Weekly review: miserable September sees market lose over 7%

A miserable September drew to a fitting fizzling end with the Australian share market sagging by a further 1.2% to take the monthly fall to a woeful 7.3%.

After a brief upward hurrah to welcome the UK bond rescue package on Thursday, the market returned to the recent theme it knows best – falling – on Friday, with industrial shares leading the way to a 1.5% drop for the week.

That left the ASX 200 just 40 points short of testing its lowest close for 2022 back on 20 June, with the statistically weak and volatile month of October still to come.

RBA expected to pull the trigger on a 0.5% rise

Next week’s Reserve Bank of Australia meeting is almost universally predicted to lead to the fifth straight months of 0.5% rises.

If that happens, it would bring the cash rate to 2.85% – taking it to a nine year high and providing plenty to worry about as central banks around the world keep fighting inflation no matter the cost.

The previous accepted wisdom that a heightened risk of a recession would cause central banks to slow down their campaign to “normalise” interest rates seems to have been replaced by a grudging acceptance that this time they really are serious and will keep hitting the rate rise button until the inflation numbers really start to make a meaningful move down.

Rising rates sends industrials lower

Some of the industrial shares that soaked up this gloomy outlook included Qantas (ASX: QAN), which fell 4.2%, Auckland Airport (ASX: AIA) shares, down 3.4% and toll road operator Transurban (ASX: TCL) shares, which fell 5.1%.

The situation was just as bad for consumer discretionary stocks, despite the resilience of the latest consumer spending figures, with Flight Centre (ASX: FLT) shares down 4.4%, Domino’s Pizza (ASX: DMP) shares off by 4.9% and Jeweller Lovisa (ASX: LOV) lost its shine after dropping 4.9%

Shareholders also grew concerned about the buoyant Australian car market which has suffered from lack of supply for the past couple of years. Shares in US used-car retailer CarMax fell by a whopping 24.6% on Wall Street after reporting that economic uncertainty was starting to reduce demand for vehicles.

Local car group Eagers Automotive (ASX: APE) saw its shares drop 5.5% on the news that car demand could be waning, while Carsales.com (ASX: CAR) slumped hard by 7.8% to $18.81.

If there was any good news around it was for the traditional safe haven of gold, with the price rallying to US$1,672 an ounce. Local gold giant Newcrest Mining (ASX: NCM) enjoyed a 2.7% rise in its share price and many other local gold stocks had even bigger rises.

The big miners also did well, with the rising US dollar helping to boost their profits.

Small cap stock action

The Small Ords index fell 2.91% for the week to close at 2615.6 points.

Small cap companies making headlines this week were:

Dundas Minerals (ASX: DUN)

Junior explorer Dundas Minerals has encountered massive sulphides and ultramafic rocks in two drill holes to a maximum depth of 37m at the Central target in Western Australia’s Albany-Fraser Orogen.

Drilling spoil (chips) have been recovered from each hole and analysed using handheld portable Xray fluorescence (pXRF), with many returning massive sulphides containing cobalt, nickel, copper and silver.

While pXRF does not analyse for gold, the company said the presence of large amounts of pyrite along with the silver readings was an encouraging sign of potential gold mineralisation.

MetalsGrove (ASX: MGA)

Initial results from a detailed surface mapping program at MetalsGrove’s Upper Coondina lithium project in WA’s Pilbara region have highlighted multiple outcropping pegmatite dykes occurring in swarms.

The company believes they may be part of the same system which hosts a major discovery announced by Global Lithium at its Archer project to the northeast.

Data obtained from the mapping program will be combined with other pre-drilling work completed at site to develop priority targets ahead of maiden drilling before year end.

Archer Materials (ASX: AXE)

Archer Materials this week confirmed it had taken a significant step forward in the development of its ¹²CQ quantum chip technology (¹²CQ chip) by nanofabricating devices which electrically integrate its qubit material.

The room-temperature, on-chip electronic transport in Archer’s qubit material supports the potential for practical solutions to quantum-enabled mobile devices.

This achievement has been considered a significant milestone and a fundamental requirement for the operation of the ¹²CQ chip.

InhaleRx (ASX: IRX)

Australian healthcare and technology company InhaleRx confirmed two new appointments this week as it prepares for clinical trials of its cannabinoid-based inhaled therapies.

Existing executive director Darryl Davies was announced as chief executive officer, while experienced plastic surgeon Dr John Crock became the newest non-executive member of the board.

Mr Davies joined InhaleRx as an executive director in July last year and has more than 17 years’ experience in psychology, harm minimisation and healthcare commercialisation.

Dr Crock brings with him his vast network of medical connections and will advise on the clinical trials, offering a wealth of experience in inhaled medicines.

Greenwing Resources (ASX: GW1)

Chinese electric vehicle maker NIO has become a potential joint venture and offtake partner in Greenwing’s San Jorge lithium development in Argentina by taking a 12.16% stake plus call option in the project.

The $12 million transaction will allow Greenwing to accelerate its exploration program at San Jorge and gives NIO direct rights to the project’s offtake.

San Jorge is located in the famed “lithium triangle” comprising adjacent regions of Chile and Bolivia.

The San Jorge ground covers 36,000 acres and includes the San Francisco salar.

Far East Gold (ASX: FEG)

After embarking on the first ever drilling program the Woyla project in Indonesia has ever seen, Far East Gold has hit quartz vein in the first two holes.

The company has an 18-hole program underway, which is targeting the project’s Anak Perak epithermal vein.

Drill core from the first two holes contained dark grey sulphide-rich zones and other geological indicators of mineralisation. These are known to be common features of other significant deposits.

Far East describes Woyla as one of South East Asia most prospective undrilled copper-gold projects.

The week ahead

This week the RBA decision will be the biggest local influence and just about everyone – with the notable exception of the Commonwealth Bank – is predicting a 0.5% interest rate rise.

Even Commonwealth admits that its 0.25% call could turn out to be wrong and the only real consolation is that much of this expectation is already built into the market.

The RBA board decision on Tuesday isn’t the only news out on that day – with consumer confidence numbers, job advertisements, manufacturing and building approvals, and lending indicators for August also out.

It will not come as much of a surprise if home lending is down a little as it gets harder to make repayments and save for deposits given higher interest rates, but building approvals are expected to remain stronger.

Other local data released during the week will include more detail on retail trade and sales, which rose by 0.6% in August to a fresh record and international trade numbers which are likely to show a fall in Australia’s trade surplus as coal and iron ore sales come off a little.

Looking offshore, US jobs figures for September are probably the main feature with any weakness a sign that higher interest rates are starting to suppress demand.

Other US figures include manufacturing, chain store sales and factory orders, along with mortgage applications, international trade data and unemployment benefit claims.

It looks like it will be a quiet week in China with financial markets taking some time off to celebrate the Golden Week public holiday.

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