Market Update & Important Indicators:
U.S. stocks bounced around the flat line Wednesday as a pullback in the price of oil weighed on shares of energy companies. Energy companies in the S&P 500 were the worst performers in the index Wednesday, falling 1.1%, as the price of U.S.-traded crude oil declined. On Tuesday, oil rose to its highest settlement since December. The S&P 500 and the Nasdaq Composite slipped 0.1% in recent trading, while the Dow Jones Industrial Average rose 0.1%. The U.S. gold price was up slightly overnight finishing at 1,237.30 US$/oz. The pause follows a strong day of gains on Tuesday when all three indexes closed at new records. Small daily moves, most of which are minor gains, have been a theme for the stock market in recent months. The S&P 500 has not posted a 1% or more decline in 90 trading days, the longest stretch since 2006, according to WSJ Market Data Group. Similarly, the index has failed to post a 1% or more gain since Dec. 7, the longest such stretch since 2014. Even without big moves, since Dec. 7 the S&P 500 has risen about 5.5%. Federal Reserve officials said they anticipated raising short-term interest rates "fairly soon" and some officials said it might be appropriate to move "potentially at an upcoming meeting," according to minutes from the Fed's latest meeting published Wednesday.
European stocks finished flat, following three consecutive sessions of gains. The Stoxx Europe 600 finished unchanged at 373.38, frustrating those looking for a fourth-straight win but still hovering at best levels since late 2015. The regional benchmark on Tuesday rose 0.6% to 373.40, the best close since Dec. 2, 2015, helped by a better-than-expected preliminary reading on manufacturing activity in the Eurozone.
Gains in Asian shares were capped Wednesday as investors worried that rising U.S. interest rates may prompt a flight of capital in the region. Investors opted to stay cautious ahead of the release of minutes from the U.S. Federal Reserve later in the global day. The Nikkei Stock Average closed flat, and the FTSE Malaysia index edged lower by 0.1%. Despite the apprehensions, Hong Kong's Hang Seng Index closed up 1%, adding to its 6.6% gains in the past three months, and the Shanghai Composite rose 0.2%.
Well-received earnings results from a handful of companies helped drive a broad rise in Australian equities Wednesday, snapping a three-session run of modest losses. Gains by energy stocks spurred the market as crude-oil prices recovered from recent weakness and offsetting a sharp drop in Commonwealth Bank of Australia as it traded ex-dividend. Ending at the session high, the S&P/ASX 200 rose 14.1 points, or 0.2%, to 5805.1. The consumer staples subindex notched the strongest advance, rising by 2.5%.
The London Metal Exchange's three-month copper contract closed down -0.33% at $6,040/t. The other base metals were mixed on Wednesday. Lead prices rose 0.5% at 2,267/t whilst aluminium prices ended the day flat at 1,876/t. Falling for the day, nickel dropped 0.4% to 10,754/t, tin fell 2.4% to 19,287/t and zinc prices fell 0.4% at 2,861/t.
In this Issue:
Fortescue Metals (FMG) | Stellar result but how long can the iron ore party last?| SELL
Market Cap: $21.7bn | Current Price $6.98 | Target Price $6.04
Fortescue Metals (FMG) released a stellar 1HFY17 result with revenue of US$4,492m (+34% on 1H16). Underlying EBITDA of US$2.65bn was 103% higher than the previous period driven largely by productivity improvements contributing to lower operating costs and sustained higher product pricing and price realization. NPAT of US$1.22bn was 283% higher than the previous period which was enhanced by a strong uptick in iron ore prices and a 20% reduction in C1 costs from 1H16. Cash on hand at Dec 31 was US$1.16bn with net debt of US$3.97bn. We maintain our view that iron ore prices will moderate in the short term. SELL recommendation and upgrade our price target to $6.04ps ($5.18 prior).
Recent Contacts & Presentations:
Paringa Resources Ltd (PNL), The Gruden Group Ltd (GGL), Primary Gold Ltd (PGO), Vault Intelligence Ltd (VLT), Botanix Pharmaceuticals Ltd (BOT) Orthocell Ltd (OCC), Strandline Resources Ltd (STA) Dragontail Systems Ltd (DTS), ABM Resources Ltd (ABU), Acacia Coal Ltd (AJC), Troy Resources Ltd (TRY), Hazer Group Ltd (HZR), Berkeley Energia Ltd (BKY), Sino Gas & Energy Holdings Ltd (SEH), Sovereign Metals Ltd (SVM), Kin Mining (KIN), Vital Metals Ltd (VML), Mincor Resources (MCR), Dacian Gold (DCN), Leaf Resources Ltd (LER), Alchemy Resources Ltd (ALY), OpenDNA Limited (OPN), MZI Resources Ltd (MZI), Seafarms Group Ltd (SFG), Marindi Metals Ltd (MZN)
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