Overseas Market Report – U.S. Stocks Finish Slightly Higher
U.S. stocks pared some early losses to finish slightly higher Monday as crude-oil prices staged a modest rebound.
The U.S. oil benchmark briefly fell below US$35 a barrel but pared most of its loss. West Texas Intermediate crude-oil futures trading on the New York Mercantile Exchange were attempting a modest rebound after six-days of losses as were Brent-crude futures.
At the close the Dow, S&P 500 and NASDAQ were up 0.6%, 0.5% and 0.4%, respectively.
For Australian ADRs listed on the NYSE, BHP Billiton slipped 14 cents (0.59%) to $23.67, ResMed added 35 cents (0.63%) to $55.66, Telstra Corporation gained 20 cents (1.09%) to $18.62, Spark New Zealand lifted 7 cents (0.67%) to $10.53 and Westpac declined 18 cents (0.81%) to $22.10.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.23% and the 5-year yield was 1.65%.
Newell Rubbermaid (NWL) confirmed it is buying Jarden (JAH) for US$13 billion. The deal brings together a large number of consumer brands from Crock-Pot to Sharpie to Cephalon under one roof.
European markets gave up early gains to move lower. The FTSE 100, French CAC 40 and Germany's DAX were down 1.3%, 1.7% and 1.9%, respectively.
Asian markets were mixed. The Shanghai Composite climbed 2.5%, while the Nikkei 225 was down 1.8% and the Hang Seng was off 0.7%. India's Sensex was 0.4% higher.
Australian Market Report – Local Market Expected To Open Lower
Ahead of the local open, SPI futures were 7 points lower at 4,914.
The Australian sharemarket started the week sharply lower with the downward trend continuing throughout Monday, extending its losing streak to the fifth consecutive session. The big four lenders experienced heavy losses, all lower by around 2 per cent; while resource stocks were also hit hard as oil prices plunged to a new record low. All sectors finished in the red, with energy being the biggest laggard. The Australian dollar appreciated against most major currencies.
The All Ordinaries slumped 96.70 points to 4,981.90 while the S&P/ASX 200 dropped 100.90 points to 4,928.60.
In This Issue
Argonaut Research | Austal (ASB) | BUY
ASB expects FY16 EBIT from the US shipyard to be lower than FY15 as a result of pressure on margin, which is expected to be in the range of 4.5-6.5%. We have reduced our short-term US forecasts, but maintain longer term expectations as it is still early days in the LCS programme. ASB is also well positioned to win work in Australia under a local ship build programme and has shown it can be competitive building vessels for export from Henderson. The share price fall is overdone and we maintain our buy call.
Argonaut Research | Independence Group (IGO) | BUY
Independence Group (IGO) released a BFS level optimisation study on its newly acquired Nova Ni/Cu project in Western Australia. Impressively, the Company has increased project NPV by 36% on the original BFS conducted by previous owner Sirius Resources. Nova boasts forecast steady state cash costs of $1.83/lb, making it the fifth lowest cost nickel operation globally. The project is on budget with estimate capex of $443m and ahead of schedule on both mine and infrastructure development.
Suncorp Group (SUN)
Suncorp reported that the increased cost of settling claims following 2014 record run of natural hazard events, combined with the lower Australian dollar, would impact the General Insurance margin for the half year to 31 December 2015. As a result, the underlying ITR is expected to be around 10% for the half year to 31 December 2015. The underlying ITR for the full year would be supported by increased claims management and pricing initiatives, as well as the Group's Optimisation program which is on track to deliver $170m of benefits in the FY2018. SUN lost $1.28 to $11.77.
Graincorp announced expansion of its grain origination footprint in Canada, through the establishment of a JV with Zen-Noh Grain Corporation, a subsidiary of major Japanese agricultural cooperative Zen-Noh (National Federation of Agricultural Cooperative Associations). The Company will hold a 50% share in the JV, which will be based in Calgary, Canada and plans to operate grain receival sites across Alberta and Saskatchewan. To support the start-up phase, including construction and commissioning of the sites, it will contribute CA$30m over the next 2 years, while the JV will source additional funding from financial institutions of CA$60m. Construction is expected to be staged progressively from the second half of FY16 through to the end of FY18. GNC fell 7 cents to $7.90.
Recent Contacts & Presentations
Tox Free Solutions (TOX), AWE Limited (AWE), Ausdrill (ASL), GR Engineering (GNG), Medusa (MML), Resolute (RSG), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), FAR Limited (FAR), Central Petroleum (CTP), Senex Energy (SXY)