Market Update & Important Indicators:
U.S. stocks climbed intraday, lifted by a series of upbeat earnings reports. The Dow Jones Industrial Average rose 246 points, or 1.2%, to 21010 intraday, on track for its biggest one-day point gain in 2017. The S&P 500 climbed 0.7%, and the Nasdaq Composite added 0.7%, on track to close above 6000 for the first time. The U.S. gold price bucked the trend falling 0.9% to 1,264 US$/oz. Major stock indexes have rebounded in recent sessions as corporate earnings have showed sustained strength among U.S. companies. S&P 500 firms have reported better-than-expected quarterly results, Bank of America Merrill Lynch said this week, with the share of companies beating analysts' estimates for both per-share earnings and sales rising to its highest level since 2012. Solid results from companies could help major indexes keep climbing, investors and analysts say, even as many hold concerns that stock valuations are stretched.
European stocks nudged higher, with French stocks closing at a nine-year high as relief over a potentially market-friendly outcome in France's presidential election continued to boost sentiment. The Stoxx Europe 600 rose 0.2% to 386.91, closing at the highest level since August 2015. The gain comes after the benchmark on Monday jumped 2.1%, driven higher on relief among investors that centrist Emmanuel Macron won the first round of voting in the France's presidential race. Polling shows Macron is heavily favoured to win his runoff election against far-right candidate Marine Le Pen on May 7.
Asian stocks extended gains, tracking Monday's rally in the U.S. and Europe. Japan's Nikkei Stock Average rose 1.1% as currency moves helped export-reliant stocks, while an uptick in sovereign-debt yields helped Japanese insurers, which invest heavily in the sector. Local media reports that there are unlikely to be massive fund redemptions in entrusted investments helped Chinese equities, which had faced pressure recently amid worries that a government clampdown on speculative trading could extend to the country's shadow financing and tighten liquidity. After logging its biggest decline in four months on Monday, the Shanghai Composite Index rose 0.2%. South Korea's Kospi rose 1.1% as consumer confidence increased the most in nearly four years after the removal of President Park Geun-hye. Hong Kong's Hang Seng Index added 1.3%. Thailand's SET fell for the second straight session as consumer, property and construction stocks weigh. The 30-stock benchmark index fell 0.2% to 1562.27. There were 833 losers and 336 gainers in the market. Malaysian stocks rose amid broad Asian gains, with the FTSE Bursa Malaysia Index gaining 0.6% to 1765.80. Australian equity markets were closed for the ANZAC Day Public Holiday on Tuesday.
The London Metal Exchange's three-month copper contract closed up 0.9% at $5,706/t. All other base metals finished higher on Tuesday. Nickel prices rose 0.7% at 9,271/t, lead prices rise 0.3% to 2,169/t, zinc prices rose 0.1% at 2,592/t whilst aluminium prices rose 0.9% at 1,955/t. Tin prices bucked the trend falling 0.1% at 19,675/t.
In this Issue:
Fortescue Metals (FMG) | Under the weather | HOLD
Market Cap $16.8b | Target Price $5.44 | Current Price $5.45
Fortescue Metals (FMG) reported March Q results with 39.6Mt shipped at US$13.05/wmt C1 vs Dec Q 42.2Mt @ US$12.54/wmt (+4% cost increase, -6% shipped Q-o-Q). This was below Argonauts forecast of 42Mt largely as a result of weather related impacts. The Company repurchased a further US$1.0b in debt, reducing gross debt to US$4.3b and net gearing to 22% (from 30% in Dec Q). Year to date production of 125.4Mt puts FMG on target to achieve the mid-upper range of its 165-170Mt guidance. Average realized prices pulled back to US$65/dmt for the quarter representing a 75% price realization on the average quarterly 62% index price of US$86/dmt. Chinese steel de-capacity programs and weaker demand will continue to weigh on iron ore prices. We downgrade our price target to $5.44ps ($6.04ps prior) and upgrade our recommendation to HOLD (from SELL) due to recent stock weakness.
Recent Contacts & Presentations:
Metro Mining Ltd (MMI), Tox Free Solutions Ltd (TOX), St George Mining Ltd (SGQ), Venturex Resources Ltd (VXR), Creso Pharma Limited (CPH), Sino Gas & Energy Holdings Ltd (SEH), Orecorp Limited (ORR) Doray Minerals Limited (DRM), Capricorn Metals Ltd (CMM) Independence Group (IGO), Cardinal Resources Limited (CDV), Metal Bank Ltd (MBK), MOD Resources Ltd (MOD) Quintis Ltd (QIN), Regis Resources Ltd (RRL), Apollo Minerals Ltd (AON), Ironbark Zinc Ltd (IBG), Sovereign Metals Ltd (SVM), Pilbara Minerals Ltd (PLS), Laconia Resources Ltd (LCR), Hazer Group Ltd (HZR), Transerv Energy Ltd (TSV), Ausquest Ltd (AQD), Quintis Ltd (QIN), Paradigm Biopharma Ltd (PAR), Pharmaust Ltd (PAA)
Please read Argonaut's Important Disclaimers & disclosures