Market Update & Important Indicators:
U.S. stocks slipped Monday, dragged down by commodity-linked shares. Major U.S. stock indexes haven't covered much ground in recent weeks. The S&P 500 was on track for its 31st consecutive session without a move of 1% or more in either direction, the longest such stretch in two years. The index hit its 11th record of the year last Monday but has since pulled back. With corporate earnings season winding down, markets have been fluctuating on mixed signals from Federal Reserve officials, reflecting investors' uncertainty over the timing and rationale behind the bank's next steps. Energy shares' moves have been more pronounced, tracking recent swings in oil. Ms. Yellen is slated to speak Friday at the Jackson Hole Symposium in Wyoming. Fed Vice Chairman Stanley Fischer on Sunday struck an optimistic note on the economy's short-term outlook, calling inflation within "hailing distance" of the bank's 2% target and noting economic growth is expected to pick up in the coming quarters.
Asian shares were mixed on Monday, with traders braced for hawkish commentary from U.S. Federal Reserve officials at its annual conference this week. The Nikkei Stock Average traded 0.3% higher after the yen slipped 0.6% against the U.S. dollar in Asian trade. A weaker yen makes Japan's exports more competitive. Investors were also looking ahead to possible comments from Bank of Japan Gov. Haruhiko Kuroda on Tuesday, with analysts expecting him to expand on his earlier remarks that the BOJ has room to cut rates. Elsewhere, the prospect of Fed tightening weighed on equities in the region. Korea's Kospi was off 0.7%. Hong Kong's Hang Seng Index closed relatively unchanged and the Shanghai Composite was down 0.8%. Also weighing on the markets Monday were oil prices, which fell in Asian trade.
Australian shares edged lower Monday, weakening alongside the local currency as investors ponder the possibility the U.S. Federal Reserve is preparing for a rate increase. Despite spending much of the day slightly higher, the S&P/ASX 200 closed down 11.6 points, or 0.2%, at 5515.1. Most sectors fell, led lower by mining and energy stocks. The Australian dollar was also weaker, tracking broad falls among Asian currencies against the U.S. dollar ahead of the Fed's annual meeting at Jackson Hole, Wyo., at the end of the week. Energy stocks sank under the weight of lower crude-oil prices in Asian trade, as investors sought to cash in gains on concerns the push higher by prices of late would encourage more U.S. shale-oil producers to return to the oil fields.
The London Metal Exchange's three-month copper contract settled down 1% at $4,748.50/t. Aluminium closed up 0.1% at 1,656/t, tin closed flat at $18,578/t, zinc fell 0.2% to $2,282/t, nickel fell 0.9% to $10,215/t, and lead fell 1.6% to $1,842/t.
In this Issue:
Fortescue Metals (FMG) | FY16 Financial results – At a glance | SELL
Market cap $14,977m | Current Price $4.92 | Valuation $3.65
FMG increased its net profit after tax by 212% year-on-year despite a 17% decrease in revenue. NPAT of US$985m was 11% higher than Argonaut’s forecast, largely driven by lower cost of goods sold. Lower realised prices were vastly overshadowed by cost reductions with an impressive decrease in the Company’s breakeven price from US$39/dmt to US$28/dmt (62% CFR basis). Debt was decreased by US$2.9b in FY16 with net cash currently standing at US$5.2b.
Troy Resources (TRY) | Raindrops keep falling on my pit | BUY
Market cap $172m | Current Price $0.53 | Valuation $0.68
The impact of heavy rainfall, mechanical breakdowns and issues processing clay ores has seen TRY’s production costs increase at Karouni. At the same time, we see available cash dwindling as debt repayments and commitments to a loss making hedge book limits free cash generation in the September quarter. TRY trades on an undemanding p/NAV of 0.8x (vs sector average 1.3x), the cheapest in the gold sector in our view. We see potential for a short term turnaround as rains abate and if working capital issues can be addressed.
Recent Contacts & Presentations:
Rio Tinto (RIO), Silver Lake Resources (SLR), Lynas Corporation (LYC), Evolution Mining (EVN), Regis Resources (RRL), Xanadu Mines (XAM), Mincor Resources NL (MCR), Carbine Resources Ltd (CRB), Antipa Minerals (AZY), Energia Minerals Ltd (EMX), Pantoro Limited (PNR), Boss Resources Ltd (BOE), Metro Mining Ltd (MMI), Metal Bank Ltd (MBK), Actinogen Medical (ACW), St. George Mining Ltd (SGQ), Resapp Health Ltd (RAP), Orecorp Limited (ORR), Dimerix Limited (DXB), Genesis Minerals Ltd (GMD), Dakota Minerals Ltd (DKO), Breaker Resources NL (BRB), Bard1 Life Sciences Ltd (BD1), Alto Metals Ltd (AME), Birimian Limited (BGS), Antipa Minerals Ltd (AZY), Vault Intelligence Ltd (VLT)