Weekly review: retail sector surge led by Myer sees market close higher

In one of the more amazing share comebacks, Myer shares burst out of their very own bargain basement and flew up an amazing 45% on Friday to lead the overall market higher.

News that Myer (ASX: MYR) stores would reopen as the Federal Government announced a three-point plan to gradually wind down the pandemic shutdown saw Myer shares leap $0.09 to $0.29.

Myer wasn’t alone among the retail stocks with “GO” Harvey Norman (ASX: HVN) shares also jumping 6.7% or $0.19 to $3.03 as investors warmed to the idea of shoppers snapping up more electronics and furniture as Australia emerges from having the coronavirus shutters drawn.

Completing the retail picture Adairs (ASX: ADH) was up 6.2% and JB Hi-Fi (ASX: JBH) added 3.7%.

Mall owners also came out of hibernation in better shape, with Vicinity (ASX: VCX) up 5.15% to $1.43 and Westfield mall owner Scentre (ASX: SCG) ending the day up 3.7% at $2.20.

Up for the week but still recovering

Overall, the ASX 200 rose 0.5% on Friday, jumping 26.9 points to 5391.1, mostly boosted by higher prices for financials and retail stocks.

For the week the bourse was up by 2.77%, winning back about half of the previous Friday’s 5% downward crunch.

Appropriately for a day of positivity, the millionaire factory Macquarie Group (ASX: MQG) added a snappy 5.7 % to reach $105.19 while troubled financial powerhouse AMP (ASX: AMP) was also enjoying a rare positive day with a 3.3% to $1.41.

Travel stocks take tentative steps

Even clapped out travel stocks were buoyed by the return to domestic travel with Flight Centre (ASX: FLT) and Webjet (ASX: WEB) up by 8.1% and 9.3% respectively – although they both have a very long way to go before even approaching their pre-pandemic levels.

Not all of the news was good with the Reserve Bank of Australia’s May statement of monetary policy predicting that unemployment would peak at 10% in Australia before improving.

That accords with most analyst’s estimates, although most have warned that the recovery in employment numbers would be slow and take years rather than months.

“This may take a while to reverse, especially if there are lingering concerns about control of the virus. In addition, some workers who have been laid off will take time to find other employment, especially if their previous jobs were in industries facing lower ongoing demand,” said the RBA.

Predictably, the RBA said the tourism, entertainment and education sectors would bear the brunt of the downturn in economic activity and it was not clear how long it would take to recover.

“The uncertainty about future demand prospects will also curtail business investment intentions,” the RBA said.

Small cap stock action

The Small Ords index rallied 4.94% to close the week at 2429.5 points.

Small cap companies making headlines this week were:

Alt Resources (ASX: ARS)

Private investment group Aurenne has forayed further into the resources space by making a bid for advanced gold explorer Alt Resources.

Aurenne has made an all cash offer valuing Alt at $0.0505 per share. The private investment firm has also agreed to lend Alt $3.68 million through a convertible note, enabling Alt to meet its funding commitments and deliver its maiden reserve and feasibility study without shareholder dilution.

Alt’s board has backed the offer, with chairman William Ellis describing it as “compelling” and a “strong endorsement” of the company’s Mt Ida and Bottle Creek gold project in WA.

However, he has advised shareholders to take no action at this stage while the company evaluates the offer details including all conditions.

Alt’s Mt Ida and Bottle Creek project is 85km north-west of Menzies in WA’s northern goldfields. The project has a combined resource of 11.55Mt at 1.54g/t gold for 571,000oz gold and 6.66Mt at 20.5g/t silver for 4.38Moz silver.

Aurenne owns interests in a number of projects within the goldfields region.

XCD Energy (ASX: XCD) and 88 Energy (ASX: 88E)

Alaskan North Slope oil explorers XCD Energy and 88 Energy will merge to create a larger oil play focused on the region.

Under the deal, 88 Energy will issue 2.4 shares for every XCD share held, plus 0.7 88 Energy shares for every XCD listed option.

The bid values XCD at $0.012 – a 71% premium to its closing price of $0.007 on Wednesday. The offer also represents a 140% increase on XCD’s closing price of $0.005 on Friday 24 April prior to 88 Energy’s initial bid on Monday 27 April.

Once the merger has been completed, XCD shareholders will own 20% of the combined company.

Both companies have unanimously recommended the merger, claiming the new entity would have increased scale, market presence, funding capability and liquidity across the ASX and London AIM.

“In addition to a significant premium, the transaction provides XCD shareholders with the opportunity to become shareholders of a company with significantly increased scale and demonstrated operational capability that is focused on the world class potential of the North Slope of Alaska,” XCD chairman Peter Stickland explained.

Tesoro Resources (ASX: TSO)

Chile focused gold explorer Tesoro Resources’ El Zorro project has offered up more positive news this week, with latest assays returning “exceptional” thick high-grade intersections.

Highlight results were 34.73m at 2.94g/t gold from 187.27m, including 15m at 5.99g/t gold and 2.7m at 22.21g/t gold.

Another intercept returned 68.52m at 0.47g/t gold from 21m, and 41.17m at 1.38g/t gold from 78m including 14.17m at 3.25g/t gold and 5.32m at 6.54g/t gold.

Tesoro has now completed 11 holes for 2,855.3m during its latest drilling program at El Zorro, with assays for the final five holes anticipated within the next four to six weeks.

