Weekly review: vigorous tug of war goes nowhere

Tug of war US tax ASX oil AMP April 2021
WEEKLY MARKET REPORT

This has been one of those weeks on the share market in which the tug of war has lurched first one way and then the other before finally ending up pretty much where it started.

Technically, a late comeback on Friday left the ASX 200 up 0.1% for the day at 7060.7 points but for the week the market was still down 2.8 points for the week – effectively steady.

That result hides some fairly large moves during the week with some early strength which set us up to break record highs which being overcome by the realisation that President Biden was deadly serious about pushing through some hefty capital gains tax increases for those on high incomes in the United States.

US tax changes spark wave of selling

That led to a wave of selling from those wanting to bring forward their capital gains while there was still time to negotiate the concessional tax scales left over from President Trump, although US company reports continued to look very strong and the jobs market is improving.

The end point once again leaves the Australian market delicately poised to either break out by 1.5% and hit the record high set back in February 2020 or perhaps break back in the downwards direction.

One factor that could drive a retreat is a realisation that the COVID-19 crisis is still very much with us, with a snap lockdown in Perth and a further 13 positive cases in the Howard Springs facility showing that the Indian crisis in which there were an unprecedented 1.5 million cases in a week is threatening to go global.

Oil prices dragging energy stocks down

Other bearish factors include worries about the strength of the economic recovery and falling oil prices on the back of anticipated lower demand due to the Indