Market Update & Important Indicators
The Dow Jones Industrial Average retreated on Thursday following disappointing earnings reports from a handful of big U.S. companies. Investors were disappointed with the quarterly results from Dow components American Express Co., 3M Co. and Caterpillar Inc., even as many companies continued to surpass the muted expectations of the second-quarter earnings season. The Dow fell 0.7% to 17,732 and the S&P 200 dropped 0.6% to 2,102.
Australia's stock market sank for a second straight day on Thursday as faltering commodity prices continued to weigh on energy and mining shares. Mining heavyweights BHP Billiton and Rio Tinto lost 2.9% and 1.9%, respectively, while iron-ore focused Fortescue Metals Group sank 6%. South32, a mining company recently spun off from BHP Billiton, shed 3.4%. The ASX 200 lost 0.4% to close at 5,590.
Chinese shares notched their sixth straight session of gains Thursday as Beijing-backed funds and buying by large shareholders appeared to support the market's rebound, according to analysts. Hong Kong’s Heng Seng rose 0.5% to 25,399.
Stocks in Europe stumbled Thursday on a set of disappointing corporate earnings. Daily Mail & General Trust PLC led losses. Shares in the U.K.-based media company tumbled almost 8.5% after it warned that its full-year results would be at the lower end of expectations. The FTSE 100 fell 0.2% to 6,655.
Metals on the LME were mostly down. Copper fell 1.64% to US$2.38/lb and nickel lost 0.9% to US$5.16/lb. Gold was also down, dropping 0.3% to US$1090/oz. The AUD/USD is trading at 0.735.
In This Issue
Fortescue Metals (FMG) | HOLD
FMG released June Q results with a strong finish to the financial year, shipping 41.3Mt (attributable) at C1 costs of US$22/wmt. This beat Argonaut’s forecast of 39Mt at US$23/wmt. Impressively, FMG achieved C1 costs of US$19/wmt for the month of June which places the Company in good stead to meet FY16 cost guidance of US$18wmt. Q-on-Q, the balance sheet improved with net debt reducing by ~US$200m to US$7.2b (previously US$7.4b) following further release of working capital from inventories.
Argonaut maintains a HOLD recommendation with a $2.50 price target. While the stock is trading at a significant discount to our target, we believe it will continue to underperform given the near to medium term surplus market conditions.
Recent Contacts & Presentations
Resolute (RSG), Rift Valley (RVY), Pacifico (PMY), Kingsgate (KCN), Troy (TRY), Tox Free Solutions (TOX), GR Engineering (GNG), Austal (ASB), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Karoon Gas (KAR), Austex Oil (AOK), UIL Energy (UIL), Tlou Energy (TOU), FAR Limited (FAR), Cooper Energy (COE), Central Petroleum (CTP), Senex Enrgy (SXY)