The Markets
Market opening: The FTSE-100 is expected to open between 30-20 points lower this morning. At 7:31 am FTSE-100 Futures were trading down 33.3 points.
New York: Wall Street ended in the red, as the Fed’s interest rate decision raised concerns among investors about global economic recovery. The S&P 500 fell 1.6% on Friday and 0.2% for the week.
Asia: Markets are trading lower on negative cues from the Wall Street. Risky bets were avoided amid weaker investor confidence after the Fed’s rate decision. The Nikkei 225 dropped 2.0%, whereas the Hang Seng was trading 1.1% lower at 7:00am.
Continental Europe: Equities witnessed a sharp decline, as investors remained concerned over global growth after the Fed kept the interest rate at record low levels. Germany’s DAX and France’s CAC 40 declined 3.1% and 2.7%, respectively.
Crude Oil: On Friday, WTI and Brent Crude Oil prices decreased 4.7% and 3.3%, respectively. The spread between the two varieties stood at US$2.8 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.18% higher on Friday at 742.09.
Today’s news
House prices in UK rebound sharply in September
As per Rightmove, house prices in the UK jumped 0.9% m-o-m to £294,834 in September after a 0.8% m-o-m decline in August. The prices were up 6.4% y-o-y. The price rise was primarily ascribed to supply shortage.
Company News
Petra Diamonds (LON:PDL) – Hold
On Friday, Petra Diamonds released its preliminary results for the year ended 30th June 2015. The company’s revenues declined 10% to US$425.0m whereas the adjusted EBITDA contracted 26% to US$139.3m owing to poor quality production from the mature, diluted mines. Weaker demand for diamonds also impacted the company’s financial results. Pre-tax profit for the period decreased 33% to US$2.8m and consequently the basic EPS from continuing operations was down to 9.46 cents from 12.80 cents a year ago. On the operational front, production improved 2% to 3.2 Mcts while the operating costs remained well under control. Meanwhile the company’s gross Diamond Resources also increased 2.5% to 308.7 Mcts. Petra declared a maiden dividend of 3.0 cents per share for FY 2015 and issued US$300m senior secured second lien loan notes. The company expects an increase of 3 – 6% on FY 2015 production to 3.3 – 3.4 Mcts for FY 2016. Plans are underway to start the construction of a modern processing plant at the Cullinan mine after the year end.
Our view: The Company’s prospects have been marred by a drop in the average diamond prices and the poor quality of stones being produced from the diluted ore at the Finsch and Cullinan and that reflected in the company’s overall performance throughout the year. Even the favourable impact of a weaker Rand failed to lift the overall performance of the company. Going forward, the company has plans to invest US$274.1m for its expansionary endeavours. We expect the company’s operating margins to improve once it starts accessing the undiluted mining areas at Finsch and Cullinan from FY 2016 onwards. Even though the market conditions remain subdued in the short term, the declaration of maiden dividend is testimony that the management is confident of the company’s future performance. We retain our Hold rating on the stock.
Economic News
US leading Index
The Leading Economic Index for the US edged up 0.1% m-o-m in August, after a revised flat reading for the month of July, the Conference Board said yesterday. Markets had expected a slightly higher gain of 0.2% for the month.