The markets
Europe
The FTSE-100 finished Friday's session 1.70% higher at 6,156.32, whilst the FTSE AIM All-Share index closed 0.72% better-off at 727.86. In Europe, markets ended higher, ignoring uncertainty over a possible interest rate hike by the Fed. Investors turned their focus towards the meeting of finance ministers and central bankers from the G7 economies. France's CAC 40 and Germany's DAX advanced 1.7% and 1.2%, respectively.
Wall Street
Wall Street ended in the green on Friday, paring losses made earlier in the week. Investors cheered the release of positive economic data in the US. The S&P 500 rose 0.6%, led by a rally in information technology stocks. For the week, the market closed 0.3% higher.
Asia
Equities are trading mixed after the meeting of G7 economies failed to reach an agreement to revive global growth. The Nikkei 225 fell 0.5% due to strengthening of yen and a fall in Japanese exports. The Hang Seng was trading broadly flat at 7:00 am.
Oil
On Friday, WTI and Brent oil prices decreased 0.9% and 0.2%, respectively. The spread between the two varieties stood at US$1.0 per barrel.
Headlines
Japan's exports decline in April
As per data from Japan's Ministry of Finance, the country's exports fell 10.0% y-o-y in April and imports slipped 23% y-o-y, resulting in a trade surplus of ¥823.0bn. The weak trade data was primarily due to poor demand from China, the US, and other emerging economies. Moreover, Japan's manufacturing PMI dropped to 47.6 in May from 48.2 in April, its sharpest decline since December 2012.
Company news
Asiamet Resources (LON:ARS, 2.38p) - Speculative Buy
On Friday, Asiamet Resources (Asiamet) filed a technical report supporting the independently prepared preliminary economic assessment (PEA) study on the Beruang Kanan Main (BKM) mine. The study has been finalised in accordance with the guidelines of Canadian National Instrument 43-101. The main highlights of PEA include target annual production of 25,000 tonnes of LME grade A (99.999%) copper metal to deliver gross revenue of US$1.27bn over the eight-year life of the mine. The project has an after-tax net present value (NPV) of US$204.3m, internal rate of return (IRR) of 38.7% and payback period of 2.4 years. The project's initial capital cost is US$163.8m. Furthermore, operating costs have been set at US$1.28 per pound.
Our view: The update mentioned above underpins the considerable potential and quality of the BKM mine. The PEA study results are attractive, indicated by high NPV and IRR. In addition, the study indicated low operating costs, low strip ratio, strong cash flow generation capacity and short payback period. Moreover, further work and exploration in and around the BKM mine would enhance project value. The mine remains open in several directions with presence of targets at Beruang Kanan South (BKS), Beruang Kanan West (BKW) and BKZ polymetallic prospects. These prospects have great potential for additional copper mineralisation, indicated by strong surface and drilling results until date. Asiamet plans to carry out drilling at the targets around the BKM site to expand resource potential. We are buoyed by Asiamet's PEA study results and look forward to further developments. Therefore, we maintain a Speculative Buy rating on the stock.
Meggitt (LON:MGGT, 379.90p) - Buy
On Friday, Meggitt announced that Meggitt Target Systems (MTAS) had won a five-year National Individual Standing Offer (NISO) worth up to US$35.0m from Canada's Department of National Defence. The majority of the targets would be manufactured at the production facility of MTAS in Medicine Hat, Alberta, with deliveries expected this year.
Our view: Meggitt continues to build on its existing ties with the Canadian Armed Forces, given it has received another contract. The target systems to be manufactured include the advanced, unmanned Hammerhead surface system, which can form part of a swarm threat simulation of up to 16 vessels, and Vindicator, an aerial target that can present the appearance of various aircraft profiles to radar, for naval weapons development and personnel training. Recently, Meggitt reported its Q1 2016 trading updates, which were in line with expectations. The company remains on track with regard to cost-cutting plans. Meggitt is likely to benefit from a stronger US dollar and the two composite acquisitions completed towards the end of 2015. The company has undertaken initiatives to improve R&D investments and acquire new platforms, aimed at long-term revenue growth. In addition, the deployment of the Meggitt Production System has resulted in several tangible improvements in many operational and customer satisfaction metrics. Meggitt's high focus on product quality, operational efficiency and programme management is likely to increase the company's attractiveness as a supplier of choice to meet changing customer needs. Thus, in the view of continuous internal improvements and multiple contract wins, we maintain a Buy rating on the stock.
Shanta Gold (LON:SHG, 6.12p) - Speculative Buy
On Friday, Shanta Gold launched an open offer for raising up to €3.2m through the issue of 38.47 million new ordinary shares at a price of 6.5p per share. Qualifying shareholders can subscribe for open offer shares on the basis of one open offer share at the issue price of eight existing ordinary shares held on the record date (i.e. 5.00 pm on 18th May 2016).
Our view: Shanta Gold primarily engages in gold mining, processing and exploration in Tanzania. The open offer has been made after the company issued new ordinary shares to raise US$10.0m earlier this month. The earlier offer received positive response from shareholders, given about US$10.5m was raised. The funding would help Shanta Gold in meeting capital expenditure requirements at the New Luika Gold Mine (NLGM) over the rest of 2016. In addition, the company would be able to execute the Base Case Mine Plan, undertake the underground development of the NLGM and progress with satellite deposit exploration. Moreover, the proceeds from the open offer would strengthen its financial position, enabling further exploration work. Considering the argument mentioned above, we maintain a Speculative Buy rating on the stock.
Economic news
US existing home sales
Existing home sales in the US increased 1.7% m-o-m to a seasonally adjusted annual rate of 5.45 million units in April, from a revised 5.36 million units in March, the National Association of Realtors announced on Friday. The markets expected the home sales to increase to 5.40 million units.