Market Update & Important Indicators
U.S. stocks turned lower after minutes from the Federal Reserve's April policymeeting suggested officials are keeping open the possibility of a June rate increase.Officials said an interest-rate increase in June was possible if incoming data showedan improving economy, and sought to push back against market expectations that a move atits next meeting was unlikely, minutes from the Fed's April meeting show. Fed officials had expected two interest-rate increases this year, as of their Marchforecasts, while many investors have predicted just one increase. Further signals thatFed officials continue to expect more increases than market participants could triggerturbulence in markets, similar to what happened at the start of the year. "There is this widespread complacency this year that [Fed officials] won'traise rates as many times as they said they would," said Sameer Samana, globalquantitative strategist at Wells Fargo Investment Institute. "That's arisk," he added. The Stoxx Europe 600 rose 0.9%.
Stocks in China were down sharply Wednesday, with losses spreading across most of Asia, as investors worried about the nation's tighter grip on its markets, which added to concerns about higher U.S. interest rates. The Shenzhen Composite Index finished the day 2.7% lower, falling from the morning, after high-ranking Chinese official Zhang Dejiang failed to mention the launch of a trading link between the Hong Kong and Shenzhen stock markets, which traders hope will generate excitement about China equities. Hong Kong's Hang Seng Index ended 1.5% lower and stocks in Shanghai fell 1.4%. Mr. Zhang, the Chinese Communist Party's No. 3 official, instead focused his speech in Hong Kong on China's "Belt and Road" initiative to develop trade and infrastructure links between China, the rest of Asia and Europe. Across the region, stocks were hit by worries about the potential fallout of higher U.S. interest rates on riskier assets. Upbeat U.S. economic data and comments from U.S. Federal Reserve officials helped to heighten investor expectations that interest rates there will rise as early as June.
Australian shares snapped a two-day rally, retreating from a nine-month high after a weak lead from Wall Street and concerns that U.S. interest rates could head higher soon. Weaker-than-expected Australian wage growth, which could pave the way for further rate cuts in the country, was ultimately shrugged off with the market ending near its day's low. The S&P/ASX 200 finished down 39.7 points, or 0.7%, at 5356.20. On Tuesday, it came within less than 5 points of the psychologically important 5400 mark. The energy subindex, however, showed gains as the Brent crude benchmark advanced nearer to US$50 a barrel as production outages in Africa and Canada and production declines outside the Middle East fuelled expectations for tighter supply. In Australia, data showed wage growth slowed to an 18-year low in the first quarter, fuelling local expectations of further interest-rate cuts. The Reserve Bank of Australia surprised markets earlier this month by cutting its cash rate for the first time in a year, before cutting its inflation forecasts. Australia's major banks fell, with National Australia Bank down 2.2%, Commonwealth Bank of Australia losing 1.4% and Westpac Banking easing 0.7%. Australia & New Zealand Banking Group rose 0.8%.
Copper futures closed lower in London, as a firmer greenback pressured the metal lower. The London Metal Exchange's three-month copper contract was down 0.9% at $4,612.50 a metric ton at the PM kerb close, having hit a three-month low earlier in the session at $4,563.50 a ton. The greenback strengthened ahead of the release of the Federal Open Market Committee's most recent meeting minutes, which could provide clarity over when further U.S. interest rate increases are likely to take place. Market consensus is that there will be a rate rise this year. Among the other base metals, aluminium closed up 0.4% at $1,551 a ton, zinc was down 0.8% at $1,888 a ton, nickel was down 1.9% at $8,635 a ton, lead was down 1.1% at $1,702.50 a ton and tin was down 1.1% at $16,775 a ton.
In this Issue
Austin Engineering (ANG) | Sells COR | HOLD
Market Cap $28m | Current Price $0.18 | Valuation $0.20
The $14m sale of COR is a positive step toward an improved balance sheet. However, we believe it was one of ANG’s better performing business units and will make it harder to reverse the declining Australian earnings trend. Fixing the balance sheet is work in progress in our view and we are yet to see hard evidence of an operational turnaround (reflected in our forecast net loss for FY17). Hold maintained.
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