivery in March, the European benchmark, settled at $US50.17 a barrel in London trade, up $US2.50 from Thursday's closing level. "How low the market's floor will be is anyone's guess," the IEA says in its monthly report. "A price recovery – barring any major disruption – may not be imminent, but signs are mounting that the tide will turn." The IEA cautions that prices are expected to keep falling in the short term, with a potential rebalancing of the market coming in the second half of this year because demand does not appear to be picking up.
Metals on the LME all rose with the exception of tin which was down a touch. Copper regained some of the week’s losses, adding 1.1% to US$5,681/t. Gold was up 1.4% to US$1280/oz, while Brent rose, closing at US$50.17/bbl.
In This Issue
The encouraging signs of a pick-up in activity in the last half will likely be undone by an oil price that is currently 44% lower than at the time of the 1Q15 update. A sharp slowdown in oil & gas drilling activity is anticipated and we expect the performance of this segment to prove a drag on the gradual recovery in the minerals sector. We have pulled back our forecasts and our target price but retain a Buy rating on a longer term view following the recent share price decline (down 38% this month).
While the market has been more focused on frontier nickel provinces in recent years, namely the Albany Fraser Mobile belt, Duketon Belt and Eastern Goldfields, the established Kambalda province continues to deliver. Intercepts of Cassini’s tenor would be “hero-making” if reported by a nickel developer.
Panoramic Resources (PAN)
Following a review of existing data and due diligence, Rio Tinto Exploration Canada Inc. (RTEC) has agreed to continue with the Thunder Bay farm-in. RTEC has elected to earn in a 70% interest in the Thunder Bay North (TBN) PGE project by spending C$20m. A minimum C$5m is required before RTEC can withdraw.
Argonaut’s Stock Coverage & Recommendations
Recent Contacts & Presentations
Northern Star (NST), Doray Minerals (DRM), Troy Resources (TRY), Gold Road Resources (GOR), Saracen Mineral Holdings Limited (SAR), Beadell Resources Limited (BDR), Resolute Mining Limited (RSG) , RTG Mining (RTG), MACA Limited (MLD), Alexium International Group Limited (AJX), Decmil Group Limited (ACG), Pacific Energy Limited (PEA), Otto Energy Limited (OEL), Peninsula Energy Limited (PEN), Sandfire Resources NL (SFR), Atrum Coal (ATU)