Market Update & Important Indicators
U.S. stocks rose Friday as investors settled into heightened expectations that the Federal Reserve will raise interest rates this summer. The gains reversed losses from earlier in the week, which were sparked by comments from Fed officials that put pressure on stocks. Stocks have been stuck in a holding pattern of sorts in recent weeks after their sharp rebound from February lows. Even as many companies beat analysts' lowered earnings expectations, first-quarter results and guidance were gloomy, dampening investor enthusiasm for stocks. Major indexes have posted weekly declines for the past three weeks, but the S&P 500 on Friday snapped that weekly losing streak, gaining 0.3% for the week. On Friday, the Dow Jones Industrial Average rose 0.4%, the S&P 500 gained 0.6%, and the Nasdaq Composite climbed 1.2%. Traders said changing expectations about when the Fed will next raise short-term interest rates have dominated trading this week. Minutes from the Fed's April meeting, released Wednesday, showed that an interest-rate increase is in play for June's policy meeting if the economy keeps improving. Fed-fund futures, used by investors and traders to bet on central-bank policy, showed a 30% likelihood of a rate increase at the Fed's June policy meeting and a 55% likelihood of a rate rise in July, according to data from CME Group, a steep rise from the start of the week. Technology stocks led the S&P 500 higher with a 1.2% gain, and remain up 1.5% month-to-date, the only sector in positive territory in May.
European stocks rallied Friday, recording their second consecutive weekly gain, as investors' appetite for risk returned after a selloff spurred by concerns about the next U.S. interest-rate hike. The Stoxx Europe 600 recovered all of the previous session's losses, rising 1.2% to close at 338.01, marking its best daily gain since April 19, according to FactSet. The index booked a 1% gain over the week. Friday's advance was led by energy, financial and basic materials stocks.
A bounce in oil prices lifted most Asian stock benchmarks Friday, but the prospect of higher U.S. interest rates dragged down smaller markets. Stocks in Hong Kong rose 0.8%, led up by property and energy shares. China Shenhua Energy was up 2.8%. China Resources Land and China Overseas Land & Investment gained 4.9% and 3.4%, respectively. Data earlier this week showed China's home prices continuing to rise in April, buoying the property sector. Energy stocks gained alongside a continued recovery in crude oil prices. Elsewhere, the Shanghai Composite Index was up 0.7% and the Nikkei Stock Average closed up 0.5%. But the Philippine benchmark slumped 1.7%, shares in Vietnam were off 0.5% and Investors in the region are grappling with uncertainties, ranging from the increased likelihood the U.S. Fed will raise interest rates in June, to volatility in the oil market and uncertainty around how Japan's authorities will address yen strengthening. That has weighed on Asian stocks, which have slipped since late April. The MSCI Asia Pacific stock benchmark is trading around levels seen in mid-2014.
Australian shares closed higher, buoyed by a recovery in resources stocks on the back of a rise in oil prices during the session. Ending a volatile week for the market, the S&P/ASX 200 shook off initial weakness in the session to finish up 28 points, or 0.5%, at 5351.3–just shy of the nine-month high reached Tuesday. Despite losses Wednesday and Thursday, the index climbed for a sixth straight week with a rise of 0.4% as it continued to distance itself from mid-February lows.
Copper futures closed slightly lower in London Friday, as the dollar firmed. The London Metal Exchange's three-month copper contract was down 0.01% at $4,589 a metric ton at the PM kerb close, having hit a two-day high earlier in the session at $4,637.50 a ton. The base metals were mixed at the end of the week. Aluminium closed up 0.2% at $1,536 a ton, zinc was up 0.6% at $1,861 a ton, nickel was down 0.6% at $8,500 a ton, lead was down 0.6% at $1,670 a ton and tin was down 0.4% at $16,454 a ton. Additionally, Oil prices edged lower Friday but posted a second straight weekly gain, as traders continued to focus on supply disruptions. U.S. crude for June delivery settled down 0.9% at $47.75 a barrel on the New York Mercantile Exchange. Prices rose 3.3% this week and are up 6.9% in the past two weeks. The June contract expired at settlement Friday. The more actively traded July contract fell 0.5% to $48.41 a barrel.
In this Issue
Ausdrill (ASL) | Walking the talk | BUY
Market Cap $148.3m | Current Price $0.48 | Valuation $0.85
With top line growth a tough ask, ASL’s strategy has been to focus on reducing costs and rationalising the business. The Company is executing, with today’s announcement that Drilling Tools Australia (DTA) is to be sold for $66m in addition to the sale of DT HiLoad and placing EDA on care and maintenance this half. We expect ASL to enter the next upcycle, when it comes, a leaner business. The strengthened balance sheet provides more comfort and flexibility and, in our view, there is deep value on a longer term view. We maintain a buy call on an unchanged valuation of $0.85
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