Market wrap: inflation pushes share prices lower on last trading day of the financial year

Inflation was the word on everybody’s lips as they dumped shares on the last trading day of the financial year but it was the price of goods and services rather than shares that had caught their attention.

The week’s stunning news that inflation had reared back up to 4% for the year to May brought with it the end of a narrative of slowly falling inflation and interest rates and brought into sharp focus whether there was another interest rate rise in prospect for Australia.

With markets now indicating a much greater chance of a rise in the cash rate to 4.6% by November, with some tipping a rise by August, that changed the whole dynamic on which markets had been pricing in lower rates and resulted in the ASX 200 falling 0.3% or 7.9 points to 7657 points to end the financial year on a slightly downbeat note.

Miners on the nose again

Once again the mining sector led the cascade of selling, with the materials index down 1% as lithium miners also ended the year on a downer, with shares in Pilbara Minerals (ASX: PLS) down 5.8% and Mineral Resources (ASX: MIN) down 3.6%.

This reinforced the lesson of the past financial year which has see technology shares and particularly those with an Artificial Intelligence (AI) bias, with Australia’s nascent technology sector up 28% for the financial year while the worst sector was energy, which fell 7.4%, largely driven by falls in the price of market leader Woodside (ASX: WDS).

On average, that led to a 7.8% annual return for the ASX 200, just short of last year’s return of 9.7% but a far cry from the 25% effortlessly pumped out by the S&P 500 index in the US or the even more impressive 31% return on the Nasdaq index.

It certainly wasn’t the year to be concentrated on a market dominated by banks and miners, given the big technology and chip manufacturers were behind much of the outperformance by the US markets.

ANZ gets $4.9 billion Suncorp deal across the line

However, there was some market specific news that caused ructions on the Australian market with Treasurer Jim Chalmers announcing that ANZ’s $4.9 billion proposal to buy Suncorp Bank can proceed subject to a range of enforceable conditions.

Suncorp will retain its insurance operations based in Queensland and return most of the proceeds of the sale to shareholders by the first quarter of 2025, following further regulatory approvals.

Suncorp (ASX: SUN) shares rose 3.6% to an impressive post-GFC high of $17.41, while ANZ Bank (ASX: ANZ) shares fell 0.2% to $28.24.

Given that this is likely to be the last acquisition by a big four bank of a regional rival and is the biggest banking deal since Commonwealth swallowed BankWest in 2008 during the GFC, kudos must go to ANZ which fought hard for this acquisition despite massive regulatory hurdles.

ANZ has agreed not to close any regional branches across Australia over the next three years and will also ensure there are no net job losses over the same period but has managed to get the acquisition across the line despite the Australian Competition and Consumer Commission opposition to the deal on market concentration fears.

Those fears were overturned by the Australian Competition Tribunal in March, which found the challenge from Macquarie had shaken up the major banks, meaning that ANZ’s purchase of a regional lender would not make that much difference to competition.

ANZ will also need to “make every effort” to join Australia Post’s Bank@Post service alongside the other major banks, which would allow customers to do basic banking at the post office.

Insurance rival also trading higher

Shares in rival insurer IAG (ASX: IAG) were also up a strong 7.2% to $7.14 after it announced a major reinsurance deal and confirmed operating earnings guidance for the year to June.

In other news Mirvac Group (ASX: MGR) sold a $1.3 billion stake in a new office tower in Sydney to Japanese developer Mitsu, with Mirvac shares up firmed 3.3% to $1.87 on the news.

Following an excellent float, shares in Guzman y Gomez (ASX: GYG) struggled to find their feet, falling 7.5% to $27.42.

Small cap stock action

The Small Ords index fell 1.06% this week to close at 2972.9 points.

Small cap companies making headlines this week were:

Patriot Battery Metals (ASX: PMT)

Patriot Battery Metals is intensifying exploration efforts at its Corvette property in Québec’s Eeyou Istchee James Bay region with an ambitious summer-to-fall work plan.

The company has deployed multiple rigs to CV13 to expand the high-grade Vega zone, achieving notable results such as 34.4m at 2.9% lithium oxide.

