Today's edition features:
• Sunrise Resources (LON:SRES)
• ASOS (LON:ASC)
"US equities remained in a positive mood yesterday following more dovish comments from Janet Yellen on the second day of her Testimony, this time before the Senate Banking Committee. During a quieter session, however, some traders sought excuses for not to take major new positions, pointing instead to new key macroeconomic data due for release later today, including reports on retail sales, consumer prices and industrial production. Thursday’s Labor Department report, however, confirmed a slight decrease in Initial Jobless plus a modest 0.1% uptick in US producer prices for the month of June, both of which remained consistent with the Fed Chair’s expected move to normalize the size of its US$4.5tr balance sheet later this year, which she bases on continuation of a strong labour market and firming economic activity. All three major averages nevertheless put on fractional gains sufficient to see the Dow Jones set its 24th record high of the year, while the Nasdaq rose for its fifth straight session, its longest run in six weeks. With second quarter earnings reports kicking-off today, including key releases from three of Wall Street’s biggest banks: Citigroup, JP Morgan and Wells Fargo, S&P Financials were the strongest performer of the 11 major sectors yesterday, with a rise of 1.1%. Techs were also in demand, but Oils became relatively becalmed following recent volatile sessions, despite crude prices moving lower on Thursday as the IEA reported global crude supplies in June lifting by 720k bbl to 97.5 million/day, as a result of higher output from both OPEC and non-OPEC producers including the U.S. Elsewhere gold stocks came under pressure, with the ARCA Bugs index falling 1.52%, as the precious metal pulled back after three rising sessions. The yield on benchmark 10-year U.S. Treasuries settled at 2.348%, up 2.3bp, ending three days of rising prices as gossip circulated that Central Banks will soon tighten the easy money policies that have supported asset prices for the past decade; focussing this was news that Mario Draghi, President of the ECB, is scheduled to speak at August’s Jackson Hole Economic Policy Symposium for the first time in three years, during which he could signal a shift to reduce the Eurozone’s dependence on monetary stimulus. While most Asian markets moved gently higher on Friday morning, with the Fed having bolstered risk appetite across the region, Chinese equities chose not to participate. This was despite the country’s fiscal spending surging 19.1% in June from a year earlier, or more than twice May's 9.2% expansion, according to data released by the Ministry of Finance on Friday. Instead, the Shanghai Composite was trading 0.2% down shortly ahead of the close, while the Hang Seng remained roughly flat as traders voiced concerns that new regulation or lending limits might be proposed during the forthcoming National Financial Work Conference, in order to restrict some highly geared activity and funding offered through Chinese financial groups. Elsewhere in the region, the KOSPI gained on tech demand, the S&P/ASX 200 was boosted by buying across its mining groups, while the Nikkei rose modestly as the Yen gave back a little of its recent strength. Riding on the backs of the US and Asian market closes, continental European equites remained in the positive throughout Thursday. The STOXX 600 ended up 0.32% with the IBEX 35 the strongest amongst local markets that all closed in the positive. Amongst features, Daimler recovered from an early plunge following media reports it had cheated on emission tests, while Telecom Italia was boosted by a credit rating upgrade. In London, however, equities spent the day bouncing either side of unchanged to end fractionally down. The FTSE-100 was undermined by hawkish comments from BoE policy maker Ian McCafferty as he called for an early ending of the Central Bank’s QE programme, whilst an already soft US$ also firmed Sterling. Meanwhile, the British Chambers of Commerce’s Quarterly Economic Survey confirmed the economy grew at a subdued rate in the second quarter of 2017, with domestic services in particular showing weakness. Miners were firm early on after strong Chinese data confirmed a jump in June imports, although this had mostly been given back by the close. Elsewhere, gains were led by BT Group, while media reports suggesting AstraZeneca’s CEO had resigned to join Israeli generics firm, TEVA, sent the shares tumbling. There is no UK macro data due for release today, although the EU provides its May Trade balance. The US, however, has a significant batch of number due for release, including June Retail Sales, Consumer Prices, Capacity utilisation and Industrial production, as well as the Michigan Consumer Sentiment Index. FOMC Member, Robert Kaplan is also due to make a speech. UK corporates due to release earnings or trading updates include DCC (DCC.L), Ashmore group (ASHM.L), Hays (HAS.L), and Workspace Group (WKP.L). Tracking sentiment from the overnight markets, Europe is expected to rise modestly from the opening although the FTSE-100, which is likely to remain subdued relative to its continental neighbours, is seen up between 5 and 10 points in early trading."
- Barry Gibb, Research Analyst
The FTSE-100 yesterday's session 0.05% lower at 7,413.44 whilst the FTSE AIM All-Share index was down 0.13% at 956.81. In continental Europe, the CAC-40 finished up 0.25% at 5,235.40 whilst the DAX finished 0.12% higher at 12,641.33.
