Market Update & Important Indicators
The Dow Jones Industrial Average rose after the Federal Reserve said it would hold short-term rates steady. The market widely expected the Fed to leave the benchmark federal-funds rate unchanged. Still, stocks were largely unchanged from ahead of the statement, which some analysts said shouldn't come as a surprise after multiple instances when investors were prepared for rate raises and none happened. With just over 200 companies in the S&P 500 reporting, earnings in the index are on track to drop 4% in the second quarter from the prior year, marking the fifth consecutive quarter of contracting earnings, according to FactSet. That is a smaller decline than the 5.3% drop analysts had expected as of June 30 and marks a stronger result than the first quarter, FactSet data shows.
European stocks finished higher, with the Stoxx Europe 600 rising 0.4% to end at 342.74. The Federal Reserve after the close of European trade Wednesday is widely expected to leave interest rates steady. While investors wait for firm word from those global monetary and fiscal fronts, the corporate earnings season has picked up pace.
Japan's bigger-than-expected stimulus package failed to help boost shares in Asia beyond its home market on Wednesday, as China toughed up against speculative trade. The Nikkei Stock Average soared as much as 2.7% during the session, before paring gains to close up 1.7%. A report citing Japanese Prime Minister Shinzo Abe as saying that the planned economic stimulus will be more than double the amount expected by the market, as well as plans by the Bank of Japan to issue 50-year bonds for the first time, lifted broad buying interest in local equities. Nonetheless, the earlier rise in the yen dampened any joy from robust earnings. On Wednesday, the yen whipsawed against rival currencies amid changing expectations from the soon-to-be released stimulus steps. It was last trading lower to the dollar at 105.62. The stimulus news in Japan did little to boost demand for stocks in other markets. South Korea's Kospi fell 0.1%, and Hong Kong's Hang Seng Index ended up 0.4%.
Australia's share market ended nearly flat after inflation data failed to provide clarity on whether the Reserve Bank of Australia will likely cut official interest rates in August. The S&P/ASX 200 finished up 2.2 points, or 0.4%, at 5539.7 on Wednesday. The index started the session higher, taking its lead from U.S. stocks and higher iron-ore prices which boosted the mining sector. However, the local bourse drifted lower during the morning, accelerating its descent after the inflation data. Australia's second-quarter inflation data was expected to show core inflation up 0.4% in the quarter, low enough to justify an interest rate cut in August. But it came in at 0.5%, complicating the decision.
Copper futures closed lower in London, pressured by a stronger dollar ahead of this week's Federal Reserve meeting. The London Metal Exchange's three-month copper contract was 1.62% lower at $4,850/t at the PM kerb close Wednesday. Other base metals were mixed. Aluminium closed flat at $1,582/t, zinc was down 2.5% at $2,170/t, nickel was flat at $10,312/t, lead was down 1.9% at $1,788/t and tin was up 0.2% at $17,680/t.
In this Issue
Independence Group (IGO) | Raising equity to lower the debt burden | HOLD
Market cap $2,431m | Current Price $4.08 | Valuation $3.75
Independence Group (IGO) announced a $280m equity raising at $3.75/sh representing an 8.1% discount to the last closing price. We regard this raising as accretive, given the premium to Argonaut’s previous valuation of $3.60 and the significant reduction to forecast debt drawdown. The Company also released June Q results incorporating FY17 guidance. Production and costs included: 28.5koz gold @ A$1,135/oz AISC at Tropicana (IGO attributable), 2.0kt nickel at A$3.51/lb cash cost at Long and 8.9kt zinc and 3.2kt copper at A$0.02/lb cash cost at Jaguar. At June 30, IGO had $46.3m cash, $271m drawn debt and $279m undrawn debt. Our valuation increased to $3.75 (from $3.60), but we downgrade from BUY to HOLD based on recent share price performance.
Recent Contacts & Presentations
Metro Mining (MMI), Pacific Energy (PEA), Novatti Group Ltd (NOV), Hammer Metals Ltd (HMX), Helix Resources Ltd (HLX), Saracen Mineral Holdings Ltd (SAR), Merdeka Copper Gold (MDKA: IJ), Monument Mining (MMY.V: TSX), Apollo Consolidated (AOP), Botanix Pharmaceuticals (BOT), Sino Gas & Energy (SEH), 4DS Memory Ltd (4DS), Troy Resources (TRY), Gold Road Resources (GOR), Bionomics Ltd (BNO), Orthocell Ltd (OCC), Walkabout Resources Ltd (WKT), Migme Ltd (MIG), Syntonic Ltd (SYT)