The FTSE-100 finished Friday's session 0.56% higher at 6,138.50, whilst the FTSE AIM All-Share index closed 0.08% lower at 724.49. On the continent, equities ended in the green, as robust GDP expansion in Germany during Q1 2016 lifted investor sentiment, even as the Eurozone's economy grew at slower pace. Germany's DAX and France's CAC 40 advanced 0.9% and 0.6%, respectively.
Wall Street ended in the red, despite retail sales rebounding strongly in the US during April. Oil prices resumed their downtrend, dampening investor sentiment. The S&P 500 fell 0.9%, with the financial sector declining the most, followed by energy and consumer staples.
Markets are trading higher, despite the release of data indicating slower growth in investment, factory output and retail sales for April in China. The Hang Seng was trading 1.2% up at 7:00 am. The Nikkei 225 added 0.3%, led by a weekend media report that stated Japan would delay a sales tax hike set for April 2017.
On Friday, Brent and WTI crude oil prices declined 0.5% and 1.1%, respectively. The spread between the two varieties stood at US$1.6 per barrel.
House prices in UK rise in May: Rightmove
As per the property tracking website Rightmove, the average asking price for a house in the UK increased 0.4% m-o-m to £308,151 in May after a 1.3% rise in April. On a y-o-y basis, house prices gained 7.8% in May compared with a 7.3% rise in April. The prices increased after an investor rush to beat a new stamp duty introduced in April left led to a scarcity of homes for sale.
Arian Silver Corporation (LON:AGQ, 1.00p) - Speculative Buy
On Friday, Arian Silver Corporation announced that the company has made progress on its detailed metallurgical test work at the Noche Buena tailings project ('Tailings Project'). This announcement follows the company's exclusive agreement with privately owned Tierra Nuevo Mining Ltd (TNM). The results from the metallurgical and mineralogical test works are expected to provide the data required to define the process necessary to produce commercially viable gold and silver concentrate from the Tailings Project. The analysis is being undertaken and managed by Resource Development Inc (RDi) of Denver, Colorado (US). The first batch of bulk sampling is currently underway and will be sent within the next few days to RDi's facilities in Denver.
Our view: The initiation of the metallurgical sampling programme on the Tailings Project at Noche Buena is good news from the company's camp, and preliminary results are expected within the next few weeks. These results will enable Arian to undertake increasingly precise metallurgical tests and optimise the process flow required for the commercially viable production of gold and silver concentrate. The Tailings Project has an indicated mineral resource containing 1 million tonnes with 3 grams per tonne (g/t) gold and 55 g/t silver, representing approximately 100,000 ounces (oz) of gold and some 1.7 million oz of silver. Additionally, the company continues to explore the potential of several mineral properties in Mexico, including mineral properties owned by TNM. We look forward to more such positive updates from the company and, therefore, maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Arian Silver Corporation plc
Aureus Mining (LON:AUE, 3.62p) - Speculative Buy
On Friday, Aureus Mining announced its unaudited financial results for the quarter ended 31st March 2016. During the period, the company's revenues stood at US$23.1m from the sale of 19,249 oz of gold. Gold production from New Liberty was 22,706 oz, processed from 252,578 tonnes of ore at an average feed grade of 3.01g/t. The company's operating and all-in sustaining cash costs were US$1,034 per oz and US$1,153 per oz, respectively. At the end of the period, Aureus' cash balance stood at US$2.9m, whereas inventory was valued at US$14.3m. On the operational front, the mining operations at Kinjor and Larjor pits progressed, with tonnes mined totalling 1,971,461 tonnes. Strip ratio for the quarter was 6.5 and is expected to increase, going forward, following the deployment of additional mining equipment. Plant recoveries for the quarter averaged 85%. Currently, the company is working to address the performance of the INCO detoxification circuit, following the temporary suspension of processing operations, and will provide a further update this week.
Our view: Aureus' updates for the quarter look promising as the company prepares to resume processing following a temporary suspension on 7th May 2016. During April 2016, the company's gold production stood at 5,967 oz. Mining activities continue, with preparations for the forthcoming wet season well underway and additional new mining fleet (consisting of five Komatsu HD785 haul trucks and a PC1250 excavator) having been deployed in May 2016. The company is taking advantage of the process plant stoppage to complete scheduled plant maintenance and increase its ore stockpile which it expects will enable the lost production to be recovered later in the year. The company has progressed well in all aspects related to the project, and given the significant potential of this project, we are optimistic about positive production results from the company in the near future. We reiterate a Speculative Buy rating for this stock.
Hutchison China Meditech (LON:HCM, 1,755.0p) - Buy
Hutchison China MediTech ('Chi-Med'), the China-based healthcare group, on Friday announced that it has completed enrolment of 416 patients for FRESCO, its Phase III trial of fruquintinib (HMPL-013) in third-line locally advanced or metastatic colorectal cancer ('CRC') in China. Fruquintinib is a highly selective small molecule drug candidate that has been shown to inhibit vascular endothelial growth factor receptors 24 hours a day via an oral dose, without known off-target toxicities. The FRESCO trial is evaluating the efficacy of fruquintinib versus placebo, with all patients receiving best supportive care. The primary endpoint is overall survival. Chi-Med has received a milestone payment of US$18m from its partner, Eli Lilly and Company, following positive Phase II data for FRESCO. The Group also stated that it is accelerating the another studies of fruquintinib, FALUCA, for ongoing Phase III trial in non-small cell lung cancer, as well as launching a Phase II study in gastric cancer in combination with paclitaxel, new studies in the US, and certain exploratory studies in combination with other oncology agents. Its CEO, Christian Hogg commented "Completing enrollment of our first Phase III clinical trial is an important milestone for our company. We believe fruquintinib has the potential to significantly improve outcomes in several types of solid tumors".
