Market Update & Important Indicators
U.S. stocks declined sharply, with the Dow Jones Industrial Average accelerating losses in a volatile trading session that saw the benchmark briefly plummet more than 1,000 points. The blue-chip benchmark dropped as much as 1,089 points in the first six minutes of trading before partly recovering. The Dow's tumble marked its largest one-day point decline ever on an intraday basis, as intensifying growth fears sparked steep stock-market losses world-wide. At the end of the day the Dow had lost 588 points, or 3.6%, to close at 15,871, while the S&P 500 dropped 78 points, or 3.9%, to 1,893.
The dollar weakened against its main rivals as analysts say a selloff in U.S. stocks has all but ruled out the possibility of an interest-rate increase by Federal Reserve policy makers next month. The dollar has been weakening against the currencies of major industrialized nations since Wednesday, when minutes from the last Fed meeting showed that several expressed doubt that inflation was rising fast enough to satisfy the conditions for a rate hike. The Fed next meets in mid-September. Meanwhile, the deepening rout in global stocks and commodities sent investors piling into the safe harbour of U.S. government bonds Monday, sending the yield on the benchmark 10-year note below 2% for the first time since April.
The pan-European Stoxx Europe 600 closed 5.3% lower, the biggest one-day decline since December 2008. The index is now slightly lower so far in 2015, after a massive rally sparked by the European Central Bank's stimulus program melted away. Germany's DAX fell 4.7% and has now lost more than 20% since its April peak, meaning the index has entered a so-called bear market. Germany's stock market, which contains many car makers and industrial firms with a big chunk of their sales in China, has been among the worst-hit by the recent selloff. The U.K.'s FTSE fell 4.7% to its lowest close since late 2012. Mining stocks, which are highly sensitive to fears of waning Chinese demand, bore the brunt of the selloff. Basic resources companies on the Stoxx Europe 600 fell 9.3%.
China's stock markets suffered their sharpest daily fall since the global financial crisis on Monday, with the government withholding support at a time when investors world-wide have been rattled by volatile selling in China and a slowdown in its economy. The Shanghai Composite Index's loss of 8.5% by Monday's close was its daily percentage decline since February 2007. Today's performance reminded investors of an 8.5% drop on July 27, when worries mounted that authorities were pulling back on measures to prop up the market. Asia-Pacific markets from Japan to Australia slid more than 4% and a number of regional currencies fell to fresh multiyear lows.
Commodities were not spared the rout either. Base metals all declined on the LME overnight, with copper losing 1.9% and nickel tumbling 6.8%. Brent crude dropped 6.6% to $42.48/bbl, while WTI fell 5.3% to 38.09/bbl. Gold dropped slightly to $1,155/oz. The sting is eased somewhat by the declining A$, which lost a further 0.3% to US$0.713 overnight.
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Austin Engineering (ANG) | BUY
Given guidance, there was little in the way of surprises in ANG’s FY15 result. Underlying EBITDA of $15.0m was similar to FY14’s result – a level which ANG believes is its low point. The balance sheet was stretched at financial year end, and a $31.6m equity raise and a $20m subordinated loan in July subsequently alleviated some of the pressure. An earnings recovery is proving a long, hard road, but we believe ANG to be undervalued on a longer term view. With balance sheet risk reduced we maintain our buy call.
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