Overseas Market Report – Stocks Higher; Oil Eyed
Stocks finished higher at the close on Monday, despite the continued fall in oil prices.
Oil prices remained in focus as Brent oil futures fell to the lowest levels since July 2004. The continued fall in prices put pressure on Energy shares.
At the close the Dow gained 0.7%, the S&P 500 was up 0.8% while the NASDAQ rose 0.9%.
For Australian ADRs listed on the NYSE, BHP Billiton rose 35 cents (1.46%) to $24.28, ResMed lost $1.09 (2.02%) to $52.91, Telstra Corporation fell 6 cents (-0.31%) to $19.48, Spark New Zealand gained 11 cents (1.06%) to $10.53 and Westpac rose 24 cents (1.05%) to $23.16.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.19% and the 5-year yield was 1.66%.
There was limited corporate news to start the holiday-shortened week.
Shares of Disney (DIS) were down after Star Wars: The Force Awakens grossed a record $246 million this weekend in the U.S., ahead of expectations.
European markets gave up gains to end mostly lower at close. The FTSE 100 fell 0.3%, the Paris CAC dropped 1.3% while Germany's DAX was off 1%.
Asian shares were mixed. The Shanghai Composite rose 4.4%, the Hang Seng was up 0.2% while the Nikkei 225 lost 0.4% lower. India's Sensex gained 0.9%.
Australian Market Report – Local Markets Are Expected To Open Higher
Ahead of the local open SPI futures were 2 points higher at 5,071.
Monday 21 December – close. The Australian sharemarket enjoyed a fourth consecutive day of gains after a seesawing session, as a late rally in the big banks and gains from resource stocks helped the benchmark index eke out a small profit in the last minutes before the closing bell. There were mixed results from the sectors; energy gained most significantly while health care lagged behind the rest. The Australian dollar fell against the greenback but experienced mixed results against other major currencies.
The All Ordinaries added 1.30 points to 5,157.80 while the S&P/ASX 200 lifted 2.30 points to 5,109.00.
Australian shares held steady for a second straight session, after late gains nudged the market into positive territory.
Angus Nicholson, a market analyst at IG in Melbourne, said 5100 is shaping up as a key level for the market. Volume for the day was significantly lower than usual, with many investors likely away on holiday, he said.
Energy shares made the strongest gains, rising 1%, while materials stocks gained 0.6%.
That helped offset weakness in other areas, including utilities and health care, with the latter continuing to falter after the federal government in its recent mid-year economic review proposed changes to how some patients are billed for areas including pathology and diagnostic imaging.
Among energy shares, Woodside Petroleum rose 1.4%, Oil Search added 1.2% and Santos gained 4.1%.
BHP Billiton was 1.5% higher and South32 and Rio Tinto each rose 1%, while Fortescue Metals Group climbed 2.6%.
Mining and energy stocks were helped higher by the weaker local currency, as well as some investors betting oil spot prices won't fall substantially lower, Mr. Nicholson said.
Commonwealth Securities said volume was light with 1.91 billion shares valued at 3.92 billion Australian dollars (US$2.81 billion) traded.
In This Issue
Argonaut Research | Troy (TRY) | BUY
Troy Resources (TRY) announced a A$10m, two-tranche placement at A$0.20 to improve working capital while the Karouni Project is ramping up. Whilst the pressure on working capital is not entirely unexpected (see Argonaut note dated 30th October), the capital raising implies higher than anticipated working capital requirements and / or slower than expected revenue generation. Argonaut’s valuation decreases to A$0.44 (was A$0.55) after factoring in higher working capital requirements at Karouni and equity dilution. The Company provided an operational update at Karouni, where the plant throughput and metallurgical recoveries indicate the ramp up is now progressing as planned. Whilst the recent commissioning delay, equity raising and resultant share price depreciations are disappointing, we recognise Karouni’s potential as a low cost mine and early but encouraging signs during ramp up. BUY maintained.
Telstra Corporation (TLS)
Telstra Corporation announced that the Company and NBN have signed a Memorandum of Understanding (MoU) to negotiate a significant contract for the Company to support the NBN network build in areas currently covered by its HFC footprint as well as additional work for the Company under NBN's maintenance contracts. Under the MoU, the Company and NBN will negotiate to finalise a contract covering the design, engineering, procurement and construction management of the NBN network in the HFC footprint covered by the existing its HFC network. This contract is expected to be completed early in 2016. It has also been awarded work under two new contracts as one of the network operations and maintenance services providers to NBN with work anticipated to start in early 2016. TLS slid 4 cents to $5.44.
Westfield Corporation (WFD)
Westfield Corporation announced that it has completed the divestment of five assets in the U.S. for $1.1bn. The investor group is a newly formed JV comprising Centennial Real Estate Company as managing member, together with Montgomery Street Partners (an affiliate of Blum Capital Partners) and USAA Real Estate. The Company will retain a 20% non-managing common equity interest. Combined with the recent divestment of Carlsbad, it will realise $1bn in net proceeds from the transactions. Prior to the redeployment of capital, the transactions are expected to initially reduce gearing by 3% and have an annualised dilutionary impact on Funds from Operations of 3.5cps. The transaction settled on 18 December 2015 in the United States. WFD lost 12 cents to $9.58.
Recent Contacts & Presentations
Empire Oil & Gas (EGO), Millennium Minerals (MOY), Geopacific Resources (GPR), Saracen (SAR), Agrimin (AMN), Salt Lake Potash (SO4), Reward Minerals (RWD), Transerv Energy (TSV), Carnarvon Petroleum (CVN), Success Resources (SGU), High Peak Royalties (HPR), Heron Resources (HRR), OBJ (OBJ), Goldfields Money (GMY), Hazer (HZR), MZI Resources (MZI)
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