Market wrap: banks and miners force market lower
WEEKLY MARKET REPORT
After an impressive three weeks of gains, the Australian share market staged a bit of a retreat this week with the big miners and banks leading the bourse lower.
There were also renewed fears that next week’s core inflation CPI numbers out on Wednesday may not be low enough to stop the Reserve Bank of Australia from lifting the cash rate to 3.85% on 2 May.
By close of trade on Friday, the ASX 200 had lost 0.4% or 31.8 points, to 7330.4 points, which made up the entire 0.4% loss for the week.
Iron ore piling up
Iron ore has started to pile up at ports around the world which led to more pessimism about steel demand.
This resulted in iron ore futures falling much closer to the key US$100 a tonne mark in China and Singapore.
That was not good news for the big miners, with Rio Tinto’s (ASX: RIO) shares down 2.8% to $117, Fortescue Metals (ASX: FMG) shares 4.2% lower to $21.49 and BHP (ASX: BHP) shares down 2.3% after some lower-than-expected production news across its nickel, copper, iron ore and coking coal divisions.
It wasn’t all bad news for all miners with shares in Whitehaven Coal (ASX: WHC) jumping 5.9% after news that its Vickery project will produce coal within 15 months.
Banks under the pump
Bank shares were under the pump with ANZ (ASX: ANZ) down 0.5%, Commonwealth Bank (ASX: CBA) shares dipping 1.1%, NAB (ASX: NAB) shares declining 1.1% and Westpac (ASX: WBC) shares shedding 1.2%.
“Outperforming” the bigger banks on the downside was Bank of Queensland (ASX: BOQ) shares which lost 5%.
Once again gold has been a great safe haven, with producers continuing to rally as the precious metal’s price remained just above the important US$2,000 an ounce level.
Some examples included St Barbara (ASX: SBM) with shares up 5.4%, Silver Lake Resources (ASX: SLR) gaining 2.1% and Northern Star (ASX: NST) shares 0.9% higher.
Small cap stock action
The Small Ords index fell 1.05% for the week to close at 2893.7 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Echo IQ (ASX: EIQ)
A clinical trial of Echo IQ’s EchoSolv artificial intelligence medical software technology detected 72% more patients with severe aortic stenosis compared to human diagnosis alone.
The trial, funded by Edwards Lifesciences and conducted with the National Echo Database of Australia at St Vincent’s Hospital sites in Sydney and Melbourne, applied EchoSolv to 9,189 patient echocardiograms.
EchoSolv identified 376 individuals with severe aortic stenosis, compared to 218 diagnosed by humans.
Additionally, the AI software did not discriminate by gender, whereas women were 66% less likely to be accurately diagnosed by human-only assessment.
EchoSolv aims to support improved diagnosis without unconscious bias and assist doctors in decision-making for aortic valve intervention and follow-up.
Larvotto Resources (ASX: LRV)
Larvotto Resources has discovered “bonanza grade” rare earth oxides from aircore drilling at the Merivale South prospect in Western Australia.
Assays returned up to 1.26% total rare earth oxides (TREO), with significant percentages of neodymium, praseodymium, and dysprosium.
Larvotto’s managing director Ron Heeks said the exceptionally high-grade mineralisation, was comparable to global leaders in the rare earth exploration sector.
The Merivale South project spans 620sq km and could be suitable for simple, low-cost processing due to the rare earths being hosted within ionic clays. Metallurgical testing is underway to confirm this theory and inform future drilling programs.
Radiopharm Theranostics (ASX: RAD)
Dutch company TerThera to supply isotope Terbium-161 to Radiopharm Theranostics for use in its Radiopharm’s RAD 602 radiotherapeutic, which targets protein tyrosine phosphatase mu (PTPmu) in cancer cells.
A phase 1 trial of RAD 602 for treating brain cancer patients is set to begin in Q4 2023. Terbium-161 is considered superior to Lutetium-177 due to its increased potency and efficacy in selectively destroying tumour cells, while preserving healthy tissue. The supply agreement lasts for an initial three years, starting from 17 April, and may be extended for an additional two years.
Pure Hydrogen (ASX: PH2)
Pure Hydrogen Corporation will launch Australia’s first Hydrogen Fuel Cell Prime Mover, the ‘Taurus,’ at the Brisbane Truck Show on 18 May 2023.
This will be followed by commercial trials with PepsiCo Australia.
The Taurus, an Australian-designed 220-kilowatt 6bx4 prime mover, was developed by Pure Hydrogen in collaboration with PepsiCo.
Pure Hydrogen holds exclusive rights to the truck design in Australia and anticipates multi-vehicle orders after the trial period.
The company is also developing Australia’s first hydrogen-powered garbage truck, set to be delivered by the end of the current quarter.
Pure Hydrogen also owns a 24% stake in H2X Global, which plans to produce fuel cell products in India in 2023 through a joint venture with Advik Hi-Tech.
Moho Resources (ASX: MOH)
Another explorer to report a “significant” clay-hosted rare earths discovery this week was Moho Resources, which announced the mineralisation had been uncovered at the Pyramid Road and Ned’s Corner Road prospects within the Peak Charles project in WA.
The project is about 88km northwest of Esperance and covers 874sq km of ground.
Moho announced on Thursday it had received assays from a maiden reconnaissance 81- hole aircore drilling program at the project.
Assays revealed up to 1,890 TREO had been encountered during the program.
Of that, magnet rare earth oxides made up to 35.3% of the TREO grade.
Additionally, critical rare earth oxides were observed in up to 41% of the TREO mix.
Moho managing director Ralph Winter said the company was “excited” by the results.
“Moho believes the identified target zone of 15 by 12km thus far, with further room for growth across the tenement package, puts the company in a positive position in the REE market in Australia,” he added.
The week ahead
Inflation is the name of the game in Australia for the coming week, with the monthly and quarterly consumer price index (CPI) to be released on Wednesday after the Anzac Day holiday.
Traders are now fairly confident that inflation has peaked, but the speed of the trend down to more reasonable levels is still highly uncertain.
Most analysts think the annual CPI will have fallen from 7.8% to around 7% after recording a 1.3% rise for the March quarter, although predicting inflation numbers comes with quite a bit of uncertainty.
Similarly, the trimmed mean or underlying inflation figure is tipped to have risen by 1.4% over the quarter, producing a measure of 6.7% for the year.
The RBA tends to look at the underlying numbers to get a measure on how fast inflation is falling so any disappointment in that number will be poorly received.
We will have to wait and see; however, rises higher than these are unlikely to be greeted with great joy by markets while bigger than expected falls could instil some extra confidence.
There is a range of other market data to be released including taxation revenue and mortality, temporary visa data and producer price indexes which give some insight into business inflation.
In the US there is a range of data in the lead up to the crucial Federal Reserve Open Market Committee meeting on 2 and 3 May, which will indicate if there is going to be a reprieve from interest rate rises or not.
The highlight is probably personal income and spending figures for March, which will show whether the US consumer is still spending while other things to watch include data on wages and salaries, consumer sentiment and housing activity.
The largest company specific announcements will come from the continuation of the US profit-reporting season, with some of the reporting companies to watch including Coca-Cola, 3M, General Electric, General Motors, McDonald’s, Verizon, Alphabet, Microsoft, Boeing, MasterCard, Visa, Amazon, American Airlines, Domino’s Pizza and Merck.