Market Update & Important Indicators:
U.S. stocks stalled Friday, sending major indexes to weekly losses following one of the busiest periods of the first-quarter corporate earnings season. Stocks struggled for traction at the start of the week, pressured by selling in government bonds that pushed the yield on the 10-year U.S. Treasury note above 3% for the first time since January 2014. A string of mixed earnings reports weighed on the stock market. The Dow Jones Industrial Average fell 11 points, or less than 0.1%, to 24,311 on Friday. The S&P 500 edged up 3 points, or 0.1%, to 2,670, and the Nasdaq Composite added 1.12 point, or less than 0.1%, to 7,119.80. All three indexes posted weekly losses, with the Dow industrials losing 0.6%, the S&P 500 shaving off less than 0.1% and the Nasdaq falling 0.4%. With more than half of S&P 500 firms having posted first-quarter results, the broad index is on track to post year-over-year earnings growth of 23% for the latest quarter, according to FactSet estimates. That has helped reassure investors that corporate profits remain on solid footing. Although many warn that stock gains could stall, especially if bond yields continue their recent climb. The US gold price was up overnight by 0.5% to finish at 1,322.60 US$/oz.
European shares pared losses to close 0.23% ahead as gains for oil and satellite companies eclipsed losses for Swedish household-appliance maker Electrolux. The Stoxx Europe 600 gained 0.89 points to 384.64, while Germany's DAX lifted 0.6% and France's CAC-40 advanced 0.5%. Finnish oil refiner Neste was the largest riser, up 10% following upbeat first-quarter numbers on Thursday.
Asian stocks rose Friday amid easing geopolitical risks in the region. China's Shenzhen A-Share index rose 0.3% after a fall of over 2% Thursday. Hong Kong's Hang Seng rose by 0.9% and South Korea's Kospi index rose 0.7%. Japanese markets barely budged as the Bank of Japan made no changes to its interest rates or bond-buying program. The Nikkei 225 ended the day up 0.7%.
Australian stocks rose strongly finishing at session highs amid an afternoon uplift for many Asia Pacific markets following a solid start. The S&P/ASX 200 rose 0.7% to 5953.6, its 3rd gain in 4 days and capping a 4th-straight winning week, the longest run since December. Still, the index is down 1.8% for the year. Utilities stocks jumped 2.6% on the overnight pullback in bond yields, their best day since February 2017. But financials rose just 0.2% and earlier hit an 18-month low.
Base metals were mostly down on Friday. The London Metal Exchange’s aluminium price fell 2.4% to finish at 2,222 US$/t, while the nickel price was down 2.5% to finish at 13,831/t. Tin lost 2.4% to close at 21,041/t, and the 3-month copper contract was also down 2.5%, ending at 6,759/t. Lead was the only commodity to gain on Friday, advancing 0.6% to 2,345/t.
In this issue:
Pacific Energy (PEA) | A broader offering | BUY
Market Cap $232m | Current Price $0.54 | Valuation $0.80
A 52MW EPC contract awarded to newly acquired Contract Power by Mineral Resources (ASX:MIN) demonstrates the expanded capabilities, broader relationships and additional sectors accessible to the combined PEA business. We believe PEA is strongly positioned to add to a portfolio of installed capacity that is now approaching 400MW, and are less concerned that recent awards have gone elsewhere during a highly competitive period. Visibility via a weighted average contract duration of >4 years and undemanding trading multiples underpins our BUY call on an unchanged $0.80 valuation.
Sandfire Resources (SFR) | Life out to 2022 | SELL
Market Cap $1,322m | Current Price $8.36 | Valuation $7.90
Sandfire Resources (SFR) released March Q results with 15.5kt copper and 10.9koz gold production at C1 costs of US$0.97/lb versus Argonaut’s forecast of 16.0kt and 8.5koz at US$0.95/lb. SFR’s cash balance continues to increase, up $24m to $188m at 31 March. The mine life at DeGrussa has been extended by ~6 month out to CY22 with the incorporation of orebody extremities. Each additional year’s production has a significant impact on Argonaut’s model, adding ~17% to our NAV10. We downgrade to SELL based on recent share price performance.
Recent Contacts & Presentations:
Gold Road Resources (GOR), Global Energy Ventures (GEV), Advanced braking technology (ABV), Fortescue Metals Group (FMG), Helix Resources (HLX), Pantoro Limited (PNR), Alt Resources Ltd (ARS), Coziron Resources Ltd (CZR), 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)