Market Update & Important Indicators:
U.S. stocks slid intraday, pressured by further declines in technology and financial shares. The Dow Jones Industrial Average had swung between small gains and losses for much of the session before turning firmly lower in the final hour of trading as losses accelerated in the tech sector. The blue-chip index fell 345 points, or 1.4%, to 23858, while the S&P 500 slipped 1.7%, and the tech-focused Nasdaq Composite declined 2.9%. The S&P 500's technology sector dropped 3.4%, suffering the biggest losses of the index's 11 major segments. Nvidia, which has made a broad push to bring its computing platform into self-driving cars, was the worst performer in the broad index after the chip company said it will temporarily halt testing of its driverless technology on public roads following the fatal crash of an Uber Technologies autonomous vehicle. The U.S. gold price fell overnight, dropping 0.6% to finish at 1,344.50 US$/oz.
European shares closed sharply higher, with the Stoxx Europe 600 index up 1.2% at 367.57, tracking U.S. stocks as fears about U.S.-China trade tensions ebb. Germany's DAX ended up 1.6%, France's CAC 40 up 1% and the U.K.'s FTSE 100 up 1.6%. Spain's IBEX 35 ended up 1% and Italy's FTSE MIB up 0.9%.
The start-of-week global stock rally continued, with Asia-Pacific equities building on Monday afternoon gains and U.S. markets poised to rise further. Last week's stock selloff was sparked by fears of a U.S.-China trade war, but those worries have eased. Following a 3% surge on Wall Street, Asian stock benchmarks were higher across the board. Japan led the way with the Nikkei closing up 2.7%, as it continued to recover from Friday's 4.5% slide. Beyond the broad improvement in sentiment, Japanese stocks were also helped as the yen continued to pull back and concerns about domestic politics eased. Former Ministry of Finance official Nobuhisa Sagawa told Parliament that Prime Minister Shinzo Abe didn't order officials to alter documents in a disputed sale of government land. Small-cap benchmarks in China continued to rise strongly. After turning an early 1.9% drop Monday into a 3.2% gain, the startup-heavy ChiNext Price Index rose a further 2.6%. Investor apprehension about a potential trade war between Washington and Beijing is receding after word that negotiations have started to improve U.S. access to China's mainland markets.
Australian stocks were able to reverse Monday's decline amid broad gains after Wall Street's 3% pop. The S&P/ASX 200 advanced 0.7% to 5832.30 after notching a 5 1/2-month closing low Monday. The materials and health-care sectors rose more than 1% while consumer discretionary jumped 1.6%. But financials continued to underperform, rising just 0.2%.
The London Metal Exchange’s 3-month copper contract rose overnight, jumping 0.71% at 6,649/t. Most of the other base metals also increased overnight. Zinc prices extended their gains, rising 0.7% to 3,288/t, whilst tin prices jumped 0.1% to 20,945/t. Nickel prices rose 0.3% to 12,948/t, whilst lead prices were the biggest base metal gainer overnight, increasing by 0.8% to 6,607/t. Aluminium prices were the only base metal to decline, shedding 0.4% at 2,018/t.
In this issue:
Alice Queen Limited (AQX) | Site visit to Horn Island | SPEC BUY
Market Cap $20m| Current Price $0.04
Alice Queen (AQX) is rapidly progressing its Horn Island gold project located in the Torres Straight in Queensland. AQX is focussing its efforts on resource expansion drilling at the historic pit on Horn Island which currently contains 375koz of Inferred Resources. AQX is mid-way through a drill-out of the historic lodes with an Exploration Target of between 800-880koz for the pit area. Exploration is also focussing on greenfields targets adjacent to the main pit areas including the Southern Silicified Ridge (SSR) ~2km to the south-west of the main pit area. Recent rock-chipping and mapping at SSR has identified surface mineralisation traceable over a strike extent of 3km. Recent drilling has confirmed the presence of mineralisation at depth at SSR with the remainder of results expected imminently. AQX’s believes the Horn Island deposit forms part of a larger 40km structural corridor which remains largely untested by modern exploration methods. We assign a Speculative Buy recommendation.
OZ Minerals (OZL) | Avanco Takeover – A regional play in Carajás | BUY
Market Cap $2,688m | Current Price $9.10 | target Price Under Review
OZ Minerals (OZL) has made an off-market takeover offer for Avanco Resources (AVB, not covered) comprising 8.5¢/sh cash and 0.009 OZL shares for every AVB share (50:50 cash/scrip). This values AVB at 17¢/sh or $418m which is a 119% premium to the company’s 1-month VWAP. While this represents a significant premium to the last price of 7.7¢/sh, OZL is buying a large portfolio of complementary copper/gold assets and will attain a foothold in a proven IOCG district of Carajás in northern Brazil. Our modelling indicates that OZL can fund the acquisition from existing cash whilst still funding the remaining $808m for the Carrapateena project and maintaining dividends. BUY recommendation.
Recent Contacts & Presentations:
ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4), Golden Mile Resources Ltd (G88), NTM Gold Ltd (NTM), Ausmex Mining Group Ltd (AMG), Matrix C&E Ltd (MCE), Austal Ltd (ASB), Decmil Group Ltd (DCG), Ventnor Resources Ltd, 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)