Afternoon Report / Iron Ore rocks the market – Fortescue tanks

By Market Matters 13 April 17

Iron Ore rocks the market – Fortescue tanks

Market Matters Afternoon Report 13th April 2017

**No Weekend Report due to Easter – back on Tuesday Morning the 18th. Have a break**

Equities have grinded higher throughout April and all was running to script until Iron Ore fell -8% overnight and Fortescue picked a poor day to deliver a weak set of production numbers which prompted profit taking across the market – but particularly in the material stocks. More on FMG below, however in terms of the index, we opened lower and there was very little appetite to buy ahead of the Easter break and we drifted sideways for the season. We had a range today of +/- 37 points, a high of 5918, a low of 5881 and a close of 5890,  off -44pts or -0.74%.

ASX 200 Intra-Day Chart

ASX 200 Daily Chart – a drop below 5900 now puts us in a more cautious frame of mind after a good run of late

Fortescue picked an average day to release an average set of production numbers and not even Nev Power and his PR team could sugar coat it – the stock closed down -6.78% to $5.50 after announcing;

-       Production volumes and shipments were good at 39.6mt however cash costs of $13.06 per ton was higher that the ~$12.50 expected. Realised price was also lower at 66/t  vs ~$70/t expected which is not great, but is aligned with what they generally get when Iron Ore prices are weak given they have lower quality Ore

-       They also lowered June QTR guidance in terms of price from 85-90% and now expect 75-85% of benchmark.

-       The stock was down -6.78% however we think they’ll be earnings revisions down by 10-15%

-       The have $1.5bn in cash and are guiding to full year shipment of 165mt to 170mt

We talked recently about buying FMG into weakness however given our exposure in BHP and RIO + the Easter break, we thought it best to revisit next week

Fortescue (FMG) Daily Chart

We took a nice +18% profit in Evolution today on the back of a nice pop in the stock. We continued to view GOLD as a trading vehicle and we’ll take those gains when they’re on offer!!

Evolution (EVN) Daily Chart

Have a great night,

The Market Matters Team


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