Market wrap: a positive Wall Street lead produce gains amid a bleak outlook
WEEKLY MARKET REPORT
A rare positive lead from Wall Street helped the Australian share market to a positive close but it was not enough to erase the memories of what has been the worst quarterly performance since early 2022.
By the close on Friday the ASX 200 was up 0.3%, or 23.8 points to 7048.6 points, although that was not enough to reverse a weekly fall of 0.3%, the second weekly fall in a row.
The reason for the lacklustre performance, of course, is the gradual but deepening awakening that investors need to recalibrate their bearings to factor in a higher interest rate environment for much longer than they had initially anticipated – a scenario that favours bonds and bank deposits versus shares for many.
That is particularly the case here in Australia which this week recorded a hefty jump in annual inflation to 5.2% in the year to August, up from 4.9% in July.
RBA tipped to raise rates this year
While that oil price induced rise is probably not enough to turn the tide in favour of a rise in official interest rates in the coming week when the Reserve Bank Board meets with new governor Michele Bullock at the helm, it was enough to reinforce the “sticky inflation” outlook and helped to boost local and international bond yields.
Global government bond yields are now running at 15-year highs while pundits are now pricing in a 40% chance of a 0.25% RBA cash rate rise by November, running up to 90% by March next year, according to Westpac.
The consensus seems to be that the RBA will wait until after the September quarter consumer price index is released on October 25 before deciding to hike from the current 4.1% cash rate at its November meeting.
Dollar up on the back of tech bounce
The Friday reprieve to consistent falls on the ASX 200 came through a rebound in US tech stocks, an easing in US bond yields and the oil price, which also saw the Australian dollar rise back above US64¢.
It was the mining sector that did much of the heavy lifting with a 1.2% rally largely based on a rise in the iron ore price.
BHP Group (ASX: BHP) impressed with a 1.2% share price jump, while Fortescue Metals (ASX: FMG) shares were up 1.3% to $20.92 and Rio Tinto (ASX: RIO) shares rose 1% to $113.55.
Lithium stocks mainly stronger
It was a mixed outcome for lithium stocks which went in both directions as takeover target Liontown Resources (ASX: LTR) shares dropped 1.3% to $2.94 after the miner lifted the capital cost estimate on its Kathleen Valley lithium project to a hefty $951 million – up 6% on previous estimates.
Lithium minnow Core Lithium (ASX: CXO) headed in the opposite direction with its shares surging 19.1% to 40.5¢ after it reported its first full-year profit as a lithium producer, with a net profit of $10 million and revenue of $50.6 million.
The heavily shorted miner also reported that early works and the updated feasibility study at its Finniss project in the Northern Territory were progressing well and that it was on track for final investment decision in the March quarter.
Most other lithium players were higher with shares in IGO (ASX: IGO) up 3.2%, Allkem (ASX: AKE) up 2.1% and Pilbara Minerals (ASX: PLS) up 1.9%.
Shares in the Bank of Queensland (ASX: BOQ) fell 0.4% to $5.74 after it said it would look to axe 250 jobs at a redundancy cost of $25 million.
Some of the other interesting moves included a solid 3.7% rise in the share price for miner South32 (ASX: S32) while investment company Washington H Soul Pattinson (ASX: SOL) saw its shares rise 1.5 %.
Most of the losses on the share market happened in the energy, healthcare, utilities and real estate investment trusts (REITS) – all sectors that traded in the red.
Small cap stock action
The Small Ords index fell 0.55% for the week to close at 2713.1 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
James Bay Minerals (ASX: JBY)
James Bay Minerals has discovered a large pegmatite outcrop known as Avro at the Aero target within the La Grande project in Canada.
The pegmatite is over 400 meters in length and up to 20 meters in width, and displays fractionation indicators and accessory minerals often associated with rare metal pegmatites.
James Bay believes the pegmatite may be an LCT (lithium-caesium-tantalum) pegmatite, similar to those found nearby at Cancet and Corvette.
The company is currently mapping Avro and collecting samples for testing.
James Bay has the largest lithium exploration portfolio in the James Bay region, covering an area of 224 square kilometres.
Peppermint Innovation (ASX: PIL)
Peppermint Innovation subsidiary, Peppermint Bizmoto Inc. (PBI), received critical bank certifications from the Central Bank of the Philippines.
The certifications allow PBI to connect directly to the country’s retail payment systems, PESONet and InstaPay, and expand its bizmoto payments platform beyond its current user base.
The surge in digital transactions in the Philippines highlights the potential for Peppermint’s growth, with electronic fund transfers through PESONet and InstaPay growing significantly in 2023.
Peppermint’s chief executive officer, Chris Kain, emphasised the significance of these certifications for direct interoperability and the potential value of their Electronic Money Issuer licensed platform in the evolving digital payment landscape.
Sovereign Metals (ASX: SVM)
Sovereign Metals, following a positive pre-feasibility study, is poised to become one of the top global producers of rutile and natural graphite through its Kasiya project in Malawi.
Kasiya is the world’s largest natural rutile deposit and the second largest flake graphite deposit, projected to produce vast quantities annually over its 25-year life-of-mine.
The PFS indicates around $25.2 billion in revenue over the mine’s life span.
Furthermore, the project has garnered support from major miner Rio Tinto and the Malawian government, emphasising its potential for significant economic and social benefits for Malawi.
Thrive Tribe Technologies (ASX: 1TT)
Thrive Tribe Technologies has increased its ownership in start-up Daily Food from 37.5% to 54% with a $132,000 investment.
Daily Food will be the primary health food option on Thrive’s upcoming app, Sixty, and its founder, Alexandra Thursfield, will become a main content provider.
Recently, Daily Food launched “Super Bites” health bars in select Australian stores and is expanding its production capabilities.
Thrive’s Sixty app aims to be a platform for health and well-being content creators to expand their reach and monetise their offerings.
Boss Energy (ASX: BOE)
Boss Energy has found opportunities to increase production and extend the mine life of its Honeymoon uranium project in South Australia, following the discovery of two new satellite prospects near the main production plant.
The company’s recent scout drilling at the Billeroo and Sunrise prospects has shown a promising increase in uranium resources.
Boss’s managing director, Duncan Craib, emphasised the potential for strong financial returns by leveraging the Honeymoon infrastructure and expressed optimism regarding the uranium market’s outlook.
Additionally, Boss plans a significant infill drilling program in 2024 for both new prospects, expecting to enhance their mineral resource estimates.
The week ahead
As mentioned earlier, there is little prospect of the Reserve Bank board meeting this week ushering in a rate rise, even if the chances of a rise this year are gaining the upper hand.
Pending a surprise on the RBA front, that leaves most of the interest in getting an overall picture of how the Australian economy is faring.
That should become more obvious as the week wears on with the release of purchasing manager indexes, home prices, international trade, building approvals, job ads, inflation, new car sales and lending finance.
Also playing a part in the coming week will be the continuation of dividends being collected by shareholders, with big deposits worth about $3.5 billion set to land in bank accounts as companies including Wesfarmers (ASX: WES), CSL (ASX: CSL) and Medibank Private (ASX: MPL) produce their payouts.
US jobs figures tipped to remain strong
Looking overseas, the big release will be the job market figures in the US which has so far surprised on the upside, which is expected to continue with an expected lift of 160,000 jobs in September as the jobless rate fell to 3.7%.
The latest theory on firm job markets is that demographic change is making it hard to find enough millennials to take over those jobs being left by Baby-boomers.
Other things to watch for in the US include a speech by US Fed chair Jerome Powell, purchasing manager indexes and international trade numbers.