Market wrap: late market rally not enough to erase midweek losses
WEEKLY MARKET REPORT
A late rally on Friday wasn’t enough for the Australian share market to recover from ground lost earlier in the week.
Despite climbing 0.96% or 73.5 points on Friday, the ASX 200 gave up 0.42% for the week.
Inflation still high
Australia’s annual consumer inflation rate accelerated to 3.6% in April 2024, its highest level since November of the previous year.
The rise in the Consumer Price Index exceeded market expectations of 3.4%, picking up from 3.5% in March.
The primary catalyst behind this uptick was a sharper increase in food and non-alcoholic beverage prices, which climbed 3.8% compared to 3.5% a month earlier.
Notably, the prices of fruits and vegetables exhibited the most substantial surge since April 2023, underpinning the overall inflationary pressures.
Telix rises on positive trial data
Telix Pharmaceuticals (ASX: TLX) rallied 15.3% on Friday to $18.15 per share on positive data from its ProstACT SELECT trial of TLX591 for treating PSMA-positive metastatic castrate-resistant prostate cancer (mCRPC).
The study reported a median radiographic progression-free survival (rPFS) of 8.8 months in a sample of 23 heavily pre-treated patients, indicating the potential efficacy of TLX591.
The results support further development of TLX591, highlighting its advantages in dosing regimen and lower cumulative radiation exposure compared to small molecule radioligand therapies.
Investigative analytics and intelligence software company Nuix (ASX: NXL) hit 52-week highs with a 7.27% rise this week.
Gold stocks close strong
Friday had the larger gold companies jumping.
West African Resources (ASX: WAF) saw its share price rally 7% to $1.53, Bellevue Gold (ASX: BGL) was up 6.2% to $4.46, Silver Lake Resources (ASX: SLR) up 5.9% to $1.54 and De Grey Mining (ASX: DEG) up 5.1% to $1.14.
BHP pulls out of Anglo takeover
BHP Group (ASX: BHP) halted its $75 billion takeover bid for Anglo American after the latter’s repeated delays and failure to secure an extension for a binding offer.
Despite submitting an increased final offer on 20 May 2024, Anglo American’s board rejected it on 22 May.
BHP’s chief executive officer Mike Henry expressed disappointment, citing that BHP’s proposals addressed Anglo American’s concerns and provided significant benefits, including economic advantages for South Africa.
The company decided to end the takeover pursuit.
Guzman y Gomez plans for IPO
Australian fast-food chain Guzman y Gomez has announced plans to go public later this month, with the goal of raising $242.5 million for nationwide expansion.
The company is launching an initial public offering (IPO) of 11.1 million shares at $22 each, placing its valuation at $2.2 billion.
From the capital raised, $200 million of the proceeds will be used to grow its corporate restaurant network in Australia.
The shares are set to be listed on the Australian stock exchange under the ticker ‘GYG’ on June 20.
Co-CEOs Steven Marks and Hilton Brett noted that this strategy will help increase the number of restaurants to over 1,000, boosting both profitability and sales.
Guzman y Gomez currently operates 210 outlets globally and projects sales to reach $1.14 billion by 2025.
Small cap stock action
The Small Ords index inched 0.38% higher this week to 3022.9 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Nanoveu (ASX: NVU)
Nanoveu has signed a binding heads of agreement with South Korean company Rahum Nanotech, providing US$19.75 million over 31 months for exclusive distribution of EyeFly3D products in South Korea.
This agreement supersedes a previous non-binding memorandum and follows another major Asian agreement with Chinese partner Shenzhen Fullsand Printing & Packaging.
The Rahum agreement includes a variety of 3D products and sets progressive order requirements until December 2026.
Nanoveu’s EyeFly3D technology allows for glasses-free 3D viewing on digital devices through a film with mini lenses.
Recently, Nanoveu formed a JV with Fullsand and a collaboration with Datature to enhance and market their 3D imaging technology globally.
VHM Limited (ASX: VHM)
VHM Limited has signed an MoU with Yellow Iron Fleet to fast-track the development of the Goschen rare earth and heavy minerals project in Victoria.
The agreement allows VHM to accelerate pre-mining activities and establish fleet requirements and mining approaches. Chief executive officer Ron Douglas commented on the shared vision of enhancing Australia’s critical minerals capabilities and benefiting the Loddon-Mallee region.
The MoU will be in place for six months, during which a formal mining partnership agreement will be negotiated, covering the project’s life of at least seven years.
The Goschen project, with substantial rare earth deposits, is expected to begin production in 2025, pending government approvals.
Forrestania Resources (ASX: FRS)
Forrestania Resources has entered an option agreement to acquire a prospective iron ore asset near Mineral Resources’ Koolyanobbing operations in Western Australia’s Yilgarn region.
The deal involves acquiring 100% of Netley Minerals, which holds one exploration license and rights to two others.
Forrestania’s chair John Hannaford highlighted the significant scale potential and the strategic location with existing infrastructure.
Forrestania plans to fast-track a drilling program to test hematite targets during the option period, with the potential for substantial iron ore development if successful.
The agreement includes a three-month option period with a $20,000 fee and a commitment to drill a minimum of ten holes on the tenements.
Aurum Resources (ASX: AUE)
Aurum Resources has discovered gold grading 163 grams per tonne during drilling at the Boundiali gold project in Côte d’Ivoire.
The best result was from a 355.5-meter diamond hole at Target 1, revealing 12.22 meters at 14.56g/t gold from 275 meters, including 1 meter at 163.42g/t and 50 meters at 0.7g/t from 48 meters.
This intercept is about 60 meters down-dip from a previous hit and 230 meters below the surface, indicating the potential for significant gold resources.
The drilling campaign, aiming for 6,000 meters per month, also includes a trenching program to identify additional high-priority targets.
Aurum plans to announce an initial mineral resource estimate for Boundiali by the end of the year, supported by a cash balance of $5 million.
Cleo Diagnostics (ASX: COV)
A benchmarking study published in the journal Cancers has shown that Cleo Diagnostics’ new blood test is significantly more effective in detecting early-stage ovarian cancer compared to conventional ultrasound and CA125 testing.
The study demonstrated that Cleo’s test can correctly identify 90% of early-stage cancers, versus the 50% success rate of current methods.
This evidence, described as “gold standard” by chief executive officer Richard Allman, is expected to facilitate discussions with physicians and support the company’s commercial pathway for the test’s adoption and reimbursement.
Currently, ovarian cancers are often diagnosed only after extensive surgery, with many suspected malignancies turning out to be benign, highlighting a significant flaw in pre-surgical evaluation.
Cleo’s blood test aims to improve patient outcomes and integrate seamlessly into existing medical workflows, offering a minimally invasive and cost-effective solution.
The week ahead
In the coming week, key economic indicators and central bank decisions are set to shape market expectations and investor sentiment.
On Tuesday, retail sales numbers are anticipated, with a modest 0.1% increase forecast.
Wednesday will bring the release of Q1 gross domestic product (GDP) numbers, where a 1.2% growth is expected, providing insights into the broader economic health.
Across the Atlantic, the United States will release non-farm payroll numbers for May at the end of the week, alongside the latest unemployment rate data.
These figures will be crucial for gauging the state of the US labor market. Additionally, manufacturing PMIs from both the US and China are expected, offering a glimpse into the manufacturing sector’s performance in the world’s two largest economies.
On the monetary policy front, the European Central Bank (ECB) and the Bank of Canada are scheduled to announce their decisions on interest rates. These announcements will be closely watched for any shifts in policy direction that could influence global financial markets.