Weekly review: central bank rate rises push resilient ASX down

The Australian share market suffered a strong downdraft after the big offshore central banks united in action to keep raising interest rates heading upwards next year.

Such unity of purpose from a range of countries including the European Central Bank – which raised rates by 0.5% to 2% – and central banks in Denmark, Mexico, Taiwan, Norway, Switzerland and the Bank of England served to heighten fears that the global economy is heading for recession with little hope of a pause in rate rises.

It wasn’t just the hawkish tone that set off market worries, it was the determination and duration of the rises with ECB president Christine Lagarde stressing that rates still needed to rise “significantly” higher next year to cool inflation.

No pivot from a hawkish ECB

She also hosed down talk about a pivot from the ECB, saying “We have longer to go and we are in for a long game.”

Amid such pressure, the ASX 200 wilted by 0.8% to 7148 points – still a much better result than the 2.5% fall on the S&P 500 and the 3.2% fall on the Nasdaq.

That took our losses for the week on the ASX 200 down 0.9%, quite a resilient performance compared to offshore markets.

Tech stocks hit hardest

As you would expect, interest rate sensitive technology stocks were the worst hit on Friday, dragged lower by losses across the rate-sensitive technology sector.

Afterpay owner Block (ASX: SQ2) was one of the worst, closing down 6.3% to $96.50 while software company Altium (ASX: ALU) fell 3.6% to $36.22.

The reason the ASX 200 performed better than offshore markets was almost entirely down to our relative lack of technology stocks and the strength of one of the big iron ore miners and energy companies, even though eight of the 11 sectors fell and 70% of stocks fell.

Rio shares higher

Rio Tinto (ASX: RIO) was one of the stronger stocks, up 1.3% and no doubt cheered a little by the opening up of the Chinese economy, although eventually BHP and Fortescue weakened a little.

Coal company Yancoal (ASX: YAL) jumped 2.8% while fellow coal stock New Hope Corporation (ASX: NHC) was up 2.8%.

Other stocks to get caught in the selective updraft included petroleum company Ampol (ASX: ALD) which rose 2.5%, lithium miner Sayona Mining (ASX: SYA) up 4.9% and steel distributor Vulcan Steel (ASX: VSL) rose 3.9%.

Aurizon up on big sale

Rail company Aurizon Holdings (ASX: AZJ) had a good day, with shares up 4% to $3.90 after the company got $425 million for investors after selling One Rail’s coal haulage business to a joint venture half-owned by M Resources founder Matt Lattimore.

Technology company Dicker Data (ASX: DDR) also swam against the tide, with its shares rising 4.8%.

Of course, it was not all good news on a down day with software company Xero (ASX: XRO) down 3% and all of the big banks closing down, with NAB (ASX: NAB) the worst, falling 3%.

The stronger US dollar helped create a 2.5% loss for copper miner Evolution Mining (ASX: EVN) while Silver Lake Resources (ASX: SLR) shares shed 6.4%.

Small cap stock action

The Small Ords index fell 0.92% for the week to close at 2839.5 points.

Small cap companies making headlines this week were:

Doctor Care Anywhere (ASX: DOC)

Doctor Care Anywhere Group announced this week its subsidiary Doctor Care Anywhere Limited entered a multi-year $18 million loan agreement with UK-based AXA PPP Healthcare Group.

The funds will go towards Doctor Care’s general working capital purposes, with company’s goal to provide high quality and effective telehealth services to patients.

Doctor Care has grown significantly since it was established in 2013 – providing services to more than 1,500 corporate and SME clients, accessed through partnerships with global companies such as AXA and HCA Healthcare UK.

The loan agreement cements a long-standing relationship between Doctor Care and AXA, having executed a strategic partnership in 2015 to offer visiting general practitioner services to AXA customers.

Also, in 2020 both companies entered a joint venture to pave a new way for patients to receive healthcare in the UK.

INOVIQ (ASX: IIQ)

The University of Queensland has confirmed INOVIQ’s Exo-Net cell capture technology has potential in isolating extracellular vesicle (EV) biomarkers in the detection of early-stage ovarian cancer.

The university conducted the Ovarian Cancer 97 feasibility study to evaluate the technology’s effectiveness in the discovery of ovarian cancer biomarkers and for the development of an EV-based diagnostic.

Data from 97 plasma samples noted “highly significant differences” between the EV biomarker content of ovarian cancer and control samples.

INOVIQ confirmed the next step is to conduct an analytical validation study to confirm the performance of Exo-Net and the EV biomarkers in serum samples and plasma.

Flynn Gold (ASX: FG1)

Flynn Gold has made a significant new gold discovery at its Trafalgar prospect in Tasmania after revealing “outstanding” drill results on Monday.

The explorer has completed five diamond drill holes at Trafalgar prospect to date, intersecting high-grade gold and silver across an open strike length of 200m and from depths of 40-400m below surface.

Highlight results were 12.3m at 16.8g/t gold and 27.6g/t silver from 108.7m, including 0.85m at 72g/t gold; and 96.1g/t silver, and 2m at 68.5g/t gold and 123g/t silver from 119m to end of hole, including 1.25m at 106.6g/t gold and 195.1g/t silver.

Flynn chief executive officer Neil Marston said the high-grade gold intersections highlight a “significant new gold discovery” at Trafalgar.

The Trafalgar prospect is located within Flynn’s 100% owned Golden Ridge project in northeast Tasmania.

Piedmont Lithium (ASX: PLL) and Sayona Mining (ASX: SYA)

Piedmont Lithium and joint venture partner Sayona Mining have secured the final permit required to restart the North American Lithium (NAL) mine and concentrator in Quebec, with first spodumene production now expected early next year.

Initial output will total about 220,000t a year of 6% spodumene concentrate, equating to about 30,000tpa of lithium carbonate equivalent.

The joint venture engaged Hatch, which began a pre-feasibility study in October into producing lithium carbonate or hydroxide from NAL spodumene, and this expected to be completed in March.

Sayona Mining chief executive officer Brett Lynch said the study will provide “valuable intelligence” on future planned downstream processing for the companies.

InhaleRx (ASX: IRX)

InhaleRx has received “valuable” guidance from the United States Food and Drug Administration (FDA) relating to the development of its unique drug device IRX616a.

The Australian healthcare company said its pre-Investigational New Drug application meeting held in October with the FDA was “constructive”.

Thanks to the feedback, InhaleRx has extended the study period of its proof-of-concept clinical trial in panic disorder patients, from four to 12 weeks, beginning in April.

IRX616a is InhaleRx’s lead cannabidiol (CBD) formulation and pressurised metered-dose inhaler product, aiming to assist in the treatment of panic disorder.

Currently, the only conventional treatment for panic disorder is selective serotonin reuptake inhibitors (SSRIs) such as Zoloft or Prozac, which often come with unwanted side effects.

Barton Gold (ASX: BGD)

Initial assays from Barton Gold’s latest drilling efforts at the Tunkillia gold project in South Australia have highlighted its growth potential.

Drilling commenced in September, targeting depth extensions of the 223 Deposit and the new Area 51 zone.

Reverse circulation drilling at the 223 Deposit backed up the existing modelling and revealed potential extensions at depth and along strike.

Initial results from the recent campaign at Tunkillia include Hole 58, where drilling intercepted three gold zones assays: 5m at 2.69g/t, 3m at 5.15g/t and 5m at 9g/t. First mineralisation was struck 243m down hole.

Barton’s managing director Alex Scanlon said the company is on the right track for potential resource growth.

Meteoric Resources (ASX: MEI)

Meteoric Resources has snapped up the Caldeira ionic clay rare earth element project in Minas Gerais state in Brazil, which it considers a tier-one deposit.

Brazil is home to the world’s third largest REE reserves, as the nation’s government pushes more companies to explore and develop critical minerals targets.

The vendor has completed limited augur drilling at Caldeira, where it identified heavy rare earths, including the magnet elements terbium, dysprosium, praseodymium, and neodymium.

Highlight assays from the project were 10m at 8,810ppm total rare earth oxides (TREO), 20m at 8,924ppm TREO, 15m at 7,042ppm TREO, and 7m at 7,646ppm TREO. Mineralisation was intercepted from surface and more than 85% of the holes ended in grades exceeding 1,000ppm TREO.

Meteoric director Andrew Tunks said the project has the “potential to host large, high-grade rare earth element ionic clays and represents an enormous opportunity” for the company.

The week ahead

With Christmas fast approaching, there are fewer announcements and statistical releases but not everything is stopping for a break.

Locally, there are consumer confidence figures and the minutes of the last RBA meeting to look out for as well as job figures and private sector credit.

In the US there are a raft of housing figures to be released, consumer confidence numbers, September quarter economic growth, chain store sales and jobless claims.

Mostly, the pressures on the market are likely to come not from statistical releases but from market developments as the raft of central bank interest rate rises and hawkish commentary are slowly digested.

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