Overseas Market Report – Stocks Snap Losing Streak; Retail Sales Eyed
U.S. stocks snapped their losing streak on Friday to post the largest daily gain this month, due in part to an improvement in January retail sales.
U.S. retail sales were up 0.2% in January from December levels. December's sales were revised up to a 0.2% gain from the originally reported 0.1% decline. Economists had predicted sales would show no change. The data was held down by a 3.1% drop in gas station sales (driven by low oil prices) and were helped by strong auto and internet sales.
Consumer sentiment dropped in early in February, according to the University of Michigan survey. The reading of 90.7 was down from 92.0 in January and was below analyst expectations of no change.
Low oil prices drove import prices down 1.1% last month, while export prices were off 0.8% in the month. Year over year, import prices were off 6.2%, while exports prices were down 5.7%.
At the closing bell, the Dow and the S&P 500 were both up around 2.0%, while the NASDAQ was 1.7% higher.
Shares of CBS (CBS) were down 0.9% at Friday close after the firm posted mixed fourth-quarter results. Revenue beat projections, but adjusted operating income was weaker than expected. For 2016, management expects growth across all three revenue sources and margin expansion across the board.
AIG (AIG) reported an ugly fourth quarter, but the biggest negative factor had been previously disclosed. Last month, AIG announced that it would boost reserves by US$3.6 billion as part of its strategic update, which pushed the company to a fourth-quarter loss of US$1.3 billion. Excluding reserve development, results in the company's core property and casualty, or P&C, operations were basically stable, and results in other segments were mixed. Investment income fell 20% year over year, largely owing to a fall-off in returns from alternative investments. The firm also said it has reached an agreement with activist investor Carl Icahn to give him two seats on the board in exchange for not pushing a breakup of the firm. Shares were up 4.9% at the close on Friday.
For Australian ADRs listed on the NYSE, BHP Billiton jumped $1.53 (7.22%) to $22.72, ResMed gained 76 cents (1.33%) to $57.88, Telstra Corporation rose 38 cents (1.94%) to $19.93, Spark New Zealand was up 15 cents (1.41%) to $10.82 and Westpac rose 16 cents (0.79%) to $20.29.
At 8:00 AM (AEDT), the 10-year Treasury note yield was 1.75% and the 5-year yield was 1.21%.
European markets rebounded on Friday.
The FTSE 100, French CAC 40 and Germany's DAX were up 3.1%, 2.5% and 2.5%, respectively.
Japanese shares plunged again on Friday, with the Nikkei 225 falling 4.8%. This capped off the worst week for Japanese stocks since 2008.
Elsewhere in Asia, the Hang Seng was down 1.2% on the day, while the Shanghai Composite shed 0.6%. India's Sensex rose 0.1%.
Australian Market Report – Local Market Expected To Open Higher
Ahead of the local open, SPI futures were 87 points higher at 4,785.00.
Friday 12 February – close. The Australian market started the day in the red, following negative leads from overseas sharemarkets overnight. Local stocks extended their losses in afternoon trade, driven by falls amongst the big banks, with the market closing at intraday lows. Most sectors experienced negative results, with only energy and telecommunication services finishing higher. The Australian dollar depreciated against most major currencies.
The All Ordinaries fell 54.30 points (-1.11%) to 4,816.60 while the S&P/ASX 200 lost 55.80 points (-1.16%) to 4,765.30.
In This Issue
Argonaut Research | Commodity Price Revision
Argonaut has revised its commodity prices (tabled on page 2). Our preferred base metal is zinc based upon steeply declining inventories in H1 FY16 and a high proportion of supply removed from the market. Despite the rapid rise of the Australian domiciled gold producers, they are still trading on reasonable normalised EV / FCF (see below) at spot prices. Iron ore is our least preferred commodity based on stagnating Chinese steel demand and oversupply from seaborne sources. Argonaut’s Hong Kong Metals and Mining coverage remains under review.
Argonaut coverage | Update
A review of companies covered and a change in personnel has resulted in adjustments to our coverage list. This note highlights the stocks affected, including where there has been a change in analyst responsibility. Dropped coverage is effective as at the date of this report. Where recent research notes have been released, links to the latest research have been included in the note.
Tabcorp Holdings (TAH)
Tabcorp Holdings announced that it is to be issued a new NSW Keno Licence extending approval to operate the exclusive NSW Keno business until 2050. The Company operates Keno in NSW under a management agreement with Club Keno Holdings, which is a joint holder of the licence. It will make a payment of $25m to the NSW Government, expected to occur in 2H FY16. An annual fee of $3m will start one year after licence commencement, increasing to $4.5m in 2022, thereafter indexed at 2.5% for the licence term. The extension adds longevity to its portfolio of Keno Licences, with the Vic licence expiring in 2022, Qld in 2047 and ACT in 2064. The licence will issue following the necessary legislative amendments. TAH added 2 cents to $4.15.
Woodside Petroleum (WPL)
Woodside Petroleum announced that the Thalin-1A exploration well in Block AD-7 in the Rakhine Basin has intersected a gross gas column of 64m. 62m of net gas pay is interpreted within the primary target interval. Block AD-7 is located in the Bay of Bengal, 100km offshore of the west coast of Myanmar. Water depth at the Thalin-1A well location is 836m. The well reached a total depth of 3034m, referenced from the rig rotary table. Following drilling, wireline logging was conducted and confirmed the presence of a gas column through pressure measurements and gas sampling. The gas discovery at Thalin-1A follows an earlier gas discovery by the Company at the Shwe Yee Htun-1 well in Block A-6 announced on 4 January 2016. WPL lost 7 cents to $26.61.
Recent Contacts & Presentations
Troy Resources (TRY), Northern Star Resources (NST), Regis Resources (RRL), Medusa Mining (MML), Doray Minerals (DRM), Beadell Resources (BDR), Red 5 (RED), Kingsgate Consolidated (KCN), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), TFS Corporation (TFC), Paragon Care (PGC), Austal (ASB), Orbital Corporation (OEC),Energia Minerals (EMX), Berkeley Energia (BKY) , Finders Resources (FND), 4DS Memory Ltd (4DS) , Bionomics Ltd (BNO)
