Market wrap: Bullock rally an appropriate welcome – now comes the hard part
WEEKLY MARKET REPORT
It would be nice to think that the Australian share market rose on the back of the historic appointment of Michele Bullock as Reserve Bank governor.
In truth, following a positive lead from the US market is a much more likely explanation for the 56.2 point rise for the ASX 200, although it would be churlish not to associate the rise with the Bullock appointment, given it might be one of the few pieces of good news she gets for a long time.
Her predecessor – current RBA governor Dr Philip Lowe – is living proof of that, having worn the wrath of millions of Australians for his undoubtedly poorly messaged “intention” to keep official interest rates at a record low 0.1% until 2024.
That “promise” spectacularly failed to go the distance when the RBA jacked up official interest rates an amazing dozen times since May last year.
Rate hikes near the end?
With any luck at all, Dr Lowe should have finished hiking rates by the time Michele Bullock moves from the assistant governor’s office to the big office in Martin Street by September.
As if in celebration, the market has now marked down the chances of an Australian rate rise in August to 40%.
With inflation falling faster than expected in the US, there is every chance that our tightening cycle is coming to an end too, although Australia has been behind on the inflation curve for some time.
Whatever the reason, the Australian share market enjoyed a fourth consecutive higher session, with investors excited that the US Federal Reserve might be able to dispense with any further interest rate rises and also for the chance of further stimulus in China.
The ASX 200 index rose 0.8% or 56.2 points, to 7303.100, with nine out of the 11 industry sectors finishing higher.
As you would expect in a “growth on” move, the technology sector came out the best, jumping 1.7% on the back of rises including WiseTech (ASX: WTC) shares up 2.4%, Xero (ASX: XRO) shares up 1.6 % and NEXTDC (ASX: NXT) shares up 1.4%.
Miners chase tech higher
The big miners had a strong day too with iron ore futures trading up 2%, helping to push shares in BHP (ASX: BHP) up 1.8% to $45.52, Rio Tinto (ASX: RIO) shares up 1.6% and Fortescue Metals (ASX: FMG) shares up 1.4%.
Gold miners also had a strong day with all of the big players higher, with Evolution Mining (ASX: EVN) setting the pace with a 3% share price rise.
Higher oil prices helped to buoy energy stocks with Woodside Energy (ASX: WDS) shares up 1.5%, Yancoal (ASX: YAL) shares up 0.9% and Viva Energy (ASX: VEA) up 3.4%.
The defensive healthcare sector was understandably weaker with a 1.3% fall by sector leader CSL (ASX: CSL) indicative of the switch away from defensive stocks.
A spectacular exception to that rule was junior biotech Neuren Pharmaceuticals (ASX: NEU), with its shares flying 16.8% higher to $13.59 following an expanded licensing deal with US distribution partner Acadia.
Mesoblast (ASX: MSB) shares were up 8.2% to $1.39, with a FDA decision on a drug application set to be released on August 2.
Small cap stock action
The Small Ords index rallied 5.23% for the week to close at 2903.4 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
One Click Group (ASX: 1CG)
One Click Group has reported a rapid increase in user registrations for its digital financial support platform, growing by 10,000 in just over a week to surpass 90,000 users, a 12% increase.
The growth was driven by tax season and mortgage rate uncertainties, coupled with growing demand for digital financial services in Australia.
One Click’s platform includes tax and mortgage services, with the recent growth presenting business opportunities especially for the core tax product.
The company has seen significant revenue growth, more than 300% between July 1-12, and has already exceeded the 2022 full year’s revenue.
The company also secured additional funding of $1 million for the expansion of its ‘Next Day Refunds’ tax product, which provides customers an advance cash payment of their tax refund.
Revolver Resources (ASX: RRR)
Revolver Resources will commence a 2,000m diamond drilling program at its Dianne polymetallic project in northern Queensland, following positive electro-magnetic survey results.
The program will focus on three targets identified in the Larramore Volcanic Belt during helicopter-borne electromagnetic survey work.
The company views these anomalies as priorities following recent field mapping activities that confirmed an 8km north-south outcrop indicative of high copper endowment in soils.
Given the compact and high-grade nature of the known mineralisation at Dianne, Revolver believes the project could become one of the world’s lowest-cost copper operations.
Exploration will also proceed at the company’s other project, Osprey, where the company is targeting Mount Isa-style copper.
Cirrus Networks (ASX: CNW)
Technology solutions provider Cirrus Networks is partnering with global computing specialist Nvidia to advance accelerated computing and AI innovations in Australia’s resources sector.
The partnership will leverage Nvidia’s graphic processing units and AI solutions alongside Cirrus’ industry expertise to facilitate AI-driven technologies.
This will enable resource companies to extract insights from large data volumes, optimise operations, improve safety, and drive sustainable growth.
Cirrus also plans to utilise Nvidia’s Spectrum-X networking platform to enhance the performance and efficiency of AI clusters.
Cirrus chairman, Paul Everingham, highlighted the transformative potential of the partnership, particularly in advancing sustainable methods and achieving net zero emissions.
Lotus Resources (ASX: LOT) and A-Cap Energy (ASX: ACB)
Uranium outfits Lotus Resources and A-Cap Energy are set to merge to develop two projects in Africa: Lotus’ Kayelekera project in Malawi and A-Cap’s Letlhakane asset in Botswana.
The former, is currently on care and maintenance, is globally ranked fourth in historical annual uranium production, while the latter is among the world’s largest undeveloped uranium deposits.
The merger will yield a five-fold increase in Lotus’s resource base, from 51.1 million lbs to 241.5 million lbs, while A-Cap shareholders will gain exposure to a production-ready asset in Kayelekera.
Under the proposed arrangement, Lotus will acquire 100% of A-Cap shares, with Lotus shareholders holding around 79% of the merged group and A-Cap shareholders holding about 21%.
The target date for implementation is October 2023.
The week ahead
The RBA will continue to dominate the news for the coming week as well, with the release of its Board minutes from the July 4 meeting, which held interest rates steady at 4.1%.
As a “pause” decision, the focus will be on what signals the Board is looking for to make its next decision in August.
One of those signals will be provided with the June labour force figures which are expected to show around 15,000 jobs added in June as the unemployment rate rises slightly to 3.7%.
China will also be in the news with the release of its June quarter economic growth numbers and also monthly retail sales data. A dramatic fall in that sale measure could usher in some pump priming by the Chinese government.
In company specific news, we are in for a very big week on the resources front with a host of big oil, gas and mining companies releasing quarterly sales, revenue and production updates.
Among others, watch out for Ampol, Beach Energy, BHP, Cooper Energy, Evolution Mining, Northern Star Resources, Rio Tinto, Santos, Whitehaven Coal and Woodside Energy.
While the US earnings reports started last week, they ramp up further this week with a host of big names including Bank of America, Morgan Stanley, Goldman Sachs, IBM, Netflix, Tesla, Blackstone, Johnson & Johnson, Newmont, Philip Morris and AMEX, to name just a few.