Sell off continues ahead of a big week for markets
A busy weak ahead on a number of fronts with a truck load of quarterly production reports from the miners while we have also have some top tier economic data both here and abroad. In terms of production numbers, Iluka (ILU) and Newcrest (NCM) were out today, both were good while tomorrow we have Oz Minerals (OZL) and Western Areas (WSA), while fellow Nickel coy Independence Group (IGO) comes out on Wednesday along with St Barbara (SBM) then Fortescue (FMG) headlines on Thursday (along with Macquarie’s AGM).
On the economic front, PMI’s from the Eurozone and the US out tonight, inflation data from Australia on Wednesday along with a decision on US interest rates before we round out the week with US GDP on Friday. Clearly a big week for markets and we’ve started on the back foot with market sold off fairly aggressively today - more so in the morning than the afternoon.
As we discussed in the Weekend Report, we have unfortunately now turned more cautious the ASX 200, at least over the next few months after the market has failed to adhere to the usual July Strength. We are now looking for a pullback towards the 5500 major support area which should provide an excellent risk / reward buying opportunity.
On the broader market today, the Telco’s were the only sector in the green which highlights what a weak mkt we had, while the Energy stocks gave back some recent gains, overall we had a range of +/- 70 points, a high of 5722, a low of 5653 and a close of 5688, off -34pts or -0.61%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Newcrest (NCM) – delivered June QTR production numbers today and they were weakish in aggregate however came in ahead of mkt expectations. Weakness was anticipated given the disruption from their Cadia mine around Orange, however the actual impact was less than the mkt thought. Lihir hit a record and now looks to be humming along and importantly, NCM has now met/beat guidance for the past 4 years which is a massive turnaround from prior years. It helps to actually have mine managers on the ground in Lihir , even though it is very remote. Clearly a good turnaround from NCM in the last few years - the stock is cheap and Gold is offering some decent tailwinds.
Newcrest (NCM) Daily Chart
Iluka (ILU) - also out with qtrly production numbers that were slightly ahead of expectations, however it looked like the mkt was already positioned for a beat - ILU opened strong and pulled back for the session and this stock is now looking overcooked from a short term perspective. Recent commentary by other companies has been positive and Iluka was the same today, saying….Improved mineral sands market conditionswere evident in the first half of 2017 compared to 2016. Both the zircon and titanium feedstock markets experienced favourable conditions in 2017. Z/R/SR sales volumes up 43% to 454kt, excluding Sierra Rutile volumes, Z/R/SR sales volumes up 23%.
The debt reduction in this business has been huge in recent times, with $360m annualised in free cash flow and debt down by $200m since December. We like ILU however would look to buy weakness rather than strength.
Iluka (ILU) Daily Chart
Have a great night
The Market Matters Team
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