Overseas Market Report – Stocks Rise as Energy Sector Rallies
Stocks were higher as the energy sector rallied.
Oil prices rose this morning after a new report from OPEC that said the cartel expect oil prices to rebound to $70 a barrel by 2020 and a separate report that crude inventories in the U.S. declined last week.
Consumer spending and incomes rose 0.3% in November from the previous month. On a year-over-year inflation adjusted basis, spending is up 2.5% and incomes are up 3.5%. The PCE inflation index, which is the Fed's preferred measure of inflation, was up 0.4% year-over-year in November.
Durable goods orders were unchanged in November from October levels. Excluding aircraft and defense goods, orders were down 0.4% in the month. One bright spot were autos which were up 1.5%.
Consumer sentiment rose in December according to the University of Michigan index. The reading of 92.6 was up from a preliminary December reading of 91.8 and above analyst expectations of 92.0. Sentiment is now at the highest level since July.
New home sales were up 4.3% to a seasonally-adjusted annual rate of 490,000 in November. Sales are up 9.1% year-over-year. The median sales prices rose 6.3% to $305,000 in the month.
At the close the S&P 500 rose 1.2%, the Dow gained 1.1% while the NASDAQ was 0.9% higher.
For Australian ADRs listed on the NYSE, BHP Billiton gained 142 cents (5.79%) to $25.96, ResMed gained 59 cents (1.10%) to $54.12, Telstra Corporation rose 8 cents (0.43%) to $19.70, Spark New Zealand gained 15 cents (1.37%) to $11.13 and Westpac gained 36 cents (1.55%) to $23.53.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.26% and the 5-year yield was 1.72%.
Wide-moat Nike (NKE) continues to leverage technology innovation, global scale, and knowledge of the consumer. In the third quarter, reported revenue rose 4% to $7.69 billion, or a 12% currency-neutral gain. The more fashion-sensitive Converse brand dropped 4% to $398 million in revenue, clipping a percentage point off the companywide top-line growth rate. Although futures orders were previously reported as of the first fiscal quarter as being up 9%, (17% currency neutral), growth came in modestly lower than expected, with North America growing only 9% to $3.5 billion, versus a 14% increase in the futures orders book.
With retail traffic seemingly softer this year across many companies, we aren't surprised that no-moat Bed Bath & Beyond's (BBBY) third quarter (ended November) had some troubles. Noting weak in-store transaction counts, the company has reduced third-quarter comp forecasts to a 0.4% decline, down from 1%-3% growth, and its earnings per share outlook to $1.07-$1.10, down from $1.14-$1.21.
European markets rallied today. The FTSE 100, Paris CAC and Germany's DAX were up 2.6%, 2.3% and 2.3% respectively.
Asian shares were mixed. The Shanghai Composite and Nikkei 225 were down 3.1% and 0.2% respectively and Hang Seng was up 1.0%. India's Sensex gained 1%.
Australian Market Report – Local Markets Are Expected To Open Higher
Ahead of the local open SPI futures were 67 points higher at 5,165.
Wednesday 23 December – close. The Australian market started the day on a high point on the back of positive results from global equity and commodity markets. Local stocks traded well above the flat line throughout the day, with major gains from the big miners and lenders leading the benchmark index to a sixth consecutive gain. There were mixed results from the sectors; materials and energy gained most significantly while health care was the biggest laggard. The Australian dollar appreciated against most major currencies, with the exception of the British pound.
The All Ordinaries rose 25.80 points to 5,193.50 while the S&P/ASX 200 added 25.10 points to 5,141.80.
In This Issue
Argonaut Research | MZI Resources (MZI) | BUY
MZI Resources (MZI) has delivered its first shipment from the Keysbrook mineral sands project a month ahead of schedule. ~1kt of zircon concentrate was sold last week to offtake partner Tricoastal/Wensheng marking the commencement of project cash flow. Both the Keysbrook Wet Concentrator Plant (WCP) and Picton Mineral Separation Plant (MSP) were successfully commissioned within seven days of first ore feed. This is testimony to the simplicity of the project and highlights the advantage of being one of the few mineral projects under development in 2015. MZI is now focused on optimising the project and is exploring a number of low capital options to expand production.
Argonaut Research | Finders Resources (FND) | BUY
Argonaut initiates coverage of Finders Resources (FND) with a BUY recommendation and a $0.23/sh target price. The Company’s 25ktpa copper cathode Wetar project (72% FND) in Indonesia is nearing completion. While the development lead time has been drawn out in the permitting and financing phases, the project is due to commence commissioning in Q1 CY16. FND provides an attractive alternative to the limited number of ASX listed copper producers, boasting respectable production of 28ktpa (incorporating a 3ktpa demonstration plant) at an all-in sustaining cost (AISC) of <US$1.50/lb. Wetar has a Reserve of 8.9Mt at 2.4%, making one of the highest grade open pittable copper development projects globally.
LendLease Group (LLC)
LendLease Group announced the introduction of a new international co-investor to the Barangaroo South precinct. A 25% co-investment stake in Lend Lease One International Towers Sydney Trust (LLOneITST) will be acquired from the Company by one of Asia's largest institutional investors. Following the completion of the sale of a 25% interest in LLOneITST, its equity commitment will reduce from $525m to $175m. Other investors in LLOneITST include The Qatar Investment Authority and the Company's managed Australian Prime Property Fund Commercial. Major tenants of Tower One include PwC, HSBC, Marsh & McLennan Companies and Servcorp. Towers 3 and 1 are expected to complete in FY16 and FY17 respectively. LLC lifted 25 cents to $13.90.
Aurizon Holdings (AZJ)
Aurizon Holdings provided update on a number of business impacts associated with current trading conditions and a challenging near-term outlook for Australian commodities, particularly coal and iron ore. This includes an update on the West Pilbara Iron Ore Project, a revision to above rail coal volume guidance for FY16, more precise guidance on 1H earnings for FY16 and the inclusion of a non-cash impairment charge in the range of $215-240m (before tax) which will be reported in its Half Year 2016 financial accounts. The Aquila Board has carried out a strategic review of the South African projects and decided to place the projects into care and maintenance whilst a divestment programme is initiated. AZJ fell 58 cents to $4.36.
Recent Contacts & Presentations
Empire Oil & Gas (EGO), Millennium Minerals (MOY), Geopacific Resources (GPR), Saracen (SAR), Agrimin (AMN), Salt Lake Potash (SO4), Reward Minerals (RWD), Transerv Energy (TSV), Carnarvon Petroleum (CVN), Success Resources (SGU), High Peak Royalties (HPR), Heron Resources (HRR), OBJ (OBJ), Goldfields Money (GMY), Hazer (HZR), MZI Resources (MZI)