Concurrently, extensive geotechnical and hydrogeological studies are underway to support advanced development and feasibility assessments.

These efforts include infrastructure planning at the Shaakichiuwaanaan camp and a new all-season road, aimed at enhancing operational efficiencies.

Patriot anticipates significant resource upgrades by targeting inferred blocks and aims for a feasibility study by late 2025.

EZZ Life Science Holdings (ASX: EZZ)

EZZ Life Science has achieved FDA approval for nine of its food category products, including Children’s Essential Minerals and Men’s Performance, paving the way for their initial launch in the US through online platforms.

The approval underscores EZZ’s commitment to product quality and innovation, according to chair Glenn Cross, positioning the company to capitalise on the $35.7 billion US health supplements market.

Concurrently, EZZ has established a US subsidiary and secured a significant sales agreement with Pinehills (Hong Kong) to expand distribution into China, Vietnam and Southeast Asia, aiming for substantial growth in the coming years.

Pointerra (ASX: 3DP)

Pointerra has secured a $2.47 million contract from the US Department of Energy (DOE) to enhance electricity supply reliability.

The contract focuses on deploying Pointerra’s Pointerra3D system to assess grid resilience investments in the US northeast, partnering with utilities like Avangrid and academic institutions such as Cornell University.

The initiative aims to develop a comprehensive risk assessment model for utilities, optimising resource allocation and reducing power outage frequency through digital twin technology.

This follows Pointerra’s recent oversubscribed $2.05 million placement, which will fund strategic initiatives including expanding sales capabilities to capitalise on existing opportunities.

Baby Bunting (ASX: BBN)

Baby Bunting has secured new supply agreements with Nuna Baby Australia and Bugaboo New Zealand, bolstering its exclusive brand strategy.

The five-year deal with Nuna includes options for extension and promises improved margins and brand development rebates.

Concurrently, a three-year exclusivity agreement with Bugaboo allows Baby Bunting to enter the New Zealand market, complementing its expansion plans with additional large-format stores.

Chief executive officer Mark Teperson highlighted these agreements as enhancing market presence and delivering value, reaffirming profit guidance for 2024 and emphasising strategic initiatives to strengthen operational efficiency and customer engagement.

Additionally, the company extended its debt facility to support ongoing growth initiatives.

Actinogen Medical (ASX: ACW)

Actinogen Medical has published promising results from a biomarker trial of its lead candidate Xanamem in the Journal of Alzheimer’s Disease.

The study involved 72 participants from Actinogen’s previous XanADu Phase 2a trial, focusing on patients with mild Alzheimer’s disease and elevated levels of phosphorylated tau (pTau).

Conducted as a double-blind trial over 12 weeks, the trial showed a significant potential for Xanamem to slow disease progression, particularly in patients with elevated pTau181 biomarker levels.

These findings suggest Xanamem’s efficacy in targeting Alzheimer’s disease progression, supported by its safety and tolerability profile at therapeutic doses.

The week ahead

Once again inflation and interest rates will be the focus on markets around the world with the minutes from both the Reserve Bank and the US Federal Reserve to be released for June.

While neither bank moved rates at the meetings, the reasoning they use might give a hint as to where they will go next, although the US seems much closer to a rate cut than Australia at this stage, which is instead moving closer to a rate rise.

A raft of other local economic news is out including home prices, retail sales, building approvals, new car sales and international goods sales.

Economic numbers will also figure in rate rise discussions

While speculation of a rate rise in Australia has become common, there have been some indications from RBA Deputy Governor Andrew Hauser that concentrating on a single number could be dangerous in predicting what the bank might do when considering the next interest rate move.

That makes analysis of these extra indicators very important because evidence of economic weakness might over-rule the temptation to add one more interest rate rise.

However, should the RBA go against the global flow and raise interest rates, that would delay consideration of any cuts probably until next year, which has ramifications for many share prices that have jumped higher on the assumption of lower rates, but they are benefiting from a “risk on” mood, and inflows into equities globally.

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