Market Update & Important Indicators:
U.S. stocks slid Monday as escalating trade tensions between the U.S. and China weighed on investors' appetite for risk. The Dow Jones Industrial Average was down 0.4%. The S&P 500 dropped 0.2%, while the Nasdaq Composite fell less than 0.1%. President Donald Trump approved tariffs of 25% on about $50 billion of Chinese goods on Friday, prompting Beijing to hit back by announcing the country would levy penalties on hundreds of U.S. goods. The moves exacerbate concerns among investors that the world's two biggest economies could descend into a trade war. Rising frictions in international trade in recent months already have instilled uncertainty in global markets, which are experiencing one of their most volatile stretches in years. Concerns about the fate of the North American Free Trade Agreement and tariffs that the Trump administration imposed on European allies also are adding to investor anxiety. The US gold price was down 0.1% to 1,277.90/t.
The Stoxx Europe 600 index ended down 0.8% as concerns about global trade frictions and European politics weighed on sentiment. German stocks underperformed, with the DAX index closing down 1.4%, on worries about tensions within Chancellor Angela Merkel's government due to a dispute between Ms. Merkel and interior minister Horst Seehofer over migration control. Other European stocks were broadly lower, with France's CAC 40 down 0.9%, Italy's FTSE MIB down 0.4% and Spain's Ibex 35 down 0.8%. U.K. stocks outperformed, however, with the FTSE 100 ending flat, buoyed by gains in heavyweight oil stocks as crude oil prices rise.
The Asian markets at the centre of ongoing global trade tensions, China, were closed Monday for a holiday along with Hong Kong and Taiwan. While selling there is likely on Tuesday, most other places in the region declined Monday amid a broad risk-off session. Energy stocks in the region were hit by crude slide both Monday and Friday. So were chip-related names as semiconductors are getting caught up in tariffs. Japan's Nikkei Stock Average finished down 0.8% while South Korea's Kospi shed 1.2%.
Australian stocks outperformed again, building on Friday's biggest gain in nearly a year to notch a one-month closing high. Despite a late-day fade, the S&P/ASX 200 finished up 0.2% as a second-straight session of gains by the heavily weighted big banks more than countered weakness in commodities names–hit by renewed global trade worries. Elsewhere, CYBG finished up 0.8% as it announced just before the closing bell an agreement to buy Virgin Money. Meanwhile, Atlas Iron popped a fresh 22% after landing another takeover bid. Telstra pulled back 2.4% after strong gains the last two sessions.
Base metal prices were mixed on the London Metal Exchange. The 3-month copper contract continued to slide and was down 0.7%, along with tin and nickel that both fell 1.4% to trade at 20,593/t and 14,892/t, respectively. Zinc was down by a lower 0.4% to trade at 3,107/t. The price of aluminium was up 0.7% to 2,221/t, while lead gained 1.1% to trade at 2,418/t.
In this issue:
Decmil (DCG) | Update and contract win | BUY
Market Cap $184m | Current Price $1.06 | Valuation $1.35
DCG has pared back FY18 guidance, confirmed FY19 revenue expectations, announced a NZ$125m contract extension in New Zealand, and provided a general update across its businesses. While our FY18 numbers have been pulled back, we remain upbeat on DCG’s medium-term prospects across east coast infrastructure and WA resource projects, as well as the increasing exposure to New Zealand. We have reduced longer term margins slightly and our blended valuation is now $1.35 (prior $1.40). Our positive macro view and the valuation upside continues to support a BUY recommendation.