Market Update & Important Indicators
U.S. stocks climbed Thursday after the Bank of England hinted that it would launch fresh stimulus next month and as stronger-than-expected earnings lifted bank shares. The Dow Jones Industrial Average and the S&P 500 were trading near record intraday highs and were on pace for a fifth-consecutive session of gains. Both indexes are now up roughly 6% for the year. The Nasdaq Composite was also trading higher. The Bank of England's rate-setting committee voted Thursday to keep its benchmark lending rate steady at 0.5%. Global stocks briefly pared gains after the announcement. But the BOE also said most of its members expect a loosening of policy in August – a reassuring sign to investors who have been pinning their hopes on further central bank stimulus in recent weeks.
Stocks across Europe advanced Thursday, remaining on higher ground after the Bank of England surprised markets by holding its key interest rate unchanged, in the central bank's first monetary-policy decision after the U.K.'s historic Brexit vote. The Stoxx Europe 600 closed 0.8% higher, for a fifth gain in six sessions. The basic materials, financials and oil and gas groups were the best performing, FactSet data showed. In a widely unexpected move, the Bank of England left unchanged its key interest rate at a record low of 0.5%. The U.K's FTSE 100 ended down 0.2% after swinging between small gains and losses into the close.
A weeklong Asian stocks rally slowed Thursday, with investors waiting to see whether a rate decision by the Bank of England would make or break equity gains. Japan's Nikkei Stock Average kept its place as regional outperformer on continued hopes for stimulus. The benchmark ended up 1%, bringing its gain for the week to 8.5% and keeping it on track to post the best weekly performance so far this year. The yen weakened as investors sold haven assets. In the rest of Asia Pacific, Korea's Kospi gained 0.2%, Hong Kong's Hang Seng Index finished up 1.1%, and China's Shanghai Composite Index ended down 0.2%.
Australian shares neared a 2016 high on Thursday, as a continued recovery by the major banks helped drive the market to a sixth-straight gain and offset weakness in resources stocks. The local market edged higher after news the economy created more full-time jobs in June, even as unemployment ticked higher to 5.8%. Sentiment has perked up in recent sessions after last week's slide in the wake of Britain's vote to exit the European Union, in part as investors look to governments and central banks to reassure markets and provide stimulus. Some economists see room for the Reserve Bank of Australia to cut further its key cash rate from a record low 1.75%. Closing at the highest level since Aug. 11, the S&P/ASX 200 climbed 23.1 points, or 0.4%, to 5411.6. The day's intrasession high was within a dozen points of the 5427 peak hit in late May.
Copper futures closed higher in London Thursday in tandem with other base metals as the U.S. dollar weakened. The London Metal Exchange's three-month copper contract was up 0.1% at $4,940/t at the PM kerb close. Other base metals climbed. Aluminium closed up 0.7% at $1,671/t, zinc was up 0.6% at $2,186/t, nickel was up 0.1% at $10,320/t, lead was up 0.9% at $1,891/t, and tin was up 0.6% at $18,067/t.
In this Issue
Ausdrill (ASL) | Whiplash | BUY
Market Cap $275m | Current Price $0.88 | Valuation $1.20
The sudden renewed interest in gold-exposed mining service businesses has seen ASL’s share price climb 245% YTD. We review our blended valuation post this gain, which now takes into account a multiple of FY17 numbers (previously FY16) and gives a higher weighting to our DCF valuation (which captures longer term earnings forecasts). Our new valuation of $1.20 (prior $0.85) is <6x the last 10 years’ average EPS. We maintain a buy call, although factors like the gold price may cause considerable near term volatility.
Recent Contacts & Presentations
Altech Chemicals (ATC), TFS Corporation Limited (TFC), Noxopharm (NOX), OBJ Limited (OBJ), Kibaran (KNL), Department 13 (D13), Peak Resources (PEK), Fortescue Metals (FMG), Paradigm Biopharma (PAR), Botanix (BOT), Peel Mining (PEX), Ausgold Limited (AUC), Gascoyne Resources (GCY), Metro Mining (MMI), Pacific Energy (PEA), Novatti Group Ltd (NOV), Hammer Metals Ltd (HMX), Helix Resources Ltd (HLX)
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