Will central banks leave interest rates where they are or go for another hike?
It is the multi-billion-dollar question heading into the next week and it is likely that the answers will vary according to which country you are looking at.
Here in Australia, the perceived wisdom is that the Reserve Bank board will continue the pause on Tuesday – however, the inflation data is fairly finely balanced so a rate hike would not be a total surprise.
Those in favour of a continuing pause point to the fall in underlying inflation and the RBA’s determination to live with a bit of inflation for a while to support the buoyant jobs market.
Inflation fell on annual, quarterly and monthly measures in the March quarter, although it is still obviously a long way from reaching the RBA’s target range of 2-3%.
However, while prices of many goods were falling or rising less quickly, inflation in the services sector increased after a large pay rise of up to 5.2% for those on minimum wages flowed through to prices in restaurants and accommodation.
Services inflation recorded its largest annual jump since 2001, up 6.1%.
US rates set for a final rise?
In the US, the chances are that after meeting for two days on Tuesday and Wednesday, the Federal Reserve will announce one more hike of 0.25% on Thursday to take the range to 5-5.25% range.
The European central bank and Norway’s Norges Bank will also hand down interest rates decisions in the coming week.
Despite widespread acceptance of another looming rise, some great profit results from technology companies saw US share indices march higher on Thursday, which fed through to the Australian share market in a more muted form due to our much smaller technology sector.
Booming US market buoys Australia
That helped the Australian share market to end a five-day losing streak on the back of gains for the major banks and miners, with the ASX 200 index closing up 0.2% at 7309.20 points on Friday.
That still represents a fall in the index of 0.2% for the week but was much better than many would have expected thanks to solid rises in the US market, led by the tech dominated Nasdaq market increasing 2.4%.
Despite two weeks of falls, the ASX 200 is still up by 1.8% this month and 3.8% for this year so there is fodder for the optimists and pessimists alike.
Megaport impresses
One of the standouts on the Australian market was technology cloud network connection business Megaport (ASX: MP1), which saw its shares rise by a stellar 41.5% to $5.63 for the day on the back of a significant earnings upgrade.
It now projects earnings to be “materially above” market consensus after moves to greatly improve its financial performance.
It now expects normalised pre-tax earnings in the range of $16 million to $18 million this financial year, rising to a range of $41 million to $46 million next year.
Supermarket group Coles (ASX: COL) was a bit more disappointing for investors with shares down 1.4% despite a 6.5% increase in total sales revenue and a 7% gain in the March quarter.
Some of that disappointment might reflect the fact that those figures were less impressive than they seemed because they were close to matching supermarket inflation of 6.2%.
Overall, six of the 11 sectors rose in Australia, with real estate jumping 1.1% and financials up 0.6%.
Small cap stock action
The Small Ords index inched 0.15% higher to close at 2898.0 points.
Small cap companies making headlines this week were:
Chimeric Therapeutics (ASX: CHM)
Clinical stage cell therapy company Chimeric Therapeutics has received ethics approval for a phase 1B clinical trial to test its CHM 1101 candidate, a chimeric antigen receptor (CAR) technology therapy, in patients with recurrent or progressive brain cancer.
CHM 1101 uses a peptide called chlorotoxin derived from deathstalker scorpion venom to target solid tumours, and preclinical research has shown its effectiveness against glioblastoma multiforme, an aggressive form of brain cancer with limited treatment options.
The two-part trial will begin with a phase 1 dose escalation/confirmation study and progress to a phase 2 dosing plan with a dose expansion cohort of 12-26 patients.
Positive results could lead to a registration trial aligned with regulatory feedback.
Chimeric also revealed it had secured a patent in India for its CAR technology using chlorotoxin.
The patents cover CH 1101 and Chimeric’s pre-clinical candidate CHM 1301.
Additionally, Chimeric received an official notification prior to acceptance from the Israel Patent Office for the same technology.
International Graphite (ASX: IG6)
A proposed graphite battery anode material facility in Collie could generate “outstanding financial returns” for International Graphite.
A scoping study on the facility estimates it could produce up to 40,000t of graphite concentrates annually.
