Market Update & Important Indicators
Stock prices have fallen, as investors recalibrated expectations for the path of U.S. interest rates. The Dow Jones Industrial Average gave up its gains for the year on Thursday, the anniversary of its record closing high. The blue-chip index has crept lower over the past month, eroding gains that had propelled the Dow from its Feb. 11 low on rebounding oil prices, the Federal Reserve's hesitance to raise interest rates and receding fears of a U.S. recession. The Dow came as close as 216 points from its record at the index's 2016 closing high on April 20. The S&P 500 lost 0.6% on Thursday and is down 0.5% so far in 2016. The S&P 500 last closed lower on the year on April 11, and the Dow hasn't closed down year to date since March 16. Comments from Fed officials this week revived investors' expectations for higher interest rates, rattling markets. Low rates have helped fuel a yearslong rally in stocks, as investors turned to the stock market for returns. Minutes from the Fed's April meeting released on Wednesday suggested an interest-rate increase could come as early as June if warranted by the economic data. The comments came amid a dearth of other market catalysts. First-quarter earnings season is drawing and there are few major economic releases left this week.
European stock markets dropped across the board, after the U.S. Federal Reserve suggested a June interest-rate hike is still in play if the economy shows more life. A crashed EgyptAir plane that had gone missing en route from Paris to Cairo also zapped sentiment, with travel operators and airlines moving lower. The Stoxx Europe 600 index dropped 1.1% to close at 333.91, finishing at the lowest level in a week. The investment mood was hampered by minutes from the Fed's April meeting, which suggested policy makers are seriously considering a rate increase next month. The CME FedWatch Tool now shows a 30% probability of a June rate increase, up from 19% just before the minutes were released Wednesday afternoon and from 4% earlier in the week. New York Fed President William Dudley reiterated the view on Thursday, saying an interest-rate increase in June or July is possible if fresh data confirm his optimistic forecast of economic growth.
Shares in Asia slid in lackluster trading over worries U.S. interest rates will rise earlier than expected. Hong Kong's Hang Seng Index lost 0.7% Thursday and Korea's Kospi retreated 0.5%. Shares ended largely flat in Japan and China. In Japan, stocks initially climbed on relief over a weaker yen. Shares of financial companies were up on hopes that higher U.S. rates could boost their net interest margins. But the gains were erased as the local currency became more volatile in the afternoon. The yen recently traded at 110.07 to the dollar.
Sharp losses for Australian resources stocks Thursday weighed heavily on the wider equity market, dragging it down for a second straight session. Most markets in the region were lower as investors reflected on the increased possibility of a rise in U.S. interest rates as early as June. That has stimulated the U.S. dollar, which in turn weighed on crude-oil and metals prices. Led by declines in materials and energy stocks, the S&P/ASX 200 fell 32.9 points, or 0.6%, to finish at 5323.3. Despite gains Monday and Tuesday, the index is now down 0.1% for the week so far.
Copper prices closed lower in London, on a combination of falling oil prices and a stronger dollar. The London Metal Exchange's three-month copper contract was down 0.7% at $4,580 a metric ton at the PM kerb close, having hit a three-month low earlier in the session at $4,540 a ton. The WSJ Dollar Index was recently up 0.11% at 87.60, making the dollar-priced commodity more expensive to buy for those holding other currencies. Additionally, weaker oil prices pressured copper lower as the two commodities are often traded by funds in the same basket, with a larger share allocated to oil. Brent, the global oil benchmark, was down 0.9% at $48.50 a barrel. Among the other base metals, aluminum closed down 0.4% at $1,545 a ton, zinc was down 1.5% at $1,860 a ton, nickel was down 0.9% at $8,555 a ton, lead was down 1% at $1,686 a ton and tin was down 1.6% at $16,510 a ton.
In this Issue
Energia Minerals (EMX) | Sorted | SPEC BUY
Market Cap $26m | Current Price $0.043 | Valuation $0.10
Energia Minerals (EMX) released results from ore sorting testwork on a bulk sample from the Company’s 100% owned Gorno zinc/lead deposit in Italy. Initial tests yielded excellent results with up to 60% mass rejection and 94% zinc recovery. Consequently, ore sorting has the potential to significantly reduce capital and operating costs in the upcoming Definitive Feasibility Study (DFS) by reducing the size of the crushing and milling circuit, reducing ore to be transported and milled, increasing mill feed and decreasing contaminants from waste rock. In the lead up to the DFS, EMX is undertaking a Resource drill out of the Colonna Zorzone deposit, which continues to generate high grade intercepts including 4.6m at 25.6% zinc and 4.7% lead. Argonaut maintains a SPEC BUY recommendation with a $0.10 target price.
Tox Free Solutions (TOX) | Chevron tests contract pricing | BUY
Market Cap $406m | Current Price $2.82 | Valuation $3.20
TOX announced that an Expression of Interest (EOI) process is underway for provision of waste management services for the operational phase of Chevron’s WA assets. We believe risk is less at the top line than at margin. Despite near term uncertainty we maintain our buy call. TOX operates in an attractive market, is well managed and is becoming increasingly well diversified across sectors and geographies.
Recent Contacts & Presentations
Paladin Energy (PDN), Credo Resources (CRQ) , Orthocell (OCC), Paragon Care (PGC), Orthocell (OCC), Salt Lake Potash (SO4), Dakota Minerals (DKO), Cradle Resources (CXX), Saracen (SAR), Gold Road Resources(GOR), Regis Resources (RRL), Gascoyne Resources (GCY), Botanix (BNE), Sino Gas & Energy (SEH), Altura Mining (AJM)