Overseas Market Report – U.S. Stocks End Higher after Fed Stands Pat
U.S. stocks finished higher Wednesday after the Federal Reserve kept its key interest rates unchanged and slashed its projections for rate increases in 2016.
Strong gains in oil prices helped lift materials and energy stocks, buoying the main benchmarks.
The Fed said in a statement that its rate-setting Federal Open Market Committee decided to leave the central bank's benchmark interest rate in a range of 0.25%-0.5%. The decision was widely expected.
The big change was in the Fed's so-called "dot plot," where officials penciled in only two quarter-point hikes this year, down from four in December.
The U.S. consumer price index was off 0.2% in February as low energy prices continued to weigh on prices levels. However, excluding food and energy, prices rose 0.3% from the previous month. Core prices are now up 2.3% year over year, the highest rate since 2012.
Industrial production in the U.S. fell in 0.5% in February, slightly better than the 0.6% decline expected by economists. The overall decline was driven by a drop in utilities and mining while manufacturing was actually up 0.2% in the month. Capacity utilisation fell to 76.7% from 77.1%.
U.S. housing starts rose by 5.2% last month, with single-family home starts hitting the highest levels in nine years. Building permits rose 3.2% in the month, a sign that housing starts have room to grow in the months ahead.
At close the Dow was up 0.4%, the S&P 500 was up 0.6%, while the NASDAQ was 0.8% higher.
For Australian ADRs listed on the NYSE, BHP Billiton rose 105 cents (4.21%) to $26.02, ResMed lost 148 cents (-2.52%) to $57.30, Telstra Corporation gained 35 cents (1.78%) to $20.01, Spark New Zealand slipped 4 cents (-0.35%) to $11.31 and Westpac rose 74 cents (3.07%) to $24.84.
At 8:00 AM (AEDT), the 10-year Treasury note yield was 1.91% and the 5-year yield was 2.71%.
The highlights of Oracle's (ORCL) third-quarter results were a significant uptick in software-as-a-service and platform-as-a-service revenue growth rates. Revenue fell 3.4% year over year (up 1% in constant currency) to US$9 billion, as declines in legacy software, hardware, and services businesses were mostly offset by torrid cloud services growth. SaaS and PaaS revenue growth surged to nearly 57%, fuelled by increased customer migration to Oracle's CRM, HCM and marketing software platforms. SaaS and PaaS gross margins expanded more than 1,100 basis points to roughly 50%, though the firm has considerable work to do to leverage its cloud investments to achieve its long-term target of 80%.
European markets were mostly higher Wednesday.
The FTSE 100 was up 0.6%, Germany's DAX was up 0.5%, while the French CAC 40 was down 0.2%.
Asian shares finished mixed.
The Shanghai Composite was up 0.2%, the Hang Seng was down 0.2%, while the Nikkei 225 shed 0.8%. India's Sensex was up 0.5%.
Australian Market Report- Local Market Expected To Open Higher
Ahead of the local open, SPI futures were 36 points higher at 5,162.
Wednesday 16 March – close. The local market opened lower on the back of mixed results on Wall Street overnight. Trade picked up by mid-morning and continued to be volatile throughout the remainder of the day, closing slightly above the red line. There were mixed results from the sectors with consumer staples posting the biggest losses while energy saw the highest gains. The Australian dollar gained against most major currencies.
The All Ordinaries added 7.10 points to 5,175.70 while the S&P/ASX 200 gained 7.60 points to 5,119.00.
In This Issue
Argonaut Research | Energia Minerals (EMX) | SPEC BUY
Energia Minerals (EMX) released a maiden Resource for the Colonna Zorzone deposit with 3.9Mt @ 7.7% Zn+Pb. Zorzone is the first deposit targeted for development in EMX’s 100% owned Gorno project in northern Italy. This Resource is a precursor to a Scoping Study, due for release late-March 2016. Gorno benefits from extensive underground infrastructure including established access to unmined ore faces. Argonaut maintains a SPEC BUY recommendation with a $0.08 target price.
Argonaut Research | Perseus (PRU) | BUY
West African gold producer Perseus Mining (PRU) recently reached an agreement with Amara Mining (AIM:AMA) for a recommended business combination via a UK scheme of arrangement. A successful acquisition will create a West African focused gold producer with long life assets, capable of growing to ~500koz pa. AMA’s assets are complementary to PRU’s existing portfolio and provide geographic diversification. Whilst funding requirements are acknowledged for both Sissingué and Yaoure, we note PRU’s existing cash balance of ~A$100m (at CY15 end), likelihood for reduced Yaoure capex (Argonaut E US$260m) based on a smaller mill and contract mining, potential for debt funding and possible ~A$60m warrant proceeds (A$0.44 exercise price). Timing wise, the development of the two projects are apart, such that Sissingué will likely be in production when Yaoure is under construction, thereby contributing CF to its capex requirements. Although the journey to 500koz could be arduous, an improving USD gold price coupled with enhanced scale should see PRU gaining broader market recognition. BUY maintained.
BT Investment Management (BTT)
BT Investment Management announced the establishment of an Australian-based Global Equities boutique with the appointment of Mr Ashley Pittard, who will lead the boutique and launch a new global equities fund. The new strategy will expand and complement the Group's existing range of global equities strategies, which include the JOHCM Global Opportunities strategy and the JOHCM Global Select strategy. The establishment of the Global Equities boutique represents an investment of $3 – $4m on an annualised basis upon full implementation of the strategy. BTT fell 1 cent to $9.38.
Caltex Australia (CTX)
Caltex Australia announced realised lagged Caltex Refiner Margin (CRM), in respect of CRM sales from production for the month of February 2016. The unlagged CRM for February 2016 was US$8.30/bbl. This is below the prior month (January 2016: US$12.76/bbl) and prior year equivalent (US$13.18/bbl). Regionally, the unlagged Caltex Singapore Weighted Average Margin was US$10.01/bbl, below the prior month (January 2016: US$13.47/bbl) and prior year equivalent (February 2015: US$13.62/bbl). The higher AUD/USD exchange rate in the last week of February 2016 drove a favourable US$0.14/bbl seven day timing lag (January 2016 favourable: US$0.76/bbl). The realised CRM for February 2016 was US$8.44/bbl, below the January 2016 CRM of US$13.52/bbl but above the prior year comparative (February 2016: US$5.31/bbl). CTX added 2 cents to $32.33.
Recent Contacts & Presentations
Troy Resources (TRY), Medusa Mining (MML), Red 5 (RED), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), Ausdrill (ASL), Danakali (DNK), Matrix (MCE), OBJ Limited (OBJ), Tox Free Solutions (TOX), Energia Minerals (EMX), Berkeley Energia (BKY) , Finders Resources (FND), 4DS Memory Ltd (4DS) , Bionomics Ltd (BNO), Resolute Mining (RSG), Avanco Resources (AVB), Rift Valley Resources (RVY), Kilbaran Resources (KNL), Pantoro (PNR)
