Market wrap: ASX 200 closes below 7000-point mark despite a tentative recovery

The Australian share market took a couple of tentative steps in the upwards direction after a tough week in which the ASX 200 fell decisively below the important 7000-point mark.

By the Friday close the index had limped upwards 0.4% or 28.7 points to 6,954.2 points after two positive days which followed on from a terrible start to the week.

That was the first weekly close below the 7000-point mark since March 24.

Improvement largely due to banks and miners

Even the reasonably positive end result was patchy with seven of the 11 market sectors down but the overweight financials and materials sectors both rose strongly, rescuing the week from disaster but still leaving the key ASX 200 index down 1.3% for the week after three straight weekly falls.

Westpac (ASX: WBC) was the pick of the banks, jumping 2.1% after a positive upgrade from influential broker Barrenjoey.

The other banks were also positive with NAB (ASX: NAB) shares up 1.5% to $28.94, Commonwealth Bank (ASX: CBA) shares adding 1.1% to reach $100.04 and ANZ (ASX: ANZ) shares adding 0.92% to $25.32.

It was a similar bullish show by the big miners which helped to drag the whole index up with Australia’s biggest company BHP (ASX: BHP) shares up 1.2% to $43.97, Rio Tinto (ASX: RIO) shares up 1.1% to $113.19 and Fortescue Metals (ASX: FMG) shares up 1.4% to $21.06.

The rises came on the back of UBS upgrades and a generally firmer outlook for the main steelmaking ingredient through to the end of the year.

Magellan has a day to forget

Of course, the Australian market was far from being all sweetness and light, with shares in fund manager Magellan (ASX: MFG) falling almost 19% to $7.18 after reporting that its funds under management had fallen by a significant 10% in a month.

International packaging giant Amcor (ASX: AMC) also had a bad day, with its shares down 1.5% to a 16-month low of $14.04.

The energy sector was also lower after crude oil prices continued to slump on concerns that slowing global growth will erode consumption.

In general, a more positive session on Wall Street and a fall in bond yields which saw the 30-year bond fall back below 5% helped the ASX to stage a slight but far from convincing recovery.

The overall mood of the week was still fairly sour as the rise in long term US bond yields acted like kryptonite to lower US share prices, with the Australian market obediently falling in sympathy.

In general, investors are worried that if ten-year US bonds have a 5 in front of them, the valuations on the share market need to head south and quickly to make any relative sense.

Small cap stock action

The Small Ords index fell 2.74% for the week to close at 2638.8 points.

Small cap companies making headlines this week were:

Dimerix (ASX: DXB)

Dimerix secured a licensing deal with Advanz Pharma Corp for the commercialisation of its Phase 3 drug, DMX-200, for the treatment of focal segmental glomerulosclerosis (FSGS) kidney disease.

Advanz will have exclusive rights to register and market the drug in several territories, while Dimerix retains rights outside these regions.

Under the agreement, Dimerix will receive up to $229.8 million, including an upfront payment and milestones, and up to 20% royalties on sales.

FSGS is a rare kidney disease with limited treatment options, representing a billion-dollar market, with DMX-200’s first analysis outcome expected in 2024.

Adacel Technologies (ASX: ADA)

Adacel Technologies secured a $93 million contract with the US Federal Aviation Administration (FAA) to support their tower simulation systems (TSS) over five years.

This will include maintenance, system upgrades, a dedicated Help Desk, and access to Adacel’s training centre.

Adacel has a longstanding relationship with the FAA and is the original manufacturer of the FAA’s TSS software.

Chief executive officer Daniel Verret emphasised the importance of consistent training and celebrated the continuation of their partnership with the FAA.

Noxopharm (ASX: NOX)

Noxopharm was granted orphan drug designation (ODD) from the US FDA for its drug CRO-67, aimed at treating pancreatic cancer.

The FDA’s ODD status offers perks such as clinical trial tax credits, fee exemptions and seven years of post-approval market exclusivity.

Chief executive officer Dr Gisela Mautner highlighted the significance of the designation and stated an urgent need for innovative pancreatic cancer treatments.

Recent in vivo research on CRO-67 demonstrated a notable reduction in tumour volume, indicating its potential effectiveness against this challenging disease.

Toys“R”Us ANZ (ASX: TOY)

Toy store chain, Toys R Us, plans to expand its US network by adding up to 24 outlets in the next decade, including in airports and on cruise ships.

This strategic move follows the company’s bankruptcy in 2018, with its resurgence spearheaded by WHP Global, which acquired a controlling stake in 2021.

The expansion includes partnering with Go Retail Group, a Texas-based firm known for operating year-round retail stores.

Meanwhile, in Australia, after entering voluntary administration in 2018, the brand was revived by Funtastic Limited, which later formed a partnership with WHP Global for UK operations

Galan Lithium (ASX: GLN)

Galan Lithium’s phase 2 definitive feasibility study for its Hombre Muerto West (HMW) project in Argentina has revealed the capacity to produce a high-grade lithium chloride concentrate, with expected strong financial returns.

The study showed potential production of 21 kilotonnes per annum (ktpa) of lithium carbonate equivalent (LCE), a substantial increase from the phase 1 estimate of 5.4 ktpa LCE.

Managing director Juan Pablo Vargas de la Vega emphasised HMW’s stature in the lithium brine industry, with phase 1 construction progressing and phase 2 production set to start in H2 2026, pending approvals.

Galan Lithium also this week partnered with Redstone Resources (ASX: RDS) to secure the Taiga, Camaro, and Hellcat lithium projects in Canada’s James Bay province, neighbouring the Corvette discovery by Patriot Battery Metals (ASX: PMT).

The week ahead

Inflation might have come down but it is far from a spent force and the coming week should give us a good reading on what more needs to be done to get it back down from the 3-4% range and closer to 2-3%.

While central banks – with the possible exception of our own tardy and hesitant RBA – have generally pushed official interest rates high enough to push inflation down, the release of the US Federal Reserve’s policy meeting minutes this week will give us a bit of a better idea of whether any further upwards fine tuning of rates still needs to happen.

Also released this week are a lot of indicators about US inflation, with numbers on producer prices, consumer prices and export/import prices expected to show that core inflation is remaining sticky around the 3% to 4% range.

Chinese inflation numbers are released on Friday which will show how effective government policies have been in shifting stubborn deflation – the opposite problem to what is happening in much of the rest of the world.

On the Australian data side, the main things to look out for are credit growth data, Australian business conditions and sentiment surveys and consumer confidence figures.

Reserve Bank Assistant Governor Christopher Kent is also delivering a speech while the annual meeting season starts in earnest with some of the larger company meetings including Aurizon (ASX: AZJ), Baby Bunting (ASX: BBN), Beacon Lighting (ASX: BLX), Brambles (ASX: BXB), CSL (ASX: CSL), Commonwealth Bank (ASX: CBA) and Insurance Australia Group (ASX: IAG), while Bank of Queensland (ASX: BOQ) is releasing earnings.

Shareholder meetings often produce some guidance about where current sales and profits are heading.

There are also some US results out for PepsiCo, Delta Air Lines, Wells Fargo, Citigroup, JPMorgan Chase, BlackRock and UnitedHealth.

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