Market wrap: central banks raining on Happy New Financial Year parade
WEEKLY MARKET REPORT
I’m sure RBA governor Dr Philip Lowe was listening this week when the major heads of the central banks were all on stage together for a European Central Bank forum in Portugal.
If we can summarise the message from the majority of them – with the exception of Japan’s Kazuo Ueda – the message may as well have been to simply keep raising interest rates to fight inflation.
With the RBA board meeting on Tuesday, those messages from the likes of the US Federal Reserve’s Jerome Powell, the European Central Bank’s Christine Lagarde and the Bank of England’s Andrew Bailey were that they had not conquered inflation and were most certainly going to keep raising official interest rates until they did.
Lowe set to pull the trigger?
From his most recent comments, Dr Lowe seems to be on the same page and is likely to once again pull the interest rate trigger again on Tuesday, although the economists are about evenly divided between a rise on Tuesday and no rise followed by one in August.
With rates now up 4% since May last year, this decision is a vital one for the direction of share and money markets for the sparkling new financial year, with the RBA trying to balance a sharp fall in headline inflation, high services inflation, stronger retail sales, poor productivity, strong employment and a tight labour market.
Friday’s fairly choppy trade on the share market brought the financial year to a close on a mildly positive note, with the ASX 200 index up 0.1% to 7203.30 points.
That’s a rise of 1.5% for the week. 1.6% for June, 0.5% for the quarter and 9.6% for the financial year, which translates to 14.5% on a total return basis.
Looking more widely, AMP numbers suggest the 2022-23 financial year was a solid result for superannuation, with returns of around 8-9% expected, with global shares up about 17% including dividends and Australian shares up around 14% with dividends included.
AMP Capital chief economist Shane Oliver said that the Australian market’s relative underperformance came because of an increasingly hawkish RBA and doubts about the strength of the recovery in China.
Shares set to do okay
“We continue to see shares doing okay on a 12-month view as central banks ease up as inflation cools but the risk of a near term correction is high,” Mr Oliver said.
During Friday trade technology, industrials, energy, discretionary and utilities were the main sectors to gain ground while the more defensive consumer staples, health care and property all fell.
Technology was the best performer, helped by an 0.6% rise by WiseTech (ASX: WTC) to $79.81 per share, a 1.4% rise in Xero (ASX: XRO) and a 3.8% jump for Life360 (ASX:360).
Energy stocks were also stronger with Yancoal (ASX: YAL) shares up 1.8%.
Miners rise
The big miners were also up on the back of firmer iron ore prices with BHP (ASX: BHP) shares up 0.1%, Fortescue Metals (ASX: FMG) up 0.3% and Rio Tinto (ASX: RIO) shares up 0.2%.
One of the day’s worst performers was Link Administration Holdings (ASX: LNK), with shares slashed by 13.9% to $1.67 a share after the company announced that its contract with industry super fund HESTA would not be renewed.
The giant fund made up about 4% of Link’s revenue for financial year 2023 but now plans to transition out by the second quarter of FY25.
Downer EDI (ASX: DOW) shares charged up 4.3% to $4.11 after the group revealed a $4.6 billion contract to manufacture trains for the Queensland government.
Small cap stock action
The Small Ords index rose 1.87% for the week to at 2794.4 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Ora Gold (ASX: OAU)
Ora Gold reported high-grade gold intercepts from drilling at the Crown Prince prospect in the Garden Gully project, Western Australia.
The drilling unveiled a newly-delineated south-eastern orebody anticline, which extends the mineralised zones of known gold occurrences.
Among the best intercepts was 40 metres at 17.53 grams per tonne gold from 30m including 19m at 36.8g/t from 35m.
New gold mineralisation zones are also present in the footwall to previously-drilled lodes.
The company will conduct further drilling to better delineate the mineralisation zone, focusing on depths of up to 300m below surface.
An update to the broader Crown Prince resource estimate, which will include an initial resource interpretation for this zone, is due by September.
INOVIQ (ASX: IIQ)
INOVIQ has reported promising results from an independent clinical validation study for its SubB2M/CA15-3 breast cancer detection test.
The study found high accuracy, sensitivity, and specificity for INOVIQ’s SubB2M test, outperforming a leading CA15-3 test.
Chief executive officer Dr Leearne Hinch has said that these results are a major milestone for the company and support the commercial potential of their test.
The company is also making progress on its development plans for the SubB2M/CA125 test for ovarian cancer.
The next step for INOVIQ is a cross-sectional monitoring study to demonstrate the test’s superior performance for treatment response and/or disease recurrence over approved CA15-3 tests.
Boss Energy (ASX: BOE)
Boss Energy has completed the first wellfield for the restart of the Honeymoon uranium project in South Australia, keeping the project on track for production by the end of the year.
Gypsum pond and water treatment plants are nearing completion, while preparatory work for structured pumping tests and flushing of startup wellfields is ongoing.
Key equipment, including mechanicals for the project’s reverse osmosis plant, have been installed.
The company remains fully-funded through to production, with a cash on hand of $103 million and a uranium stockpile valued at A$105 million.
The company has already spent $81.5 million, or 77% of the project’s $105.4 million capital expenditure budget.
Imugene (ASX: IMU)
Imugene received a patent extension from the US Patent Office for its immunotherapeutic PD1-Vaxx, used for treating non-small cell lung cancer.
The patent protects the composition and treatment method for a therapeutic antibody response against the PD1 checkpoint target and has been extended to February 2040.
Earlier, Imugene announced a partnership with Roche to trial the safety and efficacy of PD1-Vaxx combined with Tecentriq, another treatment for non-small cell lung cancer.
Additionally this week Imugene presented significant data on its lead candidate, HER-Vaxx, at the World Congress of Gastrointestinal Cancer, indicating that the treatment could generate robust anti-HER-2 antibody responses and correlate to tumour reduction in certain patients.
The findings, which show a “statistically significant” overall survival benefit compared to chemotherapy alone, validate the proof-of-concept for a first-in-class B-cell immunotherapy based on HER-2/neu peptides.
Far East Gold (ASX: FEG)
Far East Gold has finalised the acquisition of the Trenggalek copper-gold project in East Java, a site identified by Indonesian officials as a top priority gold target.
The 12,813-hectare project, which lies in the Sunda-Banda Arc known for hosting several world-class mineral deposits, has already undergone significant preliminary work including extensive drilling and airborne surveys.
The company identified four priority targets within the site, including Sentul-Buluroto, a gold-silver epithermal target, and Sumber Bening, featuring copper-gold veining and a porphyry type copper-gold target.
Additionally, Jerambah and Singgahan have been identified as porphyry copper-gold targets.
Far East Gold’s most advanced project, however, remains Woyla, a copper-gold project in northern Sumatra.
The week ahead
As mentioned earlier, the RBA interest rate decision on Tuesday will be absolutely pivotal.
Apart from that some of the things to watch out for include purchasing manager surveys and US jobs data.
The jobs numbers are particularly vital because the US Federal Reserve will need to see evidence of a softening jobs market to extend its rates pause but the consensus forecasts are for a big lift of 213,000 jobs in nonfarm payrolls in June, with the jobless rate falling to 3.6%.
If that turns out to be the case, we can virtually pencil in a rate rise for the US at the next Fed meeting while the minutes from the last meeting which decided to pause rates will be out on Wednesday in the US.