Market wrap: from record high to hefty fall in just one day
WEEKLY MARKET REPORT
What a difference a day makes with the Australian share market hitting a record high on Thursday followed by the worst fall in 16 months on Friday.
Once again, a steep fall on Wall Street was the catalyst for the 2.1% fall in the Australian market as investors fretted that the US Federal Reserve was in danger of falling behind in cutting interest rates.
That meant that the lofty record high of 8114.7 points on Thursday is now nothing but a memory as the ASX 200 shed a mammoth 171.5 points to 7943.2 points as every single sector copped a sudden beating.
Consumer and energy stocks were hit the hardest but there was nowhere to hide, with all sectors screeching into reverse.
Real estate, information technology, financials and energy all fell by more than 2% with utilities showing the lightest loss of 0.1%.
Retailers thumped
The consumer discretionary sector was the hardest hit, falling 3% as traders decided that the retail rebound trade should be abandoned, particularly given the coming week will bring profit results from Light & Wonder (ASX: LNW) and Nick Scali (ASX: NCK), with JB Hi-Fi (ASX: JBH) and Temple & Webster (ASX: TPW) reporting the following week.
Indeed, the continuing profit reporting season was probably in the back of many minds, along with the US worries from weaker economic data that the eventual start of the cutting rate cycle could coincide not with a soft landing but instead a recession.
Incredibly, given the scale of the fall, the market still ended up 0.3% for the week, indicating the strength of the rally until Friday arrived.
As you would expect from a broad retreat, the big Australian market barbells of mining and banking all took a hit.
Miners and banks lower
Rio Tinto (ASX: RIO) shares fell 0.8% to $118.75, BHP (ASX: BHP) shares dropped 1.2% to $41.98 and Fortescue (ASX: FMG) shares fell 1.3% to $18.75.
Even recovering oil prices couldn’t save the energy sector with Woodside (ASX: WDS) was down 1.9% at $27.48 and Santos (ASX: STO) shares losing 2.2% to $7.86.
The big four banks went into a big funk, with Commonwealth Bank (ASX: CBA) shares down 2.8% to $132.46, well down on its new all-time high of $138 a share hit on Thursday.
National Australia Bank (ASX: NAB) shares fell the most, down 4.1% and even Macquarie Group (ASX: MQG) shares were down 2.2% after it revealed it was considering a new hybrid raising offer.
A few bright spots
It wasn’t a total market wipeout with a couple of bright spots with Newmont Corporation (ASX: NEM) shares up 1.5% while shares in Yancoal Australia (ASX: YAL) were up 1%.
Despite all of the gloom around technology, fintech company Block (ASX: SQ2) shares jumped an impressive 5.1% to $100.10 a share, after the company announced a $US3 billion ($4.6 billion) share buyback plan.
Sleep apnoea devices manufacturer ResMed (ASX: RMD) enjoyed a bit of a share price rally after announcing fourth quarter revenue rose 9% on stronger sales but later the shares closed down 1.8%.
Small cap stock action
The Small Ords index was up 0.87% for the week to close at 3023.6 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
MPower Group (ASX: MPR)
MPower Group has achieved its first revenue generation at full capacity from the Narromine solar project in New South Wales after its successful commissioning and connection to the national electricity market.
The company employs a merchant market revenue strategy, where project revenues are based on the prevailing wholesale spot prices for energy and large-scale generation certificates, while still evaluating offers from potential offtake parties for long-term revenue security.
Chief executive officer Nathan Wise emphasised that the start of commercial operations marks a significant achievement for MPower and highlights the team’s skill and capability.
The Narromine project, which can produce over 14,000 megawatt-hours of energy in its first year, is financed by global investment firm AMPYR Energy under a debt facility agreement with an option to convert to equity.
As part of its ‘build-own-operate’ strategy, Narromine is MPower’s first project to be fully owned, constructed, and commissioned, showcasing the company’s aim to secure renewable energy assets and maximise revenue streams through its expertise.
African Gold (ASX: A1G)
African Gold has announced a maiden gold resource at the Blaffo Guetto prospect of its Didievi project in Côte d’Ivoire, reporting an inferred resource of 4.93 million tonnes for 452,000 ounces of gold at 2.9 grams per tonne, using a 1g/t cut-off.
This resource estimation is based on data from 29 diamond drill holes totalling 6,945 meters and 174 reverse circulation holes totalling 14,923 meters.
The Didievi project hosts numerous other prospects, such as the Kouassi, which has returned significant gold intercepts, and the Poku Trend, a 900-meter zone with notable gold mineralization.
African Gold plans to commence a 2,030-meter diamond drilling program to increase the resource’s scale, grade, and confidence level, aiming to achieve its exploration target of up to 1.45 million ounces of gold.
The project is strategically located within 60 kilometers of three operating multi-million-ounce gold mines, and African Gold is in the process of earning up to 80% equity in the project.
ENRG Elements (ASX: EEL)
ENRG Elements has agreed to acquire the Lamont Lake uranium project in Canada from private vendor Marino Specogna by making an upfront payment of $30,400 and issuing 33.3 million shares, with a deferred consideration of $100,000 payable in cash or shares within six months.
The company sees the project as an exceptional opportunity due to minimal modern exploration across the Lamont Lake tenement package, allowing them to build on historical uranium findings.
Located 85 kilometers northwest of Uranium City in North Saskatchewan, Lamont Lake lies near the Athabasca Basin, known for high-grade uranium deposits and encompasses four mineral claims over 22 square kilometers, with uranium grades between 0.02% and 0.5%.
ENRG’s initial analysis suggests geological similarities to the Beaverlodge region, which produced 56 million pounds of uranium oxide from 1953 to 1982, and they note that minimal ground cover at the site could result in lower exploration costs.
Managing director Caroline Keats highlighted the project’s potential to diversify the company’s portfolio and mentioned plans to complete exploration planning and assess strategic opportunities to strengthen their market presence.
RareX (ASX: REE)
RareX has reached a land access and heritage agreement with the Upurli Upurli Nguratja Aboriginal Corporation (UUNAC) for the Khaleesi niobium and rare earths project in Western Australia’s east Yilgarn region.
The agreement allows RareX to explore the project area, which lies within the native title determination area, in exchange for issuing one million shares to UUNAC.
With this agreement, RareX plans to begin exploration drilling on the project’s most prospective licenses in October, marking a significant milestone for the company.
The Khaleesi project features an alkaline intrusive complex comparable in style and scale to Brazil’s Caldeira project and is located near Lynas Rare Earths’ Mt Weld project, showing potential for niobium and rare earth enrichment.
Managing director James Durrant emphasised the importance of good faith negotiations with UUNAC and stated that RareX is preparing for the upcoming drilling program while finalising site access agreements with neighbouring project owners like Deep Yellow and AngloGold Ashanti.
The week ahead
The coming week is going to be all about the Reserve Bank of Australia, with the Board starting a two-day monetary policy meeting on Monday.
That will lead to the all-important interest rate announcement on Tuesday.
Speculation of a rate rise has become more muted after the latest inflation figures which showed some signs of moderation but that still leaves open the chances of a hawkish hold warning from Governor Michele Bullock that still has the potential to throw some further cold water on the share market.
Ms Bullock will not only be speaking to the media after the decision is announced, she is also speaking later in the week at the annual Rotary Lecture in Armidale, NSW.
There are not too many offshore announcements other than business activity reports in the US and China plus some international trade and inflation numbers from China.
However, there is plenty of action from Australian companies reporting results with just a few worth watching out for being Argo, News Corp, Transurban, AMP, REA Group, Life 360 and QBE Insurance.