Weekly review: Powell forces share markets into reverse gear
WEEKLY MARKET REPORT
Beware the market crushing abilities of a central banker who is behind the curve and desperate to battle rising inflation.
That is the takeaway message from an abrupt turnaround on the share market, firstly in the US and then in Australia.
Hawkish comments lead to interest rate speculation
The “villain” in this particular turnaround was US Federal Reserve chair Jerome Powell whose hawkish comments were interpreted as pointing to three consecutive interest rate rises of 0.5% as he told an International Monetary Fund panel discussion that “it is appropriate in my view to be moving a little more quickly.”
That was greeted by US markets like a dousing of ice water, with US stocks falling 1.5%.
If the US sneezes, we catch a cold and from challenging the former all-time high of 7,632.8 points on Thursday, the ASX 200 fell from the opening bell on Friday and closed 1.6% lower at 7,473.3 points.
That brought up a very slight weekly loss and leaves that record high a faraway dream that will require a 159.5-point rally to be realised.
Mining and tech stocks hit hard
There was no sign of that rally arriving with mining and technology stocks hit hard in the rout in what was the biggest daily fall since 24 February this year.
The technology sector was off by 2.5% and the materials sector lost 3.3% as investors hunted for security, jumping out of growth stocks and into the relative security of the healthcare sector, which lifted by 0.5%.
That rare positive streak in health stocks was fuelled in part by a 1.5% rise in CSL shares (ASX: CSL) to $270.86 and a further 1.7% rise in Ramsay Health Care (ASX: RHC) shares to $84.37, as it was buoyed by the prospects of possible competition for the proposed $20 billion takeover offer by KKR.
Healthcare rallies as a safe haven
Healthcare was a rare positive sector with even the big banks that had been rising all marked back as the fear of higher inflation and interest rates took hold.
Commonwealth (ASX: CBA), Westpac (ASX: WBC), NAB (ASX: NAB) and ANZ (ASX: ANZ) all fell more than 0.5% in the session.
It was a similarly bleak experience for the big miners with shares in OZ Minerals (ASX: OZL) down 6.3% after it posted a 5.7% quarterly decrease in copper production, and a 16.3% fall in gold production.
OZ attributed the production slide to “workforce absenteeism”, weather disruptions and supply challenges, but has stuck with its production and cost guidance for the year.
Even Mineral Resources’ (ASX: MIN) shares fell by 2.2% after it announced a 16% annual increase in its Mining Services production volume and a 22% increase in iron ore shipments.
Once again, one of the worst performers was Megaport (ASX: MP1) with shares down a hefty 9.7% on Friday to $9.04 – a far cry from the $12.93 the data storage company’s stock was fetching earlier in the week.
Small cap stock action
The Small Ords index fell 0.66% for the week to close on 3345.9 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Credit Clear (ASX: CCR)
Following the successful deployment of its digital accounts receivable platform for Techub in South Africa, Credit Clear’s platform will now be rolled-out across Techub’s US$1 billion debt portfolio.
The first deployment for Techub marks the beginning of Credit Clear’s international expansion.
Credit Clear will receive ongoing commissions and deliver remote support from Australia for each deployment of its platform in Techub’s portfolio.
The parties also have a teaming agreement to pursue business opportunities in international markets. Revenue under this agreement will be split equally for any new Techub clients that are onboarded to use Credit Clear’s platform.
Petratherm (ASX: PTR)
Petratherm impressed investors this week after it uncovered what it terms “significant rare earth (REE) occurrences” during a regional RAB drilling program at the Comet project within South Australia’s northern Gawler Craton.
The company has received samples from a shallow 44-hole RAB program across part of the project’s prospective clay horizon.
All holes returned “significant results” with 23 of these holes intercepting total rare earth oxide (TREO) values exceeding 1,000 parts per million.
Best results were 4m at 3,042ppm TREO from 36m, 3m at 2,819ppm TREO from 15m, and 3m at 2,701ppm TREO from 15m.
Within these holes, the high value magnet REE concentrations were 814ppm, 743ppm and 1,016ppm.
Petratherm noted the intercepts in clays showed “striking similarities” and comparable grades to the ion-absorption REE deposits in China, which is the world’s largest REE producer.
Mineralisation remains open at depth and surrounding areas.
Petratherm is now planning a follow-up 10,000m RAB program, which will begin in three weeks and test the extent of mineralisation. A JORC resource will be published within six months.
The company hit an intraday high of $0.195 per share after it announced the news on Wednesday – up 200% on its closing price of $0.065 on Tuesday.
iTech Minerals (ASX: ITM)
Another explorer to impress investors this week was iTech Minerals after it announced a high purity fine flake graphite was produced during metallurgical tests on ore from its Campoona project in South Australia.
