Market Update & Important Indicators
U.S. stocks pared some of their gains Wednesday as bond yields surged after minutes from the Federal Reserve's January meeting showed officials plan to keep gradually raising short-term interest rates this year. Investors have been particularly focused on economic data and commentary from central banks after concerns about rising inflation, higher government bond yields and tighter monetary policy helped trigger a stock-market correction earlier this month. Some money managers had feared that the central bank might move to raise rates more than the three times previously forecast for 2018. But Wednesday's minutes showed that while officials believed in January that the economy was set to grow faster than when they met at the end of last year, some remain worried inflation might continue to lag below the central bank's 2% target. The Dow Jones Industrial Average was recently down 0.7% after earlier rising as much as 300 points. The S&P 500 retreated 0.5%, and the Nasdaq Composite added 0.4%. On Tuesday, the Dow Industrials and S&P 500 fell for the first time in seven sessions. The U.S. gold price traded lower overnight, falling 0.4% to close at 1324.00 US$/oz.
Germany's stock benchmark finished lower Wednesday, while other major European indexes closed mostly higher, as investors received disappointing updates on manufacturing and services activity in the eurozone. Germany's DAX 30 index dipped 0.1%, and Spain's IBEX 35 dropped 0.7%. On the upside, the Stoxx Europe 600 index rose 0.2%, and France's CAC 40 added 0.2%. The U.K.'s FTSE 100 gained 0.5%, boosted by advances for miners.
Asian stock markets saw early weakness after overnight declines on Wall Street, but that didn't last as the region saw broad equities gains. Taiwan led after a week-long Lunar New Year break as the Taiex posted its biggest gain in 2 1/2 years by climbing 2.8%. Meanwhile, Hong Kong rebounded further after Tuesday's pullback, with the Hang Seng jumping 1.8%. That ahead of the expected resumption of southbound money flows Thursday when mainland markets reopen. But the Nikkei rose just 0.2% after choking up its late-morning gains despite fresh weakness in the yen. Things were better in Singapore, where the STI gained 1.1%.
In a choppy session that started with declines, Australia's stock benchmark again ended little changed–though to the plus side. The S&P/ASX 200 rose just 2.8 points, trailing broad regional gains. That as miners BHP Billiton and Fortescue slid nearly 5% following their fiscal first-half reports, and oil firm Santos lost 3.1% after broadly in-line 2017 numbers. Those with strong post-earnings stock gains included Wesfarmers, A2 Milk, LendLease, Fairfax and Seven.
The London Metal Exchange’s 3-month copper contract traded higher overnight, rebounding 0.4% to close at $7,119/t. The other base metals finished mixed. Tin prices recovered 1.2% to 21,765/t, whilst Zinc prices closed flat at 3,568/t. Aluminium prices pulled back 0.2% to close at 2,211/t. Lead prices slipped 1.8% to 2,547/t, whilst Nickel prices jumped 1.8% to finish at 13,797/t.
In this issue
MOD Resources (MOD) | Copper camp in the Kalahari | BUY
Market Cap $102m| Current Price $0.05 | Target Price $0.10
Argonaut recently visited MOD Resources (MOD) copper development and exploration assets in the Kalahari Copper Belt, Botswana confirming our view that this is amongst the best copper development companies globally. The January 2018 Prefeasibility Study (PFS) on the T3 deposit (MOD 70%, Metal Tiger [LON:MTR] 30%) outlined a Base Case with ~9 years mine life producing 23ktpa copper and 690kozpa silver at average all-in sustaining costs (AISC) of US$1.36/lb with development capex of US$155m. BUY recommendation.
Paragon Care (PGC) | Ceasing coverage | BUY
Market Cap $200m | Current Price $0.74 | Valuation $1.20
Following a research review, we are ceasing coverage of PGC to focus on WA-based industrials. PGC currently has a $70m capital raising underway to help fund a number of acquisitions and continue its consolidation strategy. The new businesses are expected to be accretive to earnings and we believe the risks associated with the integration of these large acquisitions are mitigated to a degree by successful strategy execution to date. We cease coverage with a buy call and a $1.20 valuation.
Recent Contacts & Presentations
PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SEH), Australis Oil & Gas Ltd (ATS), Explaurum Ltd (EXU), Whitebark Energy Ltd (WBE), Atrum Coal Ltd (ATU), Melbana Energy Ltd (MAY), Genesis Minerals Ltd (GMD), Proteomics International Laboratories Ltd (PIQ), Ramelius Resources Ltd (RMS), MOD Resources Ltd (MOD), Greenland Minerals & Energy Ltd (GGG), Walkabout Resources Ltd (WKT), Marindi Metals Ltd (MZN), Volt Power Group Ltd (VPR), PharmAust Ltd (PAA), Alice Queen Ltd (AQX), Jervois Mining Ltd (JRV), St George Mining Ltd (SGQ), Overland Resources Ltd (OVR)
Please read Argonaut's Important Disclaimers & disclosures
Log in to the client area below to download the full Morning Note PDF