In New York last night, the Dow Jones rose 0.1% to 21,553.09, the S&P 500 firmed 0.19% to 2,447.83 and the Nasdaq Composite gained 0.21% to 6,274.44.
In Asian markets this morning, the Nikkei 225 had risen 0.21% to 20,141.64, while the Hang Seng 0.01% to 26,348.49
In early trade today, WTI crude was up 0.17% to 46.16/bbl and Brent was up 0.23% to $48.53/bbl.
Top Stories Treasury Committee head seeks wider scope
Nicky Morgan, the new chair of the influential Treasury Committee, has said she wants the body to extend its scope beyond banks and Brexit. Ms Morgan, a former education secretary, told the BBC she wants to look "at the wider Treasury remit". She said: "We want to look at the management of the economy, public spending decisions. "We've got a Budget coming up, with issues like household debt, tax policy, investment in infrastructure. "These are all the things that actually our constituents put us in the House of Commons for, the things that make a difference to household budgets and to their economic security." Ms Morgan, the first female chair of the Treasury Committee, saw off competition from five other Tory MPs to land the role heading the committee of MPs that scrutinises the Treasury. In the past few years, its members have grilled chancellors of the exchequer and governors of the Bank of England, as well as numerous chief executives.
Source: BBC News
Sunrise Resources (LON:SRES, 0.12p) – Speculative Buy
Sunrise Resources published an update on its work programme at its flagship CS Pozzolan-Perlite Project in Nevada. The trenching work is complete with 11 trenches dug, mainly in an area where scree or other material hides the pozzolan perlite deposit below. All but one of the trenches reached the pozzolan perlite bedrock, or at least rock that looks good but will need pozzolan and perlite testing to be sure. Drilling is the other part of the work programme and will start this weekend. Six holes will be drilled, taking one week, and the material collected will be for further testing, industrial trials and mine planning.
Our View: This is a positive update for a few reasons. Trenching shows the deposit continues beyond the large areas where it is obvious and outcropping. Sunrise is showing how easy it is to operate in Nevada, and is progressing the CS Project quickly. This work will provide material for industrial trials as Sunrise looks to build an industrial minerals business as soon as possible. We have a Speculative Buy recommendation.
Beaufort Securities acts as corporate broker to Sunrise Resources Plc
ASOS (LON:ASC, 5,759.00p) – Buy
ASOS, a global online fashion retailer, yesterday provided its trading update for the 4 months ended 30 June 2017. During the period, Group revenues advanced by +32% to £675.8m, while it increased by +26% on a constant exchange rate basis (‘CE’), against the comparative period (4 months ended 30 June 2016). On a reported basis, total retail sales rose by +32% (CE: +26%) to £660.1m, comprised of +16% growth in the UK to £234.6m and +44% (CE: +32%) growth in international to £425.5m. Within international retail sales, US saw +38% (CE: +26%) growth to £94.4m, EU rose +41% (CE: +30%) to £196.6m, while Rest of World (‘ROW’) recorded +54% (CE: +41%) growth to £134.5m. Retail gross margin during the period remained flat against last year. On the operational front, the Group said “Phase 1 transition” of its warehouse site from Eurohub 1 to Eurohub 2 is operational, while “Phase 2 underway”. ASOS’s CEO, Nick Beighton, commented “This good performance has been underpinned by advances across all areas of our business including retail, technology, warehousing, delivery solutions and customer care. We remain on track and confident of meeting market expectations…”. The Group is scheduled to release its full year results on 17 October 2017.
Our View: ASOS’s performance continued to be strong for the first 10 months of the FY2017, with solid growth across all regions. Combined with strong constant currency results, its figures were boosted by the weaker Sterling against other currencies. Although UK sales year-to-date has slightly dipped to +17% from +18% seen for the first 6 months, continued strong international sales and maintained overall margin was encouraging. Looking down the KPIs, the Group has expanded its number of active customers by +25% year-on-year, with both average basket value and average order frequency improved by +3% and +6%, respectively. Total order rose by +28% year-on-year to 16.9 million, implying conversion rate improvement of +0.1%. Looking ahead, given the strong performance year-to-date, the Group said it expect to deliver its full year reported sales growth at the upper end of the +30% to +35% range, with capex remained unchanged at £150m to £170m. This leads to while pre-tax profit expected to be in line with consensus analysts’ forecast of £79.4m, which locates them a touch above the mid-point of previous indication of between £72m to £84.5m. Meanwhile, the Group’s medium-term reported sales growth guidance was reiterated at c.+20% to c.+25% per annum. Given pre-tax profit remain in line with market expectations, Beaufort reiterate its Buy rating on the share.