Market wrap: falling rates lead to fast rising share market
WEEKLY MARKET REPORT
Interest rates down, share prices up.
If that sounds like a simple formula then it certainly is but the proof is in the pudding as the Australian market put in its best week this year in the lead up to a holiday weekend.
No sooner had central banks in Canada and Europe announced the first of what may become a global move to reduce interest rates than the Australian market reacted with an impressive rise for the ASX 200 of 0.5% or 38.2 points to 7860 points.
That brought the rise for the week to 2% – the highest weekly rise since the middle of December last year.
ASX 200 approaches record after big 2% weekly rise
It also brought the index to within shouting distance of its record high, with fewer than 50 points now needed to bring on a new record high.
Admittedly a change in the tide of central banks doesn’t happen every week and the cuts to 3.75% by the European Central Bank and to 4.75% in the case of the Canadian central bank certainly increase the chances of further cuts by other central banks.
The Canadians even flagged further cuts of their own although the ECB was much more mysterious about what the future held, given that the fight against inflation has not really been a total victory at this stage.
None of that mattered too much to Australian investors who started buying shares with their ears pinned back, especially in sectors such as materials and consumer discretionary stocks.
Mining shares chase iron ore higher
There was plenty of method in these sharp rises too with iron ore futures in Singapore reversing their falls earlier in the week with a 1.9% bounce to $US108.80 a tonne on Friday.
That helped to push shares in Rio Tinto (ASX: RIO) up 0.8% to $125.31, with Fortescue shares (ASX: FMG) up 1.3% to $24.37 and BHP shares (ASX: BHP) up 1.1% to $44.55.
Amid all of the general rising tide which helped to push most boats higher there were some stocks also being propelled by company specific changes.
Life 360 spreads some Nasdaq magic
One was local technology darling Life360 (ASX:360) which successfully launched a secondary listing on the US Nasdaq exchange, with its shares there trading at $US27 each – around A$40.
While the company successfully raised US$100 million from the listing to help push its family social media apps beyond the current active monthly user base of more than 66.2 million, the local stock lost 6.1% or 89c to reach $13.80.
Still, given the company is now valued at around $3 billion and has close to doubled in value this year alone, there will be few complaints from loyal shareholders.
International students push IDP around
Another stock that moved around on news was IDP Education (ASX: IEL), jumping 5.7% or 82c to $15.33 as investors thought the company’s 7% fall on Thursday may have been overdone after the company warned of a large reduction in business due to increasingly restrictive policies in Australia and around the world for international students.
Small cap stock action
The Small Ords index shed a slight 0.11% this week to close at 3019.6 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
The Calmer Co International (ASX: CCO)
The Calmer Co International reported a 45% increase in e-commerce sales for May, reaching $496,000, driven by platforms like Shopify and Amazon in various regions.
This marks 10 consecutive months of online sales growth, with May’s revenue surpassing April’s by 28% and expected to exceed $610,000.
Sales in Coles stores also grew significantly, with orders reaching 38,000 units in May.
The company focuses on natural solutions for relaxation and sleep, sold under brands like Fiji Kava and Taki Mai in multiple countries.
To support growing demand, The Calmer Co launched a $2 million capital raising initiative to expand its Fiji production plant and enhance marketing efforts in key markets.
LTR Pharma (ASX: LTP)
LTR Pharma announced successful results from a pivotal bioequivalence clinical study for its breakthrough erectile dysfunction (ED) treatment, SPONTAN.
The nasal spray treatment demonstrated rapid absorption and a faster onset of action compared to oral treatments, achieving maximum concentration levels in as little as nine minutes.
The study showed that SPONTAN has an improved safety and tolerance profile, providing a more convenient and effective solution for ED.
SPONTAN’s unique nasal delivery technology bypasses the digestive system, offering a significant advancement over existing oral therapies.
The data from this study will support pre-submission meetings with the FDA and prescriptions via Australia’s early access scheme.
Firetail Resources (ASX: FTL)
Firetail Resources has entered an earn-in agreement with York Harbour Metals to acquire up to 80% of the historic York Harbour copper project in Canada.
The agreement involves a four-stage deal with initial cash payments and progressive equity stakes contingent on meeting specific milestones.
The project aims to build on Firetail’s strategic copper assets, complementing its existing battery metals projects.
York Harbour is known for its high-grade copper, zinc, and silver, with limited modern exploration showing promising results.
To fund the exploration at York Harbour, Firetail has launched a $1.56 million share placement and entitlement offer.
INOVIQ (ASX: IIQ)
Biotechnology company INOVIQ has developed engineered exosomes (EEVs) to target and kill breast cancer cells in vitro using its EXO-ACE technology.
In a proof-of-concept study, chimeric antigen receptors (CAR) were used to deliver therapeutic EEVs to cancer cells, showing 75% of breast cancer cells underwent cell death within 72 hours.
The study also highlighted the potential for exosomes to deliver RNA therapeutics across the blood-brain barrier for neurological diseases.
INOVIQ plans to advance its exosome therapeutics program, focusing initially on metastatic breast and ovarian cancers.
The company aims to scale up exosome production and engage in discussions with pharmaceutical companies for potential partnerships.
Astron Corporation (ASX: ATR)
Astron Corporation has signed agreements with Energy Fuels to develop the Donald rare earth elements (REE) and mineral sands project in western Victoria, with Energy Fuels contributing $183 million and issuing Astron $26.1 million in shares.
Energy Fuels will fund 100% of the project’s expenditure through an interest-free loan, converting to equity upon meeting certain conditions, and can earn a 49% interest while Astron retains 51% and manages operations.
The JV includes an offtake agreement for all REE concentrate produced for 58 years, aligning with Australia’s critical minerals strategy.
The Donald project aims to support REE production at Energy Fuels’ White Mesa mill and is expected to become a flagship mining project for both Australia and the USA.
The week ahead
While the coming week will be short on market action due to the market closure for the King’s Birthday on Monday, there are still some important things to look out for.
One is the May jobs numbers which are released on Thursday and are expected to confirm that the jobs market is still softening.
While it seems likely around 30,000 jobs were created in May, the unemployment rate is likely to stay at around 4.1%, with most pundits saying that could rise this year as growing labour supply meets falling demand.
Population growth should get a few headlines when the Australian population at the end of 2023 is announced on Thursday and there are a couple of business surveys to look out for.
The biggest market moving news for the week will probably be the US Federal Reserve Open Market Committee meeting which follows the release of inflation data on Wednesday.
While a cut to US interest rates is seen as highly unlikely yet, those famous dot points showing the expected trend for official interest rates will occupy plenty of attention from analysts.
US inflation is likely to moderate slightly to 3.5%.
Other international news to watch for includes the Chinese inflation numbers on Wednesday and the decision of the Japanese central bank on Friday, which is widely expected to hold rates steady but may offer some commentary on future moves.