Weekly review: market rises as inflation hits highest level in 32 years
每周市场报告
The Australian market continues to carry the positive momentum this month – up just over 5%, with the ASX 200 rising 1.63% to 6785.7 points for the week.
On the currency front the Australian dollar stabilised, rising 0.46% for the week to around US$0.65.
While the US dollar took a breather, risk assets saw some much needed relief. However the US dollar still appears to be in an uptrend for now.
Inflation is roaring
Inflation in Australia came in at a red hot 7.3% for the third quarter of 2022, well above the 7% that was forecast, making it the highest quarterly print in 32 years.
The consumer prices being largely impacted by the rise in housing costs, fuel and food.
The Reserve Bank meets on Tuesday next week to announce the latest move with interest rates. With inflation still well above the targeted 2-3%, we can expect rates to continue higher from here.
Big Tech takes a hit
The FAANG stocks were once considered market darlings that dragged the rest of the market higher, however this week was anything but.
Amazon (Nasdaq: AMZN) lost almost 20% from its high this week. This was despite Q3 earnings growing 15% over the same time last year, but was slightly less than expected by analysts.
The company formerly known as Facebook, Meta (NASDAQ: META), was down a whopping 30% from its weekly high after a dismal earnings report. The move into the metaverse so far being a failure with the company having spent US$1.2 billion for a total of 38 daily users.
This follows on from SNAP’s (NYSE: SNAP), the parent company of Snapchat, 35% share drop last week on its earnings report.
Meanwhile, Elon Musk’s acquisition of Twitter (NYSE: TWTR) was completed, with Musk wasting no time firing most of the executives and plans to cut much of the staff. Shares in Twitter rose for the week.
While big tech drove the last major bull run in global markets, investors might want to look at other sectors like energy, biotech or commodities for clues as to what may propell the next one.
Small cap stock action
The Small Ords index rose 2.4% for the week to close at 2732.7 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
WA Resources (ASX: WA1)
Shares in WA Resources rocketed this week after the company announced it had discovered a REE mineralised carbonatite system at its West Arunta project 490km south of Halls Creek in WA.
Maiden drilling at the project was completed in July and the first hole at the P2 target intercepted 142m at 0.31% niobium, 0.17% TREO, and 3.94% phosphorus from 74m, including 54m at 0.62% niobium, 0.18% TREO and 3.85% phosphorus from 162m.
The hole ended in 2m at 1.22% niobium, 0.22% TREO and 5.73% phosphorus.
“The discovery of a mineralised carbonatite system in the West Arunta is the first of its kind in the region and is a significant finding from our maiden drilling program,” WA managing director Paul Savich said.
Results from first 73m of the drill core are pending along with six remaining RC holes.
Koba Resources (ASX: KOB)
Investors were impressed with Koba Resources, which revealed it had acquired the Whitlock project adjacent to Canada’s only operating lithium mine in Manitoba.
The project covers 145sq km and is along strike of the Tanco mine, which has reserves of 7.3Mt at 2.76% lithium. Whitlock is also close to other known lithium deposits.
Koba managing director and chief executive officer Ben Vallerine said “extensive pegmatites” had been mapped at surface across the new project.
A geological team will be on the ground in the coming days to conduct a field program, to investigate and commence sampling outcropping pegmatites,” he added.
C29 Metals (ASX: C29)
In keeping with the lithium theme, C2 Metals revealed it was acquiring “two highly prospective” salars in Argentina’s Salta Province and the world-renowned lithium triangle.
C29 says the new projects Pocitos 7 and Pocitos 9 are drill ready after previous exploration indicated they have lithium-bearing brine potential.
As part of the acquisition, C29 has inked an agreement to use Ekosolve’s direct lithium extraction process.
C29 executive director Mark Major said most of the initial groundwork has been completed at the projects including TEM geophysical surveys.
“We have the required permits in place and the ability to undertake resource drilling as early as December this year,” he added.
QMines (ASX: QML)
Drilling at QMines’ Wood Shaft target within its Queensland-based Mt Chalmers project returned “outstanding” high-grade copper and gold results.
QMines completed 11 holes at Woods Shaft for 905m and hit 37m at 3.6% copper equivalent (CuEq) from 4m, including 4m at 8.26% CuEq from 30m; 58m at 1.26% CuEq from 15m, including 10m at 5.26% CuEq from 38m; and 41m at 1.09% CuEq from 15m, including 5m at 3.41% CuEq from 33m.
Woods Shaft is 700m southwest of the Mt Chalmers deposit within the project and is believed to have similar geology.
The company followed up the drill results with an oversubscribed $1.26 million placement to fund accelerated exploration at the project.
A third resource update is expected for Mt Chalmers in the current quarter, with a maiden estimated anticipated for Woods Shaft early next year.
The week ahead
The big one to keep an eye on next week is on Tuesday, when the Reserve Bank of Australia makes its next decision on rates. Given that inflation is still excessively high, we can expect to see more interest rate hikes.
A further 0.25% is being forecast to take the cash rate from 2.6% to 2.85%.
Retail sales for September, balance of trade, along with consumer and business confidence data are other key data to look out for.
Similarly in the US, the Federal Reserve will be making a decision on what to do with rates. Ongoing rate hikes are forecast, the question is by how much and how fast.
Given the US mid term elections are in two weeks time, we could see the Fed slow down with its rises temporarily.
Employment and non-farm payroll numbers are out at the end of the week.
Another country to be tracking is Japan, which appears to be unstable and could become a forced seller of US treasuries at some point. The Bank of Japan recently stepped up its bond buying operation.
With the country having over 250% debt to GDP and the Yen collapsing 17% against the US dollar we could see a trigger for something much larger down the track.