Market Update & Important Indicators
U.S. stocks edged lower intraday, as Federal Reserve Chairman Jerome Powell conveyed an upbeat picture of the U.S. economy and indicated the central bank remained on track to gradually raise short-term interest rates. But Mr. Powell's comments did little to assuage investors who are concerned that the economy could be growing so fast that it fuels inflation further, potentially forcing the Fed to step in and hasten its pace of interest-rate increases. Those worries already took markets down earlier in February, when the Dow industrials and the S&P 500 tumbled into correction territory for the first time in two years. The Dow Jones Industrial Average fell 299 points, or 1.2%, to 25410 in recent trading, while the S&P 500 shed 1.3%. The Nasdaq Composite declined 0.6%. The U.S. gold price traded lower overnight, slipping 1.1% to close at 1317.70 US$/oz.
European shares close higher, with the Stoxx Europe 600 index ending 0.5% higher at 383.06, helped by comments from European Central Bank President Mario Draghi, who said ample monetary stimulus is still needed. U.K. stocks outperformed, helped by the pound turning lower later in the day against both the dollar and the euro, with the FTSE 100 ending 0.6% higher. Other European indexes perform well, with Germany's DAX closing 0.35% higher and France's CAC 40 up 0.5%.
In Asia, Chinese stocks dropped, with the Shanghai Composite Index retreating 1.1% and the Shenzhen composite down 0.3%. Those moves came as investors continued to absorb the news that the Communist Party plans to remove term limits on the country's presidency at its national congress, scheduled to begin March 5, in a move which could allow Xi Jinping to remain in power for life. Hong Kong's Hang Seng slipped 0.7%, while the Taiwanese Taiex closed 0.2% lower. Selling on the tech-heavy Shenzhen composite and the Taiex came after the tech sector led a broad-based rally in the U.S. on Monday. In Japan, the Nikkei closed with a 1.1% increase as the yen pulled back from some of Monday's gains.
Even with a steady afternoon fade, Australian stocks rose for a fifth day to match winning streaks seen in both December and January. Buoyed again by the major banks and big miners, the S&P/ASX 200 rose 0.2% to 6056.9 amid another flurry of earnings reports and more regional stock gains. Iluka Resources jumped 3.6% to a fresh 4 1/2-year high after reinstating its dividend, while Caltex Australia climbed 4.1% to a two-year best as an update on its restructuring efforts accompanied 2017 numbers.
The London Metal Exchange’s 3-month copper contract traded lower overnight, falling 1.2% to close at $7,021/t. The other base metals finished mixed once more. Tin prices rose 0.4% to 21,820/t, whilst Zinc prices pulled back 1.5% to close at 3,518/t. Aluminium prices added 0.3% to close at 2,172/t. Lead prices lost 0.3% to 2,576/t, whilst Nickel prices fell 0.6% to finish at 13,798/t.
In this issue
Austin Engineering (ANG) | Into the replacement cycle | HOLD
Market Cap $159m | Current Price $0.275 | Valuation $0.270
Much improved market conditions in 2H17 extended into 1H18, where ANG delivered $155m revenue and $12.2m normalised EBITDA, slightly ahead of the $10-12m guidance range. We expect the environment to continue to support further gains in coming years, noting ANG points to a large number of pipeline opportunities in outlook commentary. Our blended valuation of $0.270 (prior $0.265) suggests a hold call remains appropriate pending conversion of opportunities at suitable margins to backfill our FY19+ forecasts.
SCEE (SXE) | Full run-rate | HOLD
Market Cap $174m | Current Price $0.75 | Valuation $0.80
SXE’s 1H18 revenue was broadly in-line with our forecast, although costs were higher than expected resulting in softer than anticipated earnings. The substantially increased revenue highlights the transformational nature of the Heyday acquisition. SXE now operates in the key growth areas of commercial and infrastructure construction, whilst maintaining its presence in resources (which should be seeing increased capex in coming years). Despite an unchanged positive view on SXE’s future growth potential, limited upside to our $0.80 valuation causes us to maintain a hold recommendation.
Recent Contacts & Presentations
Ausdrill Ltd (ASL), Alice Queen Ltd (AQX), 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)
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