The study looked at the facility producing an uncoated spheroidised purified graphite (USPG) product using a flow sheet involving graphite micronising, spheroidising and non-HF chemical purification, which would then undergo carbon coating to create a coated spheroidised purified graphite (CSPG) material.
Production of these products would be implemented in two stages.
In establishing a plant for stage one that could initially generate up to 20,000tpa of USPG and 17,000tpa of micronised by-products, the scoping study assumes capital expenditure of US$87 million (A$124 million), which includes contingency costs.
This could result in annual revenue of about US$95 million and EBITDA of US$43 million.
To install a plant that can produce 18,602tpa of CSPG and 17,000tpa of micronised by products, the study estimates a capital expenditure of US$223 million.
The second stage could then bring in about US$172 million in annual revenue and EBITDA of US$100 million a year.
Ioneer (ASX: INR)
Ioneer posted a 168% increase to contained lithium carbonate resources for the South Basin deposit within its Rhyolite Ridge project in Nevada in the US.
The update brings the South Basin deposit estimate to 3.4Mt of lithium carbonate equivalent.
Additionally, contained boric acid equivalent has increased from 11.9Mt to 14.1Mt. The resource also offers optionality over future growth opportunities including boosting lithium production, without increasing boron output.
All mineralised units at the South Basin deposit remain open in three directions and only account for about 3 square kilometres of the entire South Basin target area. Production at Rhyolite Ridge is forecast at 22,000t a year, with boron output of 17,400tpa over 26 years.
Blue Energy (ASX: BLU)
On Friday, Blue Energy revealed production testing of the Sapphire pilot well project had reached a steady flow rate 100,000 cubic feet per day of gas.
The pilot well project is part of the Sapphire Block in ATP 814 in Queensland’s North Bowen Basin.
This achievement of 100,000cfd is up from the previously reported 70,000cfd and is due to stabilising water rates.
Dewatering is continuing as part of the production testing process, with Blue noting it needs to be managing cautiously to ensure minimal damage to the coals.
The combined water rate at Sapphire from all of the pilot wells is stabilising at 200-250 barrels of water a day.
Blue stated these achievements were “encouraging”.
The object of the pilot well drilling and production testing campaign is to expand Blue’s reserve base at the Sapphire Block, as well as assessing the productivity of the coal seams for future development.
Results from the exercises will underpin sizing of the Sapphire field development.
All-up, ATP 814 hosts 2P reserves of 79PJ, and 3P reserves of 335PJ. Gas resources for the permit are about 3,000PJ.
Astral Resources (ASX: AAR)
Astral Resources has reported more high-grade gold intercepts at its Mandilla project in Western Australia, including one of the best drilled to-date at the Theia deposit.
This hole yielded a peak 1m interval grading 133.25g/t gold and unearthed more than 250-gram metres of gold across several intercepts.
Astral is continuing to focus on growing the resource base at Mandilla to reach the critical mass required to support a “robust standalone mine development”.
Mandilla has a current resource of 30Mt at 1.1g/t gold for 1.03Moz.
The week ahead
While official interest rates will be the dominant factor moving markets in the coming week, there is a major local development that will answer a lot of questions.
Initially banks shares were seen as a great place to be due to rising interest rates pushing earnings higher but that narrative changed dramatically when a couple of US banks suddenly failed.
Since then, bank share prices have remained more muted but the next couple of weeks will answer a lot of questions with interim results set to be released by National Australia Bank (ASX: NAB), ANZ (ASX: ANZ) and Westpac (ASX: WBC).
While the results will obviously reflect individual variations, they should help to paint a picture of the overall health of the sector in Australia as it battles rising mortgage stress among customers and strong competition to write mortgages amid a lot of refinancing.
Other things to watch for in the coming week are continuing US profit results, which have so far been more positive than expected and speeches by RBA governor Dr Philip Lowe and assistant governor Luci Ellis.
The RBA’s updated set of economic forecasts will also be part of Tuesday’s interest rate decision, with the semi-annual Statement on Monetary Policy out on Friday.
In the US, the main news aside from the Fed announcement will be around the strength or otherwise in job figures.
Get the wire before the market opens.
The ASX small-cap stories that matter, filed before 9am AEST. Curated by the Small Caps desk.