Weekly review: from the best of times to the worst
WEEKLY MARKET REPORT
Charles Dickens could have been referring to the Australian share market when he wrote: “It was the best of times, it was the worst of times.’’
At the start of the week the ASX 200 index happily broke through the 7000 mark and it looked like the tide had turned for the better but it has been all downhill since then, with the index falling a further 1.4% or 95.89 points on Friday to close on just 6747 points after US inflation surprised on the upside.
This tale of two cities showed we really had moved from the age of wisdom to the age of foolishness with the main index now down 5.1% for the month and 2.25% in the past week.
After the spring of hope came the winter of despair as none other than the Reserve Bank Governor Dr Philip Lowe sent analysts sprinting to amend their interest rate forecasts upwards after his testimony at the House of Representatives economics committee.
Dr Lowe prescribes more harsh interest rate medicine
Despite his words saying the economy remained strong, Dr Lowe showed plenty of resolve to keep the rate rises coming, saying the cash rate remained too low, although it may be time to make smaller adjustments than the double barrel 0.5% rises of the past four months.
“The increase in interest rates has been rapid and global and we know monetary policy operates with a lag,” Dr Lowe said.
“At some point, it will be appropriate to slow the rate of increase in interest rates and the case for doing that becomes stronger as the level of interest rates increases.”
Unsurprisingly, most analysts interpreted these comments as pointing to another 0.5% rate rise for October, with NAB one of the first banks to upgrade its previous 0.25% prediction.
Cash rate peak estimates rise
UBS Australia chief economist, George Tharenou, also revised his forecast of the peak cash rate to 3.1% from 2.85%, while the market-implied “terminal rate” of cash rose to 3.96% from 3.73%.
Understandably none of this went down very well on the share market, which was also spooked by bearish futures from the US market, with the funk most obvious in energy, industrial, materials and gold mining sectors – all down between 2% and 3%.
A few examples illustrate the issue with BHP (ASX: BHP) shares down 1.8%, Fortescue Metals (ASX: FMG) down 1.7% and Rio Tinto (ASX: RIO) falling 2.3%.
If anything, it was worse for energy stocks with Yancoal (ASX: YAL) falling 5.6%, Santos (ASX: STO) down 2.4% and Woodside Energy (ASX: WDS) down almost 3%.
Gold stocks followed the price of the yellow metal down with Newcrest (ASX: NCM) down 2.8%, Northern Star (ASX: NST) down 4.2% and shares in Ramelius Resources (ASX: RMS) were down 5.1%.
In market specific news, shares in toll road operator Atlas Arteria (ASX: ALX) were whacked down 15.6% after it announced that it had bought a 66.6% stake in a toll way in Chicago and completed the institutional part of its fund raising.
Arteria’s biggest shareholder – IFM Investors – have described the deal as “significantly value destructive – an assessment the market seemed to agree with as it pondered falling dividends.
Small cap stock action
The Small Ords index fell 2.92% for the week to close at 2850.6 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Altech Chemicals (ASX: ATC)
Pre-construction activities are underway for Altech Chemicals’ pilot Silumina anodes plant in Germany’s Schwarze Pumpe Industrial Park.
The pilot plant will produce about 120kg a day of Silumina anodes, which are high-capacity silicon graphite battery materials. Potential end-users will have access to the material for product testing.
Also this week, Altech teamed up with world-leading German battery institute Fraunhofer IKTS to commercialise the Cerenergy sodium alumina solid state battery as a grid alternative to lithium-ion batteries.
Altech will own 75% of the joint venture, which plans to construct a 100MW per hour battery plant on its land in the Schwarze Pumpe Industrial Park.
It is anticipated the plant will generate 10,000 of 10KWph Cerenergy batteries a year, which would attract a sale price of $13,200 each.
Clarity Pharmaceuticals (ASX: CU6)
A phase II diagnostic trial has begun to test Clarity Pharmaceuticals’ Copper-64 SAR-Bombesin product in imaging scans of prostate patients.
The first patients of the trial have been recruited and imaged, with the study evaluating the safety and diagnostic potential of Copper-64 SAR-Bombesin in imaging prostate specific membrane antigen (PSMA) negative cancer sufferers.
Professor Louise Emmett is heading the trail which is being completed at St Vincent’s Hospital in Sydney.
