Market Update & Important Indicators
The Dow Jones Industrial Average and S&P 500 rallied for a second consecutive session, erasing their losses for the week. Stocks have been under pressure this month amid signs of a pickup in long-dormant inflation and worries that solid U.S. economic growth could spur the Federal Reserve to raise interest rates more times than anticipated heading into 2018. Major indexes tumbled 10%, falling into correction territory earlier this month for the first time in two years before recovering some of those losses. Traders said they expected stock and bond moves to be relatively quiet in the next couple of trading sessions ahead of Fed Chairman Jerome Powell's first monetary policy update to Congress next Tuesday. The Fed held short-term interest rates steady in January, but investors widely expect the central bank to raise rates following its March meeting. They are still trying to gauge whether that will be one of three or four increases this year. The U.S. gold price traded slightly lower to end the week, falling 0.2% to close at 1328.20 US$/oz.
European stocks ended a bouncy session slightly higher, tracking gains for U.S. stocks as traders waded through a stream of corporate updates. After shifting between small gains and losses through the day, the Stoxx Europe 600 index ended 0.2% higher at 381.16. That helped swing the pan-European benchmark into positive territory for the week, ending with a 0.1% weekly gain. France's CAC 40 closed up 0.2% at 5,317.37, while Germany's DAX 30 index rose 0.2% to 12,483.79. Underperforming the major European indexes, the U.K.'s FTSE 100 dropped 0.1% to 7,244.41.
There were strong gains for much of Asia as the market continues to heal after the swoon which greeted global equities earlier this month. Indexes in Taiwan and South Korea closed with gains of more than 1% and Hong Kong's Hang Seng is trying to do the same. The regional soft spot was Shenzhen, after Chinese stocks broadly climbed 2% Thursday in their first day of trading after Lunar New Year. A 1.5% rise gave South Korea's Kospi its best day since Oct. 10. China's Shenzen A-Share index was up 0.2%. An afternoon rally allowed the Nikkei to finish near session highs, overcoming overnight strength in the yen to log its first consecutive weekly advance in 3 ½ months. The benchmark rose 0.7% to 21892.78, led by a 3.5% jump in oil/coal names on rebounding commodities prices.
Australian stocks capped their best week since October with the third-biggest gain of 2018. The S&P/ASX 200 rose 0.8% to 5999.80, putting the week's climb at 1.6%. The materials sector climbed 1.5%, with BHP Billiton rebounding that much and Rio Tinto gaining almost 1%. Meanwhile, CBA advanced 1.1% as the country's biggest bank laid out its defence to a government-led lawsuit into alleged compliance shortcomings.
The London Metal Exchange’s 3-month copper contract traded lower overnight, shedding 0.9% to close at $7,095/t. The other base metals finished mixed. Tin prices gained 0.3% to 21,782/t, whilst Zinc prices closed 0.5% lower at 3,553/t. Aluminium prices pulled back 1.5% to close at 2,169/t. Lead prices added 0.1% to 2,533/t, whilst Nickel prices slid 0.5% to finish at 13,723/t.
In this issue
Pacific Energy (PEA) | Looking for a spark | BUY
Market Cap $200m | Current Price $0.54 | Valuation $0.70
PEA’s 1H18 EBITDA of $21m on $30m revenue was in-line with guidance and forecasts. The Company has reaffirmed full year guidance for $43-44m EBITDA with recently installed capacity coming on-line in the 2H. Recently, concern has centred on PEA’s long-term growth potential after losing out on a spate of newly awarded contracts and slow progress in Africa. However, we believe the current EV of circa $240m, trading on a 5.3x FY19 EBITDA multiple, to be undemanding for a business with the consistency that PEA offers. Therefore, we upgrade to a BUY, on a revised $0.70 valuation (prior $0.67).
Recent Contacts & Presentations
PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SEH), Australis Oil & Gas Ltd (ATS), Explaurum Ltd (EXU), Whitebark Energy Ltd (WBE), Atrum Coal Ltd (ATU), Melbana Energy Ltd (MAY), Genesis Minerals Ltd (GMD), Proteomics International Laboratories Ltd (PIQ), Ramelius Resources Ltd (RMS), MOD Resources Ltd (MOD), Greenland Minerals & Energy Ltd (GGG), Walkabout Resources Ltd (WKT), Marindi Metals Ltd (MZN), Volt Power Group Ltd (VPR), PharmAust Ltd (PAA), Alice Queen Ltd (AQX), Jervois Mining Ltd (JRV), St George Mining Ltd (SGQ), Overland Resources Ltd (OVR)
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