Global markets were higher overnight, reversing Friday's losses as the US market heads for its third monthly gain in four, following a weak August.
Technology stocks were under pressure after a report suggested Trump was considering ways to limit US investments in China, which was later refuted by the Trump administration. However, weaker European manufacturing data, the threat of a Trump impeachment and lingering uncertainty over US-China trade talks took their toll on markets last week.
Closer to home, this afternoon sees a decision by the Reserve Bank of Australia – with the market expecting an interest rate cut (75% chance), following a strong hint by Givernor Lowe in his last speech.
Stock in Focus: Lynas (LYC:ASX)
Shares in rare earth miner LYC continue to be volatile amongst a number of news events, both positive and negative. The major being Lynas receiving a 6-month extension of its operating license, which was shorter than expected with conditions which are slightly tougher than previously anticipated.
This includes relocating their Cracking & Leaching process to Western Australia within 4 years – which is currently part of Lynas initial 2025 growth plan, and obtain consent for the location of a Permanent Deposit Facility (PDF) within 6 months. Lynas 2019 full year result was mixed, as weaker rare earth prices offset record production levels (up +8% from last year), which created operating earnings (EBIT) of $56.4m, down -30% from last year. Reported net profit tax was $80m for the year, up +50% from last year, largely due to lower financial expenses and a one-off financial gain. NdPr pricing was weak for most of the year, however trade war concerns (US banning Chinese rare earth imports) sparked a rally late in the financial year due to concerns around supply. In terms of near-term outlook, demand continues to remain strong outside of China, however Lynas have yet to receive approval in Malaysia to lift its production levels, which had restricted production growth in the 2019 financial year. In our view, Lynas provides an attractive investment for those wanting to gain indirect exposure to electric vehicle theme.
We currently have a BUY (High-Risk) rating on Lynas.
Australia & New Zealand Market Movers
The Australian market was lower yesterday (ASX 200 Index -0.41%) as market movements were relatively muted through the session, in the absence of any major economic or geopolitical events. A cut at the Reserve Bank's October meeting is being forecast by a majority of economists, with 20 of the 27 economists surveyed by Bloomberg expecting the cash rate to fall to 0.75 per cent this week. Rio Tinto shares rose after reports emerged it had pulled plans to sell or list its Canadian iron ore business. The miner has been seeking to divest the business for several years. Nufarm shares soared 26% after it announced it was offloading its South American business to powerful Japanese backer Sumitomo for $1.18 billion.
The New Zealand market rallied on Monday (NZX 50 Index +0.82%) with gains led by retirement stocks and A2 Milk. Shares in Sky Network Television fell as it indicated it would need shareholders to approve a plan to extend its Sanzaar rugby rights. The company is willing to bid $235 million to get the broadcasting rights, but needs shareholder approval because its market value is not more than double the value of the deal. Its market cap was sitting at $463.9 million today and deals worth more than half a company’s value must go a vote.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to continue to feature in headlines.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- Monthly US employment figures are released at the end of the week.
Have a Great Day,