The company noted the material was suitable for processing into purified spherical graphite, which is used as lithium-ion battery anodes.
Test work on Campoona ore created a concentrate exceeding 94% total graphitic carbon using an industry standard flotation circuit.
iTech plans to produce a green graphite from Campoona for the battery industry, with test work to continue improving concentrate grade and recoveries.
Way2VAT (ASX: W2V)
Developer of VAT/GST claim and return solutions, Way2VAT has partnered with Railsbank to launch the Smart Debit Mastercard.
Way2VAT says the Mastercard is the world’s first spend card for the small-to-medium business and enterprise market.
The card will allow companies to submit spend receipts and capture invoices through Way2VAT’s platform.
“The new technology is an end-to-end process from capture of the receipt through to payment that automatically analyses, reconciles, sorts and submits documentation to foreign tax authorities,” Way2VAT explained.
It has technology that controls expenses per transaction by merchant, category, date, amount and frequency.
The Smart Spend Debit Mastercard will initially be rolled out in the UK, Australia, Belgium, Cyprus, Denmark, France, Germany, Greece, Finland, Ireland, Italy, Luxemburg, Netherlands, Portugal and Spain.
It will then be expanded to hit Australia and North American markets.
Investors welcomed the news on Friday – spurring Way2VAT’s share price up 230% during intraday trade to hit a high of $0.145.
Navarre Minerals (ASX: NML)
Navarre Minerals is building the potential of its recent Mt Carlton gold operation, with drilling at the Mt Carlton United deposit returning “outstanding” intercepts.
Mt Carlton United is only 4km from the Mt Carlton mill in Queensland, with Navarre’s drilling program at the target comprising 71 holes for 5,451m.
The company has received assays for all holes with highlight results of 2m at 22.9g/t gold, 402.2g/t silver and 0.2% copper; 4m at 18.7g/t gold, 162.4g/t silver and 0.1% copper; 4m at 4.4g/t gold, 254g/t silver and 4.2% copper; 2m at 11.3g/t gold, 1,327.5g/t silver and 0.3% copper; and 7m at 8.5g/t gold, 192.2g/t silver and 2.2% copper.
Over in western Victoria, Navarre reported aircore drilling at the Morning Bill prospect had hit gold and silver.
Better results from this program were 1m at 12.8g/t of gold within 7m at 2.3g/t gold from 134; 3m at 4.2g/t gold within 16m at 1g/t gold from 74m; and 2m at 247g/t silver, within 12m at 57g/t silver from 115m.
Terragen Holdings (ASX: TGH)
Biological agriculture company Terragen Holdings presented results from recent studies carried out at dairy research farm Ellinbank SmartFarm.
The research found that Terragen’s Mylo feed supplement can reduce methane emissions in dairy cows.
According to Terragen, the study found cows not on Mylo emitted 7.5% more methane per litre of milk produced.
This indicates Mylo can reduce methane emissions by 100t of carbon dioxide per 350-cow dairy farm a year.
Terragen will undertake more research at the farm to determine if higher doses of Mylo will reduce emissions further.
Mylo is already sold in Australia and New Zealand.
The week ahead
We are in for a swag of announcements despite a shorter trading week due to the Anzac Day holiday with by far the biggest local one being the March quarter CPI figures, which are out on Wednesday.
Investors will be hoping that the plague of inflation that has hit the US will be more muted here, although there is little doubt that higher petrol prices and housing costs will have had an impact.
Headline CPI is expected to hit around 4.3% for the year, with any surprises on the upside sure to raise speculation that the Reserve Bank might also look to raise official interest rates here earlier than expected.
Other data to watch out for locally includes consumer confidence numbers, private credit numbers and other inflation indicators including Producer price indices and Trade price indices for the March quarter.
Looking overseas, the focus will go off inflation for a while and on to economic growth with the US release on economic growth in the March quarter, which is expected to take a fall to an annualised rate of 1% after hitting a super-sized 6.9% in the December quarter.
Other US data to watch out for include consumer confidence, house prices and sales, and personal income and savings.
As swag of US companies will also be delivering March quarter results which could cause some significant price movements, with better known names including Coca-Cola, PepsiCo, Whirlpool, 3M, Corning, General Electric, Alphabet, General Motors, Microsoft, Visa, Boeing, Harley-Davidson, Kraft Heinz, Ford Motor, PayPal, Caterpillar, MasterCard, McDonald’s, Merck, Twitter, Amazon, Apple, Atlassian, AstraZeneca, Chevron and Exxon.