Market Update & Important Indicators:
U.S. stocks notched their biggest weekly declines since Brexit, after Federal Reserve Chairwoman Janet Yellen said the case for an increase in U.S. short-term interest rates has strengthened in recent months. The remarks, which had been anxiously awaited all week, sparked an initial reaction to sell stocks that quickly reversed itself. Later in the session, stocks again fell, as investors' expectations for a rate rise later this year climbed. Ms. Yellen's remarks, which were part of a speech at the annual economic symposium in Jackson Hole, Wyo., were fairly consistent with what Fed officials have been saying in recent weeks. Loose U.S. monetary policy has been a driving force in financial markets, keeping the dollar soft and supporting stocks and bonds. The Dow Jones Industrial Average fell 0.3% on Friday after earlier rising as much as 124 points. The S&P 500 lost 0.2%, and the Nasdaq Composite rose 0.1%. The blue-chip index fell 0.8% for the week, the S&P 500 lost 0.7% and the Nasdaq declined 0.4%, their largest losses since the week ending June 24.The speech by Ms. Yellen makes next Friday's jobs report for the month of August more important, and it could shake an otherwise quiet market, analysts and traders said. In European markets, the Stoxx Europe 600 gained 0.5% on Friday and 1.1% for the week.
Shares in Asia drifted lower Friday, as investors largely held fire ahead of guidance from U.S. Federal Reserve Chairwoman Janet Yellen. South Korea's Kospi and Singapore's FTSE Straits Times Index fell 0.3% each. But Hong Kong's Hang Seng Index and the Shanghai Composite Index bucked the trend, both trading 0.6% higher. In Japan, the Nikkei Stock Average was down 1.1%; automobile and insurance stocks were hurt by expectations that Ms. Yellen would deliver gloomy news about the U.S. economy. In Asia, Japan's core consumer price index–which excludes fresh food–slid 0.5% from a year earlier in July, following a revised 0.4% drop in June. That was greater than a 0.4% fall forecast by The Wall Street Journal and the Nikkei. Electricity and gasoline led price declines, weighing on the index, data showed. This prompted speculation that the Bank of Japan may have to lurch back into action, to reignite inflation. But it is possible to put a positive spin on events–Japanese consumer confidence may be rising as prices fall and wages inch higher. Renewed confidence might eventually be good for Japanese reflation, analysts say.
Australian shares drifted lower Friday as investors cautiously awaited for guidance on the path for U.S. interest rates from Federal Reserve Chairwoman Janet Yellen. The S&P/ASX 200 finished down 26.4 points, or 0.5%, at 5515.5. That left it 0.2% lower for the week, after a similarly mild decline last week. The index has remained in a fairly narrow 5505 to 5565 window for the last three weeks. That is despite some sharp swings in the share prices of individual stocks as investors have reacted to corporate earnings reports, and reflects uncertainty regarding the Fed's stance on rates, said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
The London Metal Exchange's three-month copper contract was down 0.2% at $4,615/t at the PM kerb close. Other base metals were mixed on Friday. Aluminium fell 0.2% to $1,628/t, zinc rose 0.7% to $2,320/t, tin rose 0.8% to $18,900/t, nickel fell 0.4% to $9,757/t and lead rose 0.7% to $1,855/t.
In this Issue:
Peet (PPC) | Executing strategy | BUY
Market Cap $490m | Current Price $1.00 | Valuation $1.40
Results (EBITDA of $89.8m) were slightly ahead of market expectations and we believe PPC enters FY17 positioned to grow earnings as new projects come on stream (4 in FY17 and up to 8 within 2-3 years). Some of these are large, providing visibility, and most sit within the funds management business, in line with strategy. With a diversified portfolio of product acquired at the right price we believe PPC has levers to pull to counteract divergent property market conditions across the country. Buy maintained.
Matrix (MCE) | Net cash but earnings not flash | HOLD
Market Cap $38m | Current Price $0.405 | Valuation $0.40
Underlying EBITDA of $11.3m was in line with guidance, although confirms a tough 2H for the business. The read for FY17 is not positive, and with little likelihood of a near-term improvement in MCE’s key offshore deepwater drilling market, we maintain our subdued forecasts for this financial year. However, the balance sheet is positioned to ride out a tough period and we are aware the leverage to an improved operating environment is significant so we maintain a hold call on a valuation of $0.40.
Global Construction (GCS) | Rising in the east | BUY
Market Cap $94m | Current Price $0.47 | Valuation $0.65
Underlying EBITDA improved 9% to $29.6m in FY16 however it was the focus on their east coast diversification strategy, supported by a sound balance sheet, that were the key positive takeaways for us in the results. GCS indicates that growth on the eastern seaboard has the potential to take revenue to ~$500m within 3-5 years. The east coast expansion goals, the diversification strategy, the solid balance sheet and the Brookfield relationship are positives. We maintain a buy call and $0.65 valuation.
Recent Contacts & Presentations:
Carbine Resources Ltd (CRB), Antipa Minerals (AZY), Energia Minerals Ltd (EMX), Pantoro Limited (PNR), Boss Resources Ltd (BOE), Metro Mining Ltd (MMI), Metal Bank Ltd (MBK), Actinogen Medical (ACW), St. George Mining Ltd (SGQ), Resapp Health Ltd (RAP), Orecorp Limited (ORR), Dimerix Limited (DXB), Genesis Minerals Ltd (GMD), Dakota Minerals Ltd (DKO), Breaker Resources NL (BRB), Bard1 Life Sciences Ltd (BD1), Alto Metals Ltd (AME), Birimian Limited (BGS), Antipa Minerals Ltd (AZY), Vault Intelligence Ltd (VLT), Noxopharm Ltd (NOX), Gage Roads Brewing Co. (GRB), West African Resources (WAF), Cedar Woods Properties Ltd (CWP)
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