Market Update & Important Indicators
U.S. stocks rose, propelling the Dow Jones Industrial Average to 18000 for the first time since July. The blue-chip index has gained nearly 15% since mid-February, as early-year fears about the U.S. economy faded, oil prices rebounded and the Federal Reserve signalled a cautious approach to raising rates. With Monday's advance, the Dow is up 3.3% for the year. Even as stocks have posted strong gains, the rally has slowed. Global growth remains sluggish, energy prices remain near depressed levels and company earnings aren't particularly encouraging.
The Dow industrials climbed roughly 12% from their Feb. 11 lows by mid-March. Since then, the blue-chip index has risen about 3%. The last time the Dow industrials closed above 18000 was July 20. The broad move higher in U.S. stocks–all of the S&P 500's sectors rose in recent action–marked a reversal from early losses. A tumble in oil prices sparked the initial losses after major oil-producing countries failed to reach an agreement to freeze output. Energy stocks rose the most in the S&P 500, gaining 1.4%. Consumer stocks rose after a batch of encouraging quarterly results. The Stoxx Europe 600 advanced 0.4%.
A failed oil deal out of Doha sent stock markets in Asia down, with Japan suffering the steepest losses as it also faced fallout from earthquakes and a renewed surge of its currency. Japan's Nikkei Stock Average tumbled 3.4%–its worst daily percentage loss since April 1. The Nikkei is down 14.5% for the year, making it Asia's worst-performing major stock benchmark so far in 2016.
After gaining 4.5% over last week, the S&P/ASX 200 fell 20.4 points, or 0.4%, to finish at 5137.1. The basket of energy stocks led the decline, falling 2.9%, while the materials subindex lost 0.9% and financials shed 0.7%.Woodside Petroleum Ltd. lost 1.4% for the day, while Oil Search Ltd. and Santos Ltd. sank 4.3% and 7%, respectively. Smaller player Beach Energy Ltd. dropped 7.3%. Among mining shares, BHP Billiton Ltd. slid 3%, South32 Ltd. lost 3.6% and Rio Tinto Ltd. was 1.6% weaker. The major banks were all down for the day, led by a 1.5% drop for Westpac Banking Corp. and a 1% loss for Commonwealth Bank of Australia.
The London Metal Exchange's three-month copper contract was up 0.4% at $4,827 a metric ton at the PM kerb close, having hit a four-day low at $4,758 a ton earlier in the session. Among the other base metals, aluminum closed up 2.4% at $1,582 a ton, zinc was up 1.1% at $1,881 a ton, nickel was up 2.5% at $9,105 a ton, lead was down 0.1% at $1,709 a ton and tin was down 0.6% at $17,089 a ton
In This Issue
Austal (ASB) | Filling the valley | BUY
Market Cap $535m | Current Price $1.54 | Valuation $1.90
The Government’s announcement on locations and timing under a continuous naval shipbuild programme goes a long way toward addressing the so-called “valley of death” between major ship construction projects. It dovetails the end of the Air Warfare Destroyer (AWD) Programme with Pacific Patrol Boats (PPB’s), Offshore Patrol Vessels (OPV’s) and Future Frigates (FF’s) in a way that keeps workers busy across shipyards in Adelaide and Perth. As part of this ASB has been selected as the preferred tenderer to construct and maintain up to 21 PPB’s, lengthening visibility at ASB’s Henderson yard.
Paladin Energy (PDN) | Transaction speculation mounting| HOLD
Market Cap $428m | Current Price $0.25 | Valuation $0.24
Paladin Energy (ASX:PDN, TSX:PDN) released March Q production with 1.3Mlb U3O8 at US$24/lb C1 cost, compared to December Q of 1.3Mlb @ US$25/lb and Argonaut’s forecast of 1.2Mlb @ US$25/lb. The Company is currently in negotiations for a transaction to partly or wholly repay the outstanding US$212m convertible bonds (CB) due April 2017. At March 31, PDN had US$21m cash and US$362m total face value debt. Argonaut maintains a HOLD recommendation with a revised valuation of $0.29 (from $0.27). Our valuation is impacted by lower near term prices, lower C1 costs and the effect of rising AUD on USD domiciled debt. We apply a 15% discount to NAV to account for balance sheet risk, relating to outstanding 2017 CBs, to attain a $0.24 target price.
Recent Contacts & Presentations
Evolution Mining (EVN), St Barbara (SBM), Troy Resources (TRY), Explaurum (EXU), Sino Gas & Energy (SEH), Western Areas (WSA), Finders Resources (FND), Carnarvon Petroleum (CVN), Threat Protect Australia (TPS), Austal (ASB), Paragon Care (PGC), Salt Lake Potash (SO4), Peet (PPC), Department 13 (D13), Actinogen Medical (ACW)