Clarity executive chairman Alan Taylor says the company’s SAR-Bombesin can potentially provide “accurate and precise detection and treatment of cancers” across large patient populations.
iTech Minerals (ASX: ITM)
A metallurgical test work program on ore from iTech Minerals’ Campoona deposit in South Australia has generated spherical graphite.
German company ANZAPLAN tested a 407kg ore bulk sample from Campoona, and the spherical graphite generated either met or exceeded all industry standards for lithium-ion battery anode feedstock.
iTech managing director Mike Schwarz said the results show a high-value spherical graphite can be produced from the Australian project, which has the advantage of proximity to renewable energy and infrastructure.
A resource expansion program will be undertaken at the project, which has a current estimate of 8.55Mt at 9% total graphitic carbon.
Latrobe Magnesium (ASX: LMG)
In readiness for a 100,000tpa magnesium plant, Latrobe Magnesium has executed a binding MoU with Société Le Nickel (SLN).
New Caledonia-based SLN will supply 450,000tpa of ferro-nickel slag to Latrobe for 20 years.
Latrobe will use the slag as feedstock for its 100,000tpa magnesium plant.
To produce the 100,000tpa of magnesium, Latrobe will require about 600,000tpa of ferro-nickel slag.
Latrobe is in discussions with potential joint venture partners for developing the plant and a feasibility study is due later this month, which is evaluating two possible locations – the Middle East and South East Asia.
Heavy Minerals (ASX: HVY)
A scoping study has indicated Heavy Minerals’ Port Gregory garnet project could bring in $1.59 billion in life-of-mine revenue over 16-years.
The study confirmed the project had a $253 million after tax NPV and would require $110 million to develop, which Heavy Minerals says is a low outlay due to the project’s proximity to Geraldton and existing infrastructure in WA.
“The scoping study results highlight the robust nature of this project and bodes well for the future, as we look to potentially transition to the development stage,” Heavy Minerals chief executive officer Nic Matich said.
Heavy Minerals will complete another phase of drilling to underpin a feasibility study and advance offtake discussions.
RLF AgTech (ASX: RLF)
RLF AgTech unveiled its Veridium seed priming product to global markets this week, which is expected to substantially increase yield for growers.
The product is based on RLF’s latest proprietary technology and delivers plant-available nutrition directly to the seed.
A trial using 100gm of Veridium on rice seed yielded an additional 1-tonne of grain per hectare.
RLF managing director Ken Hancock said Veridium was a “breakthrough” addition to the company’s portfolio.
Mamba Exploration (ASX: M24)
Mamba Exploration revealed this week it had identified thorium anomalies at its Ashburton/Gascoyne project in WA.
The company has pinpointed eight discrete anomalies within its tenements, which are similar to those identified on nearby explorers Dreadnought Resources and Kingfisher Mining’s ground.
Dreadnought and Kingfisher’s thorium anomalies led to REE discoveries.
Mamba plans to further evaluate the REE potential at Ashburton/Gascoyne with a field visit using a pXRF unit.
Desert Metals (ASX: DM1)
First assays from a 12,745m drilling program at Desert Metals’ Innouendy project in WA has confirmed a “significant rare earth discovery”.
The company has received assays from the first 1,128m of drilling, which confirm the presence of thick, near-surface, and continuous REE.
Notable intercepts were 21m at 1,176ppm TREO from 4m, including 12m at 1,490ppm TREO; 8m at 2,734ppm TREO from 24m, including 3m at 4,104ppm TREO; and 17m at 1,347ppm TREO from 28m, including 8m at 2,085ppm TREO.
Desert managing director Rob Stuart said it was a “great result” for the company to confirm a “significant discovery” at an early stage of exploration at the project.
The week ahead
In the context of the poor market performance, the really big news for the coming week will be the US Federal Reserve interest rate decision.
The Fed starts a two-day meeting on Tuesday and will hand down its decision on Wednesday which will be before the Australian market would normally open on Thursday – something that won’t happen now due to the National Day of Mourning for the Queen.
This Fed decision is something of a crap shoot with some analysts predicting a full 1% rise in the cash rate due to the inflation blowout, although the majority are still plumping for yet another 0.75% rise, in line with the previous two decisions.
There are a few other things to look out for in the US including housing starts, building permits, home sales, current account balance and another speech from the Fed Chair Jerome Powell.
Locally there are not many announcements, with the major releases being consumer confidence, the minutes from the last RBA board meeting, a speech by RBA Deputy Governor Michelle Bullock, labour force figures, population numbers and purchasing manager surveys.