Market Update & Important Indicators
Wall Street stocks have finished lower in light pre-holiday trade after Federal Reserve Chair Janet Yellen said the plan to raise interest rates this year was on track. The Dow Jones Industrial Average dropped 53.72 points (0.29 per cent) to 18,232.02 by close on Friday. The broad-based S&P 500 fell 4.76 points (0.22 per cent) to 2,126.06, while the tech-rich Nasdaq Composite Index slipped 1.43 points (0.03 per cent) to 5,089.36. Dr Yellen said delaying a move to raise interest rates "would risk overheating the economy." However, she also warned that the US economy continues to show weakness, with significant job market slack not reflected in the 5.4 per cent jobless rate.
Europe's main stock markets have closed mixed as investors' attention focused to an EU summit on relations with the ex-Soviet states and the Greek crisis as well as US inflation data. In the euro area, Frankfurt's DAX 30 lost 0.42 per cent to 11,815.01 points on Friday and the CAC 40 in Paris dipped 0.07 per cent to end the day at 5,142.89 points compared with Thursday's close. But in London the benchmark FTSE 100 index rose 0.26 per cent at 7,031.72 points, boosted by gains to share prices of heavyweight miners that rallied on Chinese stimulus hopes.
Asian markets have risen following another record close on Wall Street as the likelihood of a US interest rate hike in the near term dwindled, with Tokyo hitting a new 15-year high. Chinese shares were again the stand-out performers on Friday on hopes Beijing will announce fresh monetary easing measures after more disappointing economic indicators. Tokyo reversed a morning sell-off to end 0.30 per cent higher, adding 61.54 points to 20,264.41 – its best finish since April 2000, while Shanghai surged 2.83 per cent, or 128.17 points, to 4,657.60. Hong Kong added 1.70 per cent, or 469.11 points, to close at 27,992.83 and Seoul closed 1.10 per cent up, gaining 23.29 points to 2,146.10.
The Australian market looks set to open lower following falls on Wall Street on Friday. The June share price index futures contract was down nine points at 5,673. The market on Friday finished flat after weakness among the big four banks offset strong gains among energy stocks. The benchmark S&P/ASX200 index was up 2.4 points, or 0.04 per cent, at 5,664.7 points. The broader All Ordinaries index was up 4.6 points, or 0.08 per cent, at 5,668.2 points.
Metals were all down on the LME with the exception of Iron ore 62% Fines, up 3.5% to $59.96/t. Nickel posted the largest decline, down 2.3% to US$12,664/t. Brent crude increased 0.3% to $65.54/bbl. Gold, fell 0.9% to $1,206/oz.
In This Issue
SAR | BUY
Given cash flow generation, exploration upside, growth and sound balance sheet, Saracen (SAR) remains a key pick in the gold space. Strong grades from producing assets and a ~2.4Mt stockpile (by FY end) will ensure competitive costs, high margins in the near to medium term. SAR’s A$20m, seven rig program is continuing with results expected from Karari, Red October (RO) and other prospects in coming months. A successful extensional drilling campaign at Karari will support boosted production at Carosue Dam (to potentially >200koz pa) and lower LOM costs, which should translate to significant share price appreciation. Following retirement of the A$12m debt March Q, the Company’s balance sheet is sound with A$30.2m net cash. The stock compares competitively against peer producers on FF EV / production basis (see Page 3, Figure 2). BUY recommendation and A$0.58 valuation maintained.
Recent Contacts & Presentations
Saracen (SAR), Kibaran (KNL), Sino Gas & Energy (SEH), Rewardle (RXH), Alexium (AJX), Ausdrill (ASL), Tox Free (TOX), OBJ Limited (OBJ), Cash Converters (CCV), Decmil (DCG), TFS Corporation (TFC), Mobile Embrace (MBE), Dacian (DCN), Saracen (SAR), Fertoz (FTZ), Atrum (ATU), Doray (DRM), Buru Energy (BRU), Carnarvon Energy (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), MZI Resources (MZI), High Peak Royalties (HPR), Spookfish (SFI)