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Basic Materials Roundup: Market Talk

17 Nov 2017 9:20 am

The latest Market Talks covering Basic Materials. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

0825 GMT [Dow Jones] Gold recorded higher bottoms and higher tops since November 16, which confirmed a positive outlook, on the 30-minute chart. The upward momentum is further reinforced by both rising 20-period and 50-period moving averages. The MACD is above its 0-level. The RSI is supported by an ascending trend line, which emerged on November 14. The downside potential should be limited by the key support at $1,277. As long as this key level is not broken, look for a further upside to $1,286.5 and even to $1,289.5 in extension. Only a break below $1,277 would turn the outlook to bearish and call for a return with $1,273 as a target. Gold is trading at $1,282 an ounce. (analysts-europe@tradingcentral.com)

0642 GMT - With Chinese containerboard prices crashing 19% the last 2 weeks, Deutsche Bank believes the turning point of a 6-month rally has arrived. It considers the medium-term supply/demand situation being grim and that this year will likely go down as the best for paper as new supply enters the market during the next few years. Nine Dragons slides 6.4% and Lee & Man drops 3.4%; both are back at late-August levels. (john.wu@wsj.com)

0524 GMT - Australian shares rose modestly further Friday, trimming the week's slide as the country's big banks provided support. As they rose as much as 0.6%, the S&P/ASX 200 rose 0.2% to 5957.3 after a similar advance Thursday. But the market was stronger early and saw another fade into the close, resulting in a 1.2% weekly drop for the index, the most in five months. BHP Billiton and Rio Tinto fell some 1.5%, but Fortescue jumped 1.5% as Chinese iron-ore futures continued to recover. (robb.stewart@wsj.com; @RobbMStewart)

2315 GMT - BHP Billiton's ambition of US$2B in productivity gains by the end of FY19 appears achievable given what the miner has achieved to date, with US$1.3B in gains reported in the last year, Macquarie says. The investment bank believes Ken MacKenzie's background and track record as CEO of low-margin manufacturing operations at Amcor bodes well for his tenure as chairman. And with BHP leveraged to improved pricing for oil and natural gas, Macquarie says the stock appears relatively cheap on spot pricing. (robb.stewart@wsj.com; @RobbMStewart)

2218 GMT - Santos may have rebuffed a bid at A$4.5/share from Harbour Energy as too low, but it's unlikely to end there, Morningstar opines. Led by ex-Shell executive Linda Cook, Harbour is no tin-pot cobbled-together outfit and it's quite possible it will table a formal offer for Santos soon, the research firm suggests. The interest could also awaken a number of other suitors, not least Woodside Petroleum given a tie-up would create an Australian powerhouse and skirt any national interest concerns. Morningstar also tips Shell as another potential contender and BHP Billiton as a long shot. (robb.stewart@wsj.com; @RobbMStewart)

1413 GMT - The rare-earths market is dominated by China and some consumers may welcome the entry of a new supplier, says SP Angel, after Mkango Resources said that Talaxis will invest GBP12 million in its Songwe Hill project in Malawi. Talaxis will acquire a 49% interest in Songwe, fund a bankable feasibility study and has an option to invest in Mkango's other rare-earths project. Chinese producers are the main sources of specific rare-earth elements and oxides, which could be a supply risk, SP Angel adds. It has a buy recommendation for Mkango, shares of which are up 5.81 pence, or 150%, to 9.69 pence. (maryam.cockar@dowjones.com)

1302 GMT - Now that Solvay's transformation into a specialty chemicals company is effectively complete, the company intends to focus on driving organic growth rather than on large acquisitions, say UBS analysts. According to UBS this may be easier said than done, as several of Solvay's key end markets, such as composites, consumer electronics and oil and gas, "remain fragile in the short term," and analysts think that margins probably won't improve notably in 2018. Automotive and personal care are more likely growth candidates, according to UBS, which expects Solvay to continue to see growth from increased content in these markets. Shares trade up 0.33% at EUR120.70.

(sonia.amaralrohter@dowjones.com)

1004 GMT - Atalaya Mining swings to third-quarter profit and reports an 8.5 million euro ($10 million) rise in revenue, but Shore Capital finds it 'mystifyingly' lower than its expectations and says that the company has not explained why. According to the brokerage, given the increase in production and improved copper prices during the period, revenue should have risen substantially more, and Shore wonders whether there are issues with product quality. Shore Capital asks whether the increase in cash costs during the quarter due to higher-than-budgeted penalties means that some sales had to be deferred, or fell through, due to such issues. Shares are down 9 pence, or 5.2%, at 164 pence.

(dimitrios.kontos@dowjones.com)

(END) Dow Jones Newswires

November 17, 2017 04:20 ET (09:20 GMT)

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