Our view: Chi-Med is making good progress with its FRESCO trial of fruquintinib, in line with their schedule. The Phase III FRESCO trial was following a 71-patient, randomised, double-blind Phase II trial of fruquintinib as a third-line (patients who have failed at least two prior systemic antineoplastic therapies, including fluoropyrimidine, oxaliplatin and irinotecan) treatment for metastatic CRC. The first patient was dosed on 12 December 2014. The study met its primary endpoint of progression free survival of 4.73 months for patients receiving fruquintinib (0.99 month for the placebo), with a hazard ratio of 0.30 (p < 0.001), and had no unexpected safety issues. We are encouraged by the progress made on FRESCO which is has large addressable market, as well as two ongoing studies of fruquintinib for non-small cell lung cancer and gastric cancer in the line. Colorectal cancer in 2012, stood at 10.3% (or 390,000 new patients diagnosed) of the total cancer in China, according to the Chinese Cancer Registry annual report 2012. The Group expect to publish Phase III top-line results at the end of 2016 or in early 2017. Beaufort reiterate Buy rating on its stock.
SABMiller (LON:SAB, 4,222.0p) - Buy
On Friday, Anheuser-Busch InBev (AB InBev) entered into an agreement with Ambev, pursuant to which, AB InBev has agreed to transfer SABMiller's Panamanian business to Ambev. In return, Ambev has agreed to transfer to AB InBev its business in Colombia, Peru and Ecuador. This arrangement is expected to enable AB InBev to focus on countries where the SABMiller businesses it acquires are well established. Additionally, it would allow Ambev to initiate operations in Panama through the established SABMiller business and further expand its businesses in Central America. The transaction mentioned above is conditional on the successful closing of the proposed business integration of AB InBev and SABMiller as announced on 11th November 2015, in addition to other customary closing conditions.
Our view: AB InBev shuffled assets with Ambev even as the company awaits the green signal to the proposed merger of SABMiller and AB InBev from competition authorities. In November 2015, AB InBev announced plans to acquire SABMiller for a consideration of around £71bn. Now, AB InBev plans to swap its breweries in Colombia, Peru and Ecuador for SABMiller's Panamanian beer and soft drink businesses. This will enable AB InBev to focus on countries where the SABMiller businesses it acquires are well established. Recently, SABMiller posted strong growth in net producer revenues for the year ended 31st March 2016. Moreover, if the merger is approved, AB InBev and SABMiller would be together selling more than 30% of the world's beer, including brands such as Budweiser, Stella Artois, Grolsch and Pilsner Urquell. In the meantime, SABMiller's strategies for expanding the beer business line and diverse portfolio of brands seem judicious. Thus, in view of the overall optimism surrounding the company's business prospects, we reiterate our Buy rating on the stock.
Consumer price inflation (CPI) in the Germany declined 0.4% m-o-m in April reversing a 0.8% rise in March but was in-line with the flash estimates, as per the estimates published on Friday by Destatis. On y-o-y basis, consumer prices dipped 0.1% y-o-y, following a 0.3% increase last month. Core prices, excluding those of energy, advanced 0.9% y-o-y.
On a quarterly basis, German GDP growth expanded the most in two years to 0.7% in Q1 2016, compared to 0.3% growth in Q4 2015, the Federal Statistics Office said on Friday. The reading came in better than the expected expansion of 0.6% q-o-q. On a y-o-y basis, calendar adjusted GDP advanced 1.6% and non-seasonally adjusted GDP was up 1.3% in Q1 2016. Both the readings beat their estimated expansion of 1.5% and 1.2%, respectively.
The Eurozone GDP expanded 0.5% q-o-q in Q1 2016 after rising 0.3% in Q4 2015, the Eurostat revealed on Friday. Markets had forecasted a 0.6% expansion. Year-on-year, Eurozone GDP grew 1.5%, slower than market expectations of a 1.6% expansion, and following a 1.6% rise seen in the fourth quarter of 2015.The Eurozone GDP expanded 0.5% q-o-q in Q1 2016 after rising 0.3% in Q4 2015, the Eurostat revealed on Friday. Markets had forecasted a 0.6% expansion. Year-on-year, Eurozone GDP grew 1.5%, slower than market expectations of a 1.6% expansion, and following a 1.6% rise seen in the fourth quarter of 2015.
US advance retail sales
US advance retail sales increased 1.3% m-o-m in April after declining 0.3% in March, the Commerce Department said on Friday. The reading came ahead of the market expectations of a 0.8% rise. Excluding the sales of auto and gas, retail sales improved 0.6% in April, better than the expected rise of 0.3%.
US PPI Final demand
The US producer price index (PPI) for final demand improved 0.2% m-o-m in April, after falling 0.1% in March, the Bureau of Labor Statistics stated on Friday. The reading was below market expectations of a 0.3% rise. Core producer prices, excluding food and energy, edged up 0.1% in April. On a y-o-y basis, PPI demand remained flat following a 0.1% decline in March.
US University of Michigan Sentiment
US University of Michigan Consumer Sentiment Index increased to 95.8 in May from 89 in April, data showed on Friday. Economists were expecting a reading of 89.5. The Consumer Expectations Index, which closely forecasts the direction of consumer spending, improved to 87.5 from 77.6, while the Current Economic Conditions Index climbed to 108.6 from 106.7.