Morning Notes

13/07/2017 Argonaut Morning Note

Market Update & Important Indicators
U.S. stocks rallied after Federal Reserve Chairwoman Janet Yellen addressed a slowdown in inflation. In testimony on Capitol Hill, Ms. Yellen said she expects consumer prices to allow the central bank to keep gradually raising interest rates, but that the Fed would alter its plans if weak inflation proved more persistent. Ms. Yellen's comments suggested that the Fed might be more cautious with future rate increases. Consumer-price index data for June is scheduled for release on Friday. The Dow Jones Industrial Average was up 0.6% in the last half-hour of trading, after hitting a new intraday high early in the session. The S&P 500 climbed 0.8% -- with all 11 sectors rising -- and the Nasdaq Composite advanced 1%. The U.S. gold price once again rose overnight, moving 0.2% to finish at 1,220 US$/oz.

European stocks rallied the most since April after U.S. Federal Reserve Chairwoman Janet Yellen said interest rates don't have to rise all that much further. A rally in oil stocks and a well-received trading update from Burberry also helped drive markets higher. The Stoxx Europe 600 index jumped 1.5%, marking its highest close in two weeks and its biggest one-day percentage gain since April 24, according to FactSet data. The pan-European benchmark was sent to intraday highs after the release of prepared congressional testimony by the Fed's Yellen. She said interest rate increases will be gradual, but that "the federal-funds rate would not have to rise all that much further to get to a neutral policy stance." Markets latched onto the latter part of that statement, seen as alleviating fears the chairwoman would strike a more hawkish tone. Yellen was still testifying before the House Financial Services panel at the time of the European market close.

Most Asian stock markets struggled Wednesday following start-of-week gains, with currency headwinds hitting Japan. Japan's Nikkei Stock Average fell 0.5% after two days of gains as the yen rebounded from two-month lows against the dollar. But Hong Kong's benchmark rose 0.6% after earlier hitting a two-year intraday high. Oil shares largely managed to rise amid gains in crude prices both overnight and during Asian trading following a bullish U.S. inventory reading. Tech also fared well, with Samsung up 1.8% and Taiwan's Largan rising 2.7% amid another record session. The Shanghai Composite Index ended down 0.2%.

Australian shares fell on Wednesday, reflecting investor caution as central bankers in North America prepare to provide new clues around the direction of monetary policy. The S&P/ASX 200 index closed down 1%, with weakness among financial stocks including Commonwealth Bank of Australia more than offsetting gains in the resources sector. CBA dropped 1%, with Westpac Banking Corp. and National Australia Bank Ltd. also lower.

The London Metal Exchange's three-month copper contract gained 0.6% overnight to close at $5,880/t. The other base metals finished mostly higher. Nickel prices rose 0.8% to 9,160/t, whilst zinc prices rose 0.4% to 2,831/t. Lead prices added 1.0% to 2,307/t, and tin prices jumped 0.7% to 20,020/t. Aluminium prices bucked the trend and finished down 0.6% for the day at 1,872/t.

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