Weekly review: market keeps driving higher on rising energy prices
每周市场报告
It’s been another solid week for the Australian share market which despite flat trading on Friday put in a healthy 1.2% for the week after chasing US markets higher.
That makes it five weeks in a row for the current rally with the ASX 200 index sitting on 7114.5 points after hitting a fresh 10-week high of 7137.5 points during Friday trade.
Other than more positive earnings results from a range of companies, the main driving force seems to be the theory that central banks such as the US Federal Reserve and Australia’s Reserve Bank will be able to slow the pace of interest rate hikes as inflation indicators start to point downwards, even as the inflation rate remains greatly elevated.
Rising energy prices drive stocks higher
Also helping the Australian market was a rise in the oil price amid a continuing energy crisis in Europe with the big mining names and particularly the energy stocks enjoying excellent trading.
Woodside Energy (ASX: WDS) shares were up a handy 4.2% while Santos (ASX: STO) outdid that with a 6.5% rise.
It was a similar but more muted scene for the big miners with Rio Tinto (ASX: RIO) shares up 1.5% to $98.53 and BHP (ASX: BHP) up 1%.
Some encouraging guidance from Newcrest Mining (ASX: NCM) saw shares in the big gold miner jump 3.6% while surging coal prices saw Whitehaven Coal (ASX: WHC) hit a record close of $7.36, up an amazing 6.2%.
The same rising coal prices helped Coronado Global Resources (ASX: CRN) to a 5.1% share price rise and New Hope Corp (ASX: NHC) to a 4% share price rise.
It wasn’t all positive news though with specific factors driving some shares backwards.
Rising costs helped chicken farmer Inghams (ASX: ING) shares fall 9.4% while ANZ (ASX: ANZ) led the banks lower with a 2% fall after it completed a bookbuild to fill a shortfall in its retail share offer for the purchase of Suncorp Bank.
Shares in electricity and gas utility AGL (ASX: AGL) fell 3.9% after its underlying profit fell short of analyst estimates.
How durable is this share rally?
As always with a market rally which follows a big fall, there remain some dissenting voices warning that there could be another leg down with Clifford Bennett, chief economist at ACY Securities, one of those warning about the durability of the current rally.
He pointed to sharply lower US home sales, double digit inflation and very low consumer confidence in the UK, a bleak winter for Europe due to energy shortages and rising Japanese inflation as some of the harbingers of taking a more cautious approach.
“The price of inflation is not just on the sticker,’’ explained Mr Bennett.
“It leads to inescapable consumer and business retrenchment of activity. Which, inevitably, takes us to reduced earnings and yes, the question of still over-valued equity markets.’’
Mr Clifford said a lot of economic pain was ready to descend on the USA, Europe and possibly Australia as well.
“Corporate earnings held higher during the first phase of inflation, as that inflation was to a large degree caused by fattening profit margins.
“This latest wave of inflation will prove to destructive to even the lofty towers of Wall Street.’’
Whether this bearish assessment proves right or not, it is a sample of some of the cautionary tales that are beginning to be told by seasoned market observers.
Small cap stock action
The Small Ords index fell 0.77% for the week to close on 3026.9 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Gateway Mining (ASX: GML)
Junior explorer Gateway has reported new high-grade assays from drilling at the emerging Julias oxide gold deposit, within the Gidgee project in Western Australia.
Consistent high-grade mineralisation was returned throughout the strike and all results will be used in the calculation of a maiden mineral resource estimate.
Highlight assays were 11m at 6g/t from 58m; 4m at 6.1g/t gold from 30m; 8m at 3.2g/t gold from 60m; 4m at 4g/t gold from 57m; 13m at 2.6g/t gold from 71m; 10m at 2.7g/t gold from 52m; and 11m at 2.2g/t gold from 43m.
Gateway managing director Mark Cossom said Julias was rapidly emerging as one of the exciting new discoveries at Gidgee.
Gascoyne Resources (ASX: GCY)
This week Gascoyne Resources announced the discovery of the Never Never high-grade lode system within its Dalgaranga gold operation in Western Australia.
The lode is part of an extension to the Gilbey’s mineralised system and has been considered a “major exploration breakthrough”.
Notable results were 59m at 12.5g/t gold from 139m, including 13m at 51.1g/t gold; 39m at 3.09g/t gold from 99m; and 20m at 1.12g/t gold from 156m.
Managing director Simon Lawson said Never Never has “immense potential” to reshape the company’s future “very quickly”.
Incannex Healthcare (ASX: IHL)
Clinical-stage biotech Incannex Healthcare this week appointed internationally-recognised pharmaceutical authority Robert B Clark as a non-executive director of the board.
Mr Clark has over 38 years of experience in strategic regulatory affairs working for pharma giants Pfizer and Novo Nordisk.
He has senior level experience in managing regulatory aspects of large-scale pharmaceutical acquisitions, significant compliance matters and business development due diligence activities.
Mr Clark will assist Incannex in its mission of bringing FDA-approved cannabinoid and psychedelic drugs to the market.
PharmAust (ASX: PAA)
Phase 2 canine trials have shown that a combination of PharmAust’s monepantel (MPL) plus standard of care drug prednisolone could double the life expectancy of dogs with cancer, while further dosage refinements could potentially achieve an even better survival benefit.
The company said pet dogs in the trial had enjoyed an average extension of survival of up to 24 weeks, which is more than double the life expectancy provided by palliative steroid therapy alone.
PharmAust is nearing the end of a phase 2 trial and will soon commence registrations for a phase 3 study.
Cobre (ASX: CBE)
Base metals explorer Cobre has announced that an additional significant copper intersection has extended the mineralisation at the Ngami project in Botswana’s Kalahari copper belt.
Drilling intersected a broad zone of visible copper mineralisation which extends over 69m downhole with 13m of abundant visual chalcocite mineralisation noted and confirmed with pXRF (portable x-ray fluorescence).
The mineralisation is believed to be associated with hydrothermal breccias, significant alteration and structural complexity, demonstrating that the target is open-ended and extends further north-east than previously anticipated.
The known footprint of mineralisation at Ngami now extends for more than 4km.
Cobre managing director Martin Holland said drilling was designed to test the first of 57 ranked targets across the relatively unexplored northern margin of the copper belt.
“Proving the occurrence of a significant strike length of copper mineralisation highlights the potential of this district to deliver new discoveries,” he said.
Cobre also confirmed this week that its exploration licences in the Kalahari copper belt had been renewed by Botswana’s government, subject to a binding earn-in agreement with local private explorer Kalahari Metals.
The five licences are held by Triprop Holdings (Pty) Ltd and have been renewed until September 2024.
Cobre’s shares were up more than 193% for the week on Friday.
The week ahead
The main influence on the Australian market this week will continue to be the direction and strength of Wall Street and also the forest of profit reports that Australian companies will release.
Scores of results are due to be released in the coming week and if the reporting season so far is any indicator, the results will likely have more to do with the fortunes of the particular market sectors than the individual company performance.
In that vein Thursday will be an interesting day with two big fund managers Perpetual and Platinum Asset Management both reporting.
It has been a tough time for listed fund managers so far this year so it will be interesting to see if one or both of these can buck the trend.
Other than company results the main local interest will be on the detailed July labour force figures which will be closely watched for what is happening to regional unemployment rates, which hit a record low of 3.7% in June.
Globally, the biggest news is likely to come out of Jackson Hole, Wyoming, where many global central bankers, policy makers and economists will be chewing over what is happening to inflation and, by extension, interest rates.
Also of interest will be the June quarter GDP report for the United States, which will show if the technical recession in the US departs or becomes more entrenched.