Market Update & Important Indicators
U.S. stocks rose intraday, putting major indexes on track to snap their recent run of losses, as concerns subsided over whether the Federal Reserve will have to ramp up its pace of interest-rate increases. Stocks have fluctuated wildly this week, highlighting the market's fragility as investors continue to assess the quickening pace of economic growth and the prospects of the Fed's tightening efforts. Investors have had to balance that unease against the fact that many companies are posting their best earnings in years. The Dow Jones Industrial Average gained 165 points, or 0.7%, to 24962 after rising more than 350 points earlier in the session. The S&P 500 added 0.5%, while the Nasdaq Composite rose 0.1%. The Wall Street Journal Dollar Index, which measures the currency against a basket of 16 others, fell 0.4% to 83.58. The greenback fell broadly, including declines against the euro, the yen and the British pound. The U.S. gold price traded higher overnight, gaining 0.6% to close at 1331.40 US$/oz.
European stocks closed slightly lower, after paring losses into close as U.S. stocks rebounded after upbeat data on the labor market. Stocks had opened in deep negative territory, tracking late-session losses in the U.S. on Wednesday that came after minutes from the Federal Reserve's meeting last month suggested more interest-rate hikes are in the pipeline. Stoxx Europe 600 index fell 0.2% to close at 380.34, after trading as low as 376.92 earlier in the day. Germany's DAX 30 index dropped 0.1% to 12,461.91, while the U.K.'s FTSE 100 slid 0.4% to 7,252.39. France's CAC 40 ended 0.1% higher at 5,309.23.
Asian stocks widely fell, following the late slide seen in the U.S. after the FOMC minutes. It continued back-and-forth and more volatile trading this month in the wake of still rising bond yields in the U.S. and Europe. Tokyo and Hong Kong stocks both saw 1% declines amid a rebounding yen and Wednesday's 2% jump for the Hang Seng — while indexes in South Korea, Taiwan and Singapore fell at least 0.5%. But Chinese equities logged 2% gains in that market's reopening following the week-long Lunar New Year break. And New Zealand's benchmark jumped 0.8% as a2 Milk popped a further 10%.
Australian stocks saw another up-and-down session amid a still-heavy batch of financial results, but the market was able to buck the region's broader weakness. Following a midday fade, the S&P/ASX 200 finished up 0.1% at 5959.9, its highest close in more than two weeks. The consumer discretionary sector led with a jump of 1.1% as Crown Resorts, Flight Centre and Nine Entertainment were each lifted by earnings reports. Likewise, Qantas Airways jumped 5.9%. Meanwhile, the heavily weighted major banks managed gains, countering weakness in the energy sector as oil futures slipped further in Asian trading.
The London Metal Exchange’s 3-month copper contract traded higher overnight, adding 0.6% to close at $7,162/t. The other base metals finished mixed. Tin prices fell 0.3% to 21,708/t, whilst Zinc prices closed 0.1% higher at 3,572/t. Aluminium prices pulled back 0.4% to close at 2,202/t. Lead prices slipped 0.4% to 2,537/t, whilst Nickel prices slid 0.1% to finish at 13,787/t.
In this issue
Matrix (MCE) | Sustained tough market conditions | SELL
Market Cap $61.4m | Current Price $0.655 | Valuation $0.46
For MCE interim results were subdued as expected, reporting an underlying EBITDA loss of $2.6m on $11.9m revenue. The Company is responding to tough market conditions by diversifying its product offering, however the rate of penetration of new markets is uncertain making forecasting difficult. Recent share price gains on the back of a rise in the oil price is unwarranted in our view and has taken the price well above our $0.46 DCF valuation. This has caused us to downgrade to a sell (previously hold) on valuation grounds.
Peet (PPC) | Set for a strong 2H | BUY
Market Cap $662m | Current Price $1.35 | Valuation $1.50
A delay in settlements in 1H18 impacted revenue, but it sets PPC up with a record number and value of contracts on hand for the 2H. The 1H18 EBITDA of $41.7m and margin of 33% was aided by price growth in the VIC portfolio, while NPAT of $21.9m was near our number following a lower interest charge. With a large, diversified land bank, a number of projects commencing development, and a strong balance sheet providing funding flexibility, we believe PPC will continue to grow into FY19. Buy maintained on a $1.50 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)