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Market wrap: higher US markets deliver positives for Australia

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By John Beveridge - 
US market Australia market wrap May 2023



A handy updraft from US and Japanese markets helped the Australian bourse record its second consecutive rise.

With the Japanese market hitting a more than three-decade high and technology names pushing all of the US indices higher, Friday capped off a good week with the ASX 200 rising 0.6% to 7279.50 points, ending the week with a 0.3% rise.

Xero shares flying

Online accounting software company Xero (ASX: XRO) led the charge in the technology sector on the back of some excellent full-year results released on Thursday which led to a forest of broker upgrades.

Xero shares closed the day up 5.4% at $108 per cent as brokers upgraded target prices dramatically following its excellent results.

The banking sector was also much stronger – with individual banks up as much as 1.8% – after three months of major share price falls of up to 20% on the back of margin pressure, economic concerns and worries about the build- up of bad loans after a rash of interest rate rises and a major reset on billions of dollars of fixed rate home loans.

While worries about the mortgage cliff remain, the market consensus now seems to be that the share price falls may have been overdone.

Gold miners fall on positive news

There were some drags on the Australian market though, the main ones being utilities and the big miners, particularly gold miners, which were hit by the good news that US budget talks seem more promising and US economic data is a bit more supportive of a soft landing.

Origin (ASX: ORG) shares dropped 0.5% and shares in gold takeover target Newcrest Mining (ASX: NCM) lost 1.9% as technology and growth took over as market engines from defensive stocks and the “head for the hills” economic fallback of gold.

Strong lead-in from the US helps

It is also hard to underestimate the positive lead-in from Wall Street with the Dow Jones index up 0.3%, the S&P 500 index up 0.9% and the tech heavy Nasdaq index up 1.5% to cap off four straight sessions of rises.

In stock specific announcements, shares in biotech company Imugene (ASX: IMU) jumped 4.4% after it announced it has received clearance to initiate a Phase 1 clinical study for its cancer treatment from the US Food and Drug Administration (FDA) as an Investigational New Drug (IND).

The clearance means Imugene can start to recruit and dose patients who might benefit from its solid tumour treatment as part of a Phase 1 clinical study.

Lithium funding approved

Shares in Core Lithium (ASX: CXO) roe 1.8% after its board announced it had approved funding of up to $50 million for early-works at its approved underground project in the Northern Territory.

It was a tough day for shareholders in candle maker Dusk Group (ASX: DSK) with the stock down 18.8% on news of softer profit guidance on the back of tougher trading conditions as the cost of living rose sharply and reduced sales and margins.

Small cap stock action

The Small Ords index slipped 0.88% lower for the week to close at 2892.9 points.

2023 May ASX 200 chart

ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Recharge Metals (ASX: REC)

Recharge Metals plans to conduct ground exploration activities at its Express lithium project in Quebec, Canada.

Spectral data analysis, along with satellite measurements, has identified potential pegmatite outcrops similar to neighbouring lithium projects.

Additional datasets, such as high-resolution aerial imagery, LiDAR, and magnetic data, are being assessed to plan the upcoming field program.

The program will involve geological mapping, sampling, and diamond drilling to confirm the presence and geochemistry of lithium targets.

Recharge is among several Australian companies tapping into the lithium boom in the James Bay Region, attracted by the global demand for lithium-ion batteries and the growth of the electric vehicle market.

Unico Silver (ASX: USL)

Unico Silver has announced a significant increase in its silver equivalent resource at the Cerro Leon silver and gold project in Argentina, with a total of 92 million ounces.

This follows the company’s acquisition of the Pingüino asset from Austral Gold and a successful placement to accelerate resource work.

The new resource estimate includes reserves from the Pingüino field and a maiden resource at Conserrat.

Unico considers Cerro Leon to be one of the largest undeveloped silver and gold resources in Santa Cruz province.

The company plans to further explore and expand the resource, aiming for approximately 150 million silver equivalent ounces.

Rhythm Biosciences (ASX: RHY)

Rhythm Biosciences has received UK Conformity Assessed (UKCA) marking for its ColoSTAT blood test used in the detection of colorectal cancer.

This regulatory milestone brings the test closer to commercialisation in the UK, validating Rhythm’s commercial pathway into global markets.

The ColoSTAT test kit measures five protein biomarkers that indicate the presence of cancer cells and offers a simple and low-cost alternative for individuals who are unwilling or unable to participate in current screening programs.

Colorectal cancer is a significant global health issue, and early detection can lead to a high cure rate.

Rhythm aims to transform the colorectal cancer diagnostics market with its fit-for-purpose ColoSTAT test, potentially reducing mortality rates and healthcare costs associated with the disease.

Lode Resources (ASX: LDR)

Lode Resources is focused on exploring the high-grade Webbs Consol silver-base metal project in the New England Fold Belt of northeastern New South Wales.

The company’s latest drill program at the Tangoa West Lode target has yielded exceptional high-grade results, indicating the potential to revitalise Webbs Consol.

Significant intercepts include 24.5m at 1,450 g/t silver equivalent and 11.1m at 2,714 g/t silver equivalent, including a record hit of 0.6m at 5,291 g/t silver equivalent.

The current drill campaign will test other lodes discovered by previous drilling and several new targets.

The historical significance of the New England Fold Belt in the mining industry adds to the potential of the project.

Pan Asia Metals (ASX: PAM)

Pan Asia Metals has signed a non-binding Memorandum of Understanding (MoU) with VinES Energy Solutions Joint Stock Company (VinES) to assess the potential development of a 20,000 to 25,000 tonnes per annum standalone lithium conversion facility in Vietnam.

The MoU will run for an initial 36-month period and will see both organisations work together to secure additional lithium concessions and lithium oxide concentrate supply agreements to feed the lithium conversion facility.

Pan Asia Metals has a range of lithium development projects in South East Asia within its portfolio, including the Reung Kiet Lithium project in southern Thailand.

The proposed lithium conversion facility would be strategically located close to VinES battery plant in Vietnam.

The eventual aim of the MoU is to negotiate a legally binding definitive agreement if the feasibility study confirms the project’s viability.

Celsius Resources (ASX: CLA)

Canadian precious metals miner Silvercorp Metals has launched an approximately $56 million merger bid for Philippines copper mine developer Celsius Resources.

The proposed acquisition would see Silvercorp acquire all outstanding Celsius shares at a fixed price of $0.03 per share in exchange for a consideration comprising 90% Silvercorp shares plus 10% cash.

The addition of Celsius’ MCB project to Silvercorp’s portfolio would align with its strategic objectives of diversifying, while also benefitting from copper’s strong fundamentals.

The proposed merger would create an interesting combination of Asian and South East Asian assets for Silvercorp.

The two parties will now finalise due diligence and seek regulatory and shareholder approvals, with a target of the execution of a definitive agreement in late-June 2023.

Power Minerals (ASX: PNN)

Power Minerals has signed a binding term sheet to buy Argentinian lithium subsidiaries of Canadian-listed Ultra Lithium Inc.

Ultra Lithium has 100% interest in 75.68 square kilometre Laguna Verde lithium brine project in Catamarca Province, plus 2500 square kilometres of prospective properties in the world-renowned lithium triangle of north-west Argentina.

Power will pay for the acquisition with ordinary shares and a secured convertible loan.

The acquisition will expand Power’s portfolio of lithium assets in Argentina to more than 2830sqkm.

Power will also divest its Santa Ines copper-gold project in Argentina to Chinese investment house Fuyang Mingjin New Energy Development Co for $1.5 million cash.

The week ahead

Stock specific share price moves will continue to be a feature of the share market in the coming week as profit reports continue to roll out both good news and ill.

Here in Australia some of the earnings names that are expected include Technology One, Webjet and almond producer Select Harvests while in the US some of the reporting companies include Zoom, Lowe’s, Bed, Bath & Beyond, Costco and Gap.

On the local economic front there is also a fair bit to watch out for including flash manufacturing and services activity and retail trade, which might reveal that consumers are buying less as high interest rates reduce their purchasing power.

The Reserve Bank in particular will be watching those retail trade numbers for evidence that its policy of jacking up interest rates to reduce inflation is starting to get traction, which might tempt it to consider another interest rate pause as the lagging effect of tougher monetary policy continues to flow through.

The hawkish Reserve Bank of New Zealand is widely expected to jack up official interest rates by 25 basis points to 5.5% on Wednesday.

US figures out this week include the flash purchasing manager’s gauge, minutes of the last Federal Reserve meeting, economic growth data and a reading on inflation.

China is also getting in on the act with the People’s Bank announcing its key lending rates on Monday.

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