“Drill results from El Zorro continue to impress and we have now delineated a significant high-grade gold zone associated with the CC500 fault,” Tesoro managing director Zeff Reeves said.

“The team has identified multiple repeats of these fault zones which provides significant scope to add additional high-grade gold mineralisation to any potential resource.”

Nanoveu (ASX: NVU)

Singapore-based Nanoveu’s anti-viral smartphone screen protector has been found to reduce coronavirus particles by 90% in 10 minutes after independent testing.

The National University of Singapore’s Department of Microbiology and Immunology carried out the tests which comprised a mouse-based murine hepatitis virus (believed to be a human coronavirus 229E surrogate).

The virus was placed on a thin film of Nanoveu’s antiviral technology, with results revealing a 90% reduction in coronavirus particles within 10 minutes.

Additionally, previous testing of the technology proved it was effective against influenza virus H3N2, feline calicivirus (F9 strain), and bacteria such as Escherichia coli (E. coli).

“From a structural perspective, all coronaviruses exhibit a large viral envelope, which is a layer of proteins derived from former host cells that shield the viral genome when outside host environments,” Nanoveu executive chairman and chief executive officer Alfred Chong explained.

“Our technology is capable of breaking down this envelope, effectively killing the virus.”

More testing on the smartphone cover is being undertaken in at a US laboratory.

Nanoveu expects to release the antiviral smartphone screen and a conventional protective phone case with the same technology early next year.

Archer Materials (ASX: AXE)

Archer Materials will work with US computing giant IBM to advance quantum computing under an agreement made this week.

The agreement paves the way for Archer to become a member of the IBM Q Network and associated IBM Quantum Experience for Business program.

One of the key drivers of the deal is to develop a quantum computing processor that can undertake a high number of calculations at faster speeds while using less power than existing technology.

Archer and IBM will also look at mutually beneficial collaboration opportunities including developing actual and conceptual quantum processors, hardware, algorithms, applications and business use cases.

“Ultimately, we want Australian businesses and consumers to be one of the first beneficiaries of this exciting technology, and now that we are collaborating with IBM, it greatly increases our chances of success,” Archer chief executive officer Dr Mohammad Choucair said.

E2 Metals (ASX: E2M)

A short scout drill program at E2 Metals’ Conserrat project in Argentina has revealed high-grade gold and silver at the Mia prospect.

The mineralisation was found after a five-hole reverse circulation program at the prospect, which is 15km along trend of AngloGold Ashanti’s Cerro Vanguardia mine in Argentina’s Santa Cruz province.

One drill hole pulled up 8m at 7.64g/t gold and 216g/t silver from 76m, including 1m at 36.8g/t gold and 1,108g/t silver from 78m.

The hole also terminated in mineralisation with the final drill sample grading 4g/t gold and 22g/t silver.

As a result of the program and previous exploration, mineralisation at Mia has been defined over 280m of strike and remains open to the north-west.

Alliance Resources (ASX: AGS)

Another gold explorer to impress investors this week was Alliance Resources, which uncovered up to 166g/t gold during infill drilling at the Weednanna deposit within its Wilcherry project in South Australia’s Eyre Peninsula.

The company had completed a 32-hole reverse circulation program for 3,737m and targeting shoots 5, 5E, 6, 9 and 10.

At Shoot 10, better results were 4m at 6g/t gold from 3m, including 1m at 20.2g/t gold; and 5m at 63.8g/t gold from 14m, including 2m at 154g/t gold.

Deeper mineralisation was intercepted at shoots 5 and 5E which returned 1m at 40.5g/t gold from 78m (Shoot 5); and 11m at 17.3g/t gold from 101m, including 1m at 166g/t gold from 102m.

Alliance has already kicked-off further drilling at the project which will comprise 41 holes for 5,100m and focus on shoots 2 and 10.

The week ahead

Unusually, what is normally a boring, short and easily missed third-quarter update for Commonwealth Bank (ASX: CBA) has assumed some real importance this time around.

As Australia’s biggest bank, CBA is now widely expected to give guidance on Wednesday about how costly rising bad and doubtful debts as a result of COVID-19 pandemic will be.

Some analysts have guessed that CBA will shoot out the lights with a $1.3 billion provision for bad and doubtful debts which would take the bank’s provisions to levels not seen since the GFC.

It may also give some forward guidance on its approach to dividends, which have been either cut savagely or postponed by its three other big banks, which have a different balance date.

There may also be some guidance on half year profits and whether CBA is likely to be asking shareholders for more capital.

Frydenberg economic update

Also, the impact of the COVID-19 pandemic will be illustrated by Federal Treasurer Josh Frydenberg’s economic update on Tuesday, which is likely to be something of a horror show.

The crisis has delayed the Federal Budget until 6 October, so this statement will be the first to really outline the size of the hit to the Federal Government’s bottom line of the shutdown and the associated wave of stimulus spending and collapsing tax revenues.

Other things to watch out for during this busy week include some consumer confidence surveys, April jobs data, business surveys and wages and tourism data.

There is plenty to look out for overseas as well, with the highlights being US consumer and producer prices data which will be watched for signs of deflation and US retail spending data.

April monthly activity data from China should give us some sort of guide as to how an economy recovers as it reopens.

This week’s top stocks