Market wrap: rally continues despite disappointing mining stocks

A broad-based rise in banking, healthcare and technology stocks helped to overcome disappointing share price falls by miners dragged down by lower commodity prices.

By the market close on Friday the ASX 200 finished up 0.3% or 26.6 points higher at 7796 points, representing a 0.9% gain for the week after the Reserve Bank held interest rates steady and warned that it has not yet ruled out the prospect of an interest rate increase to combat sticky inflation.

That followed on from a 0.3% fall for Wall Street’s S&P 500 to 5473.17 points after it had earlier peaked at 5505.53 points, making this the very first time that index has topped 5500 points.

Commonwealth bank shoots out the lights

The Commonwealth Bank (ASX: CBA) was one of the stars of the Australian market, with its share price rising to a record high of $128.25 before falling back a little to close at $127.68.

That put Australia’s biggest bank within a whisker of overtaking the mining giant BHP (ASX: BHP) as the most valuable company listed on the ASX, with weakening commodity prices playing a part in the chances that the Big Australia’s crown could be lost.

Commonwealth has also announced plans to tackle Macquarie Group (ASX: MQG) on business banking, a move that was welcomed by investors.

MinRes leads the miners lower

The bad news for the miners was perhaps worst for iron ore and lithium giant Mineral Resources (ASX: MIN), with its shares losing a hefty 7%, representing a loss of almost 30% since May 20.

As a whole, the materials sector has shed 9.5% over the last month as commodity prices and a global shift towards technology stocks has harmed the share prices of the big miners.

Float logjam ended by Guzman

One of the more interesting market moves during the week was the float of Mexican food vendor Guzman y Gomez (ASX: GYG) which successfully broke through with a 36% share price rise on its first day of trade to reach $30 on its first day.

Yesterday some investors decided to take some stag profits so the shares fell 3.3% to $29 but it is hoped that the successful listing will encourage other companies to take the plunge and list on the ASX after some lean years for the float pipeline.

One stock that disappointed yesterday was Kathmandu owner KMD Brands (ASX: KMD) with the shares losing 7.7% to 36c after the clothing and camping business warned of softening sales in 2024 as consumers struggled with rising living costs.

Spot Bitcoin begins to trade

Another interesting float this week was the beginning of trading in Vaneck’s Bitcoin ETF (ASX: VBTC), with the ETF falling 1.3% on Friday to $19.80 on reasonable volumes.

One trend on Wall Street to keep an eye on is the way a few stocks have been boosting the S&P 500 to new heights, meaning that the record setting rally is less broad based than many, which some see as a sign of a topping out of the rally.

This showed up when the AI darling stock Nvidia lost 3.5% after an eight-week winning streak, meaning that it gave back the title of most valuable company on the US market to Microsoft.

Due to the fact that Nvidia’s chips are helping to power the move into AI, the company’s shares are up an amazing 164% this year after more than tripling last year but there are concerns that investors are losing perspective.

In general, the AI boom has been propelling the US market higher even as the economy shows signs of weakness, particularly among retailers as consumers struggle to keep up with rising prices.

Small cap stock action

The Small Ords index rose 1.70% for the week to close at 3004.6 points.

Small cap companies making headlines this week were:

VHM Limited (ASX: VHM)

VHM has identified significant capital expenditure (capex) savings for its Goschen rare earths and mineral sands project, reducing Phase 1 costs from $483 million to $337 million.

The reduction was achieved through a robust optimisation review, making Goschen one of the lowest-cost rare earth projects in Australia.

The review involved early contractor involvement and leveraging VHM’s mining services partner for initial site development and selected early works.

In May, VHM signed a strategic memorandum of understanding with Yellow Iron Fleet to fast-track development and accelerate key pre-mining activities.

The project, located 275 kilometres north of Melbourne, recently concluded a public hearing, marking a critical step towards obtaining environmental approval and progressing towards construction.

K2fly (ASX: K2F)

K2fly has entered into a $38 million binding scheme implementation deed with a subsidiary of Accel-KKR, under which Accel-KKR will acquire 100% of K2fly shares for $0.19 cash per share.

The K2fly board and major shareholders support the scheme, considering it to be in the best interests of shareholders, providing certainty of value at a 90% premium to K2fly’s share price on 20 June 2024.

Significant shareholders holding 48.5% of voting shares intend to vote in favour of the scheme.

Chief executive officer Nic Pollock expressed excitement about partnering with Accel-KKR to further global growth, while Accel-KKR’s Dean Jacobson highlighted K2fly’s success and unique industry position.

The acquisition underscores K2fly’s effective business strategy and product differentiation in regulated sectors like mining and utilities.

HeraMED (ASX: HMD)

HeraMED continues to gain strong support for its HeraCARE digital maternity monitoring platform, which has reached a record 3,533 users as of 15 June 2024, reflecting a 12% growth since 31 March 2023.

Partnerships, including those with e-Lovu Health and Perth-based private clinics, are driving this growth, with e-Lovu now serving 15 clinics and 345 active users.

HeraCARE offers remote pregnancy monitoring and customised care plans, collecting valuable data that could enhance clinical interventions and reduce mortality and morbidity rates.

The platform has recorded approximately 90,000 digital measurements from its users, aiding in accurate diagnosis and treatment.

HeraMED’s strategic focus on leveraging this data aims to improve patient outcomes and support the evolving needs of maternity care, as highlighted by recent studies on rising maternity care costs and intervention rates.

Schrole Group (ASX: SCL)

TES Global has made an $18.15 million takeover bid for Perth-based Schrole Group, offering $0.48 per share, a 203% premium to the last closing price and a 160% premium to the 30-day average price.

Schrole’s board has unanimously recommended the offer, pending no superior proposals and a favourable independent expert review, with a shareholder vote expected around September 2024.

The deal offers certainty of value for Schrole shareholders, with directors intending to vote their 11% shareholding in favour.

TES Global, supported by the world’s largest community of teachers, offers various digital solutions to over 19,000 schools worldwide.

Schrole’s managing director, Rob Graham, sees strong synergy in the transaction, enhancing outcomes for clients and the team through TES’s resources and market reputation.

Nimy Resources (ASX: NIM)

Nimy Resources has completed downhole electromagnetic (DHEM) and fixed loop electromagnetic (FLEM) surveys at the Masson copper-nickel prospect within its Mons project in Western Australia, confirming the depth extension of a polymetallic anomaly.

Previous drilling revealed significant copper, nickel, cobalt, and platinum group elements (PGE) mineralisation. Executive director Luke Hampson noted a significant target size increase, with the anomaly now extending to a depth of 225 meters, indicating potential for increased mineralisation.

The surveys, conducted by Gap Geophysics, have extended the anomaly and identified four large conductor plates for preliminary modelling.

The Masson prospect, discovered in 2023, has shown promising results with substantial sulphide-rich intercepts in subsequent drilling.

The week ahead

By far the dominant feature of the coming week will be inflation figures, both locally and in the US.

The local CPI numbers are released on Wednesday and so far the predictions are a little contradictory, with the May monthly headline CPI figure predicted to fall 0.3% for May while the annual figure is expected to lift to 3.7% from 3.6% due to unfavourable movements in base inflation.

The commentary so far indicates that the chances of one more interest rate rise in Australia is not yet off the radar for the Reserve Bank, even though the global situation has been swinging towards cuts with the Swiss National Bank the latest to cut its key rate by 25 basis points this week.

Obviously, time will tell but the early indications are that there could be some nuance involved in interpreting where inflation is headed locally.

It is a slightly different scenario in prospect in the US with economists there tipping that the US Fed’s preferred indicator, the personal consumption expenditures (PCE) quarter deflator set to rise 0.1% in May while the annual growth rate will ease from 2.8% in April to 2.6% in May.

Such a result would keep alive the chances for a fall in official interest rates in September, something the US market would be likely to run with as a very good sign.

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