Morning Notes

08/08/2018 Argonaut Morning Note

Market Update & Important Indicators

U.S. stocks climbed intraday, with corporate earnings growth lifting major indexes as tariff tensions continue to loom over markets. The Dow Jones added or 0.5%, to 25629, while the S&P 500 gained 0.3%. The broad market index is on track for its fourth consecutive session of gains and is less than 1% away from its January high. The technology-heavy Nasdaq Composite rose 0.3%. While trade concerns continued to linger in the background, strong corporate earnings reports and positive economic data have bolstered stocks. "Management teams so far this earnings season sound very confident," said Robert Hinchliffe, a portfolio manager at PineBridge Investments. Mosaic was among the S&P 500's top gainers, with shares rising 6.5% after the fertilizer maker said higher prices helped boost its sales in the latest quarter. Online retailer Etsy increased its revenue guidance for the year and posted stronger-than-expected quarterly sales growth. The US gold price increased 0.3% to 12105 US$/oz.

German stocks finished higher, reflecting a broadly upbeat European session, as equities in the region took inspiration from gains across the globe, and investors appeared to momentarily set aside anxieties pegged to trade-war tensions. The Stoxx Europe 600 index rose 0.5% to close at 390.49, after finishing down 0.1% on Monday. The index was looking at its best close since late July. The German DAX 30 index advanced 0.4% to 12,648.09, while the FTSE MIB Italy index rallied by 1.3% to close at 21,853.81. France's CAC 40 index rose 0.8% to finish the session at 5,521.31 and the FTSE 100 index climbed 0.7% to end at 7,718.48. Europe picked up the baton from Asia, where stocks rose, and notably in China, as the Shanghai Composite bounced back, gaining 2.7%, after hitting fresh multiyear lows Monday. After an upbeat session on Monday, U.S. stocks extended gains at the open.

In Asia, the Shanghai Composite Index gained 2.7%, more than offsetting Monday's losses. Hong Kong's Hang Seng was up for a second straight day, increasing 1.5%, and Japan's Nikkei rose 0.7%. Asian stocks have been under pressure from investors worried about the impact of an escalating trade dispute between the U.S. and China. The Shanghai Composite is down roughly 16% on the year. Trade continued to loom over U.S. markets, but strong corporate earnings reports and positive economic data have bolstered U.S. stocks. "Management teams so far this earnings season sound very confident," said Robert Hinchliffe, a portfolio manager at PineBridge Investments

Australia, which has outperformed when trade worries have fared up lately, was among the few decliners in Asia. Australia's benchmark was off 0.3% as investors bailed on sales-financing firm Eclipx after it halved its yearly profit outlook. Shares plunged more than 40% to a record low of A$1.65 intraday and closed at A$1.80.

Base metal prices were mostly up on the London Metal Exchange. Nickel recorded a 1.2% gain to 13,763/t whilst tin increased 0.2% to 19,636/t. The 3-month copper contract added 0.6% to 6,143/t, Zinc appreciated 0.9% to close at 2,643/t. Aluminium recorded a 0.1% decline to 2,013/t.

In this issue

Matrix (MCE) | Looking to the future | HOLD

Market Cap $44m | Current Price $0.47 | Valuation $0.50

MCE’s business update confirmed weak FY18 performance, but also provided encouraging signs the revenue diversification strategy is gaining traction. We are expecting improved financial performance from MCE in the coming years, although admit the pace of recovery is hard to predict. This uncertainty is reflected in our little-changed valuation of $0.50 (prior $0.47). There is significant operating leverage in the business as revenue grows, but we believe turnaround evidence is needed to provide more clarity and reduce forecasting risk. At this stage our HOLD call remains appropriate

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