Today's edition features:
Karelian Diamonds (LON:KDR)
NU-Oil and Gas (LON:NUOG)
"Might the ECB finally call an end to its easy-money policies this summer? Business and consumer confidence was stronger than expected in January according to the European Commission’s Economic Sentiment Indicator. Rising to 108.2 from 107.8 in December, it beat consensus reaching its highest level since March 2011. With household pricing expectations now also at their highest in three years and Germany’s January inflation rate back to its mid-2013 peak of 1.9%, just fractionally below the ECB’s Eurozone target of 2%, calls to begin tapering stimulus and/or cut interest rates are getting louder. The ever-cautionary ECB will, no doubt, point out that recent data has largely been driven by energy costs and will demand more evidence from good and services before being convinced to change policy, for fear that otherwise it might simply stifle a nascent recovery. But market watchers are becoming increasingly aware that most corners of the world are signalling higher consumer prices and, although not exactly ‘trigger happy’, central banks will be determined not to be found ‘behind the curve’. Against such a background, Trump now needs to pull the next rabbit out of his hat, possibly by starting to detail tax-cutting plans or provide a genuine programme for deregulation, in order to keep US equities moving ahead. Although more than 100 US majors, including Facebook, Apple and a number of O&G groups, are due to report this week, investors concerned for the wider ramifications of the President’s selective anti-immigration stance sold US equities and the Dollar off quite sharply yesterday. All three principal US indices declined similarly, with the Dow Jones closing below the 20,000 level. This morning’s Asian trading saw the ASX following the US lead with minerals groups being targeted for profit taking once again, while the Nikkei ended even further down as the Yen:US$ touching 113.25 following the BoJ’s decision to keep policy unchanged while holding off from formally raising its forecast for consumer prices. A good batch of macro data is due from the UK this morning, including the GfK consumer confidence barometer which reportedly ticked up 2 points against expectations polled by the Wall Street Journal of a 1 point decline; other releases due mid-morning include December Consumer Credit and Mortgage Approvals, while shortly after the EU details GDP, Unemployment and CPI for January. A speech from ECB President, Mario Draghi, first thing will also be keenly listed to for any hints on prospective policy, while later the US provides January Consumer Confidence figures. UK corporates due to release earnings or trading updates include Carpetright (CPR.L), CYBG (CYBG.L), Joules Group (JOUL.L), Ocado (OCDO.L), SCS (SCS.L), Severn Trent (SVT.L) and SSE (SSE.L). London is seen recovering modestly from yesterday’s sell-off, with the FTSE-100 rising some 10 points in early trade. "
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday's session 0.92% lower at 7,118.48, whilst the FTSE AIM All-Share index closed 0.09% better-off at 881.98. In continental Europe, the CAC-40 finished down 1.14% at 4,784.64 whilst the DAX was 1.12% lower at 11,681.89.
Wall Street
In New York on Friday, the Dow Jones shed 0.61% to 19,971.13, the S&P-500 lost 0.6% to 2,280.9 and the Nasdaq was down 0.83% to finish at 5,613.71.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 1.47% to 19,083.37, while the Hang Seng dropped 0.06% to 23,360.78.
Oil
In early trade today, WTI crude was down 0.44% to $52.40/bbl and Brent was down 0.18% to $55.13/bbl.
Headlines
Deutsche Bank in money laundering fine
Deutsche Bank has been fined $630m (£504m) by US and UK regulators in connection with a Russian money laundering plan. Under the scheme, clients illegally moved $10bn out of Russia via shares bought and sold through the bank's Moscow, London and New York offices. Authorities said Deutsche had missed "numerous opportunities" to detect, investigate and stop the scheme. Deutsche Bank said it was co-operating with regulators. It also said it had put aside money to cover the cost of the settlement. During the investigation, New York authorities and Britain's Financial Conduct Authority (FCA) found that so called "mirror" trades had been carried out through the bank between 2011 and 2015. Clients would purchase stocks in roubles in Moscow before their counterparts sold the same stock at the same price through the bank's London branch.
Source: BBC News
Company news
Karelian Diamonds (LON:KDR, 0.56p) - Speculative Buy
Karelian Diamonds, the diamond exploration company focused on Finland, announced today that a diamond was discovered in one of seven till samples from the Kuhmo region undertaken by the Geological Survey of Finland on behalf of the Company. The diamond is a clear, pale green dodecahedron and measures 0.7 x 0.75 x 0.7mm. This diamond discovery coupled with high concentrations of kimberlitic indicator minerals (KIMs) identified in the area strongly suggest that a diamondiferous kimberlite is present. The KIMs include purple to red peridotitic garents (G9/G10 Cr-pyrope), mantle garnets and chromite grains. The above samples will be subject to further analysis.
Our view: This is exciting news for Karelian as finding diamonds in till samples is an extremely rare event and solidifies the potential of the area hosting diamondiferous kimberlites. The Kuhmo region of Finland hosts several previously discovered kimberlites and exhibits similar geology and geochemistry as the Arkhangelsk region in Russia, an area which hosts one of the largest diamond mines in Russia. We maintain a Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to Karelian Diamonds plc
NU-Oil and Gas (LON:NUOG, 0.41p) - Speculative Buy
NU-Oil, the independent Oil and Gas Company, announced today that it has concluded a Production Sharing Agreement with PVF Energy Services to resume operations on licence PL2002-01(A) in Newfoundland, Canada. NU-Oil will receive 50% of the net revenue from production after any costs incurred by PVF during its obligations under the agreement. PVF will cover all costs associated with an agreed Work Programme and will also fund 100% of ongoing operations on PL2002-01(A). The Work Programme comprises a coiled tubing or wireline operation to clean up the well followed by a workover rig to recomplete the well and insertion of an appropriate artificial lift system. The planned Work Programme will commence once suitable weather condition arrive and all regulatory approvals are granted, likely Q2 2017. The Agreement also allows PVF to drill additional wells on the field, a farm in agreement to cover this scenario is expected in the near future.
Our view: The Garden Hill Trend is a proven hydrocarbon-bearing accumulation beneath the Port-au-Port peninsula in western Newfoundland. We view the above announcement as positive news for the Company as the agreement will recommence activity at the site and provide new investment into the project while reducing costs to NU-Oil. We understand that PVF has created a consortium of oil and gas equipment and services providers to provide staff and takeover complete operations at PL2002-01(A). We look forward to commencement of the Work Programme in Q2 2017 with the goal of restarting production. In the meantime, we maintain a Speculative Buy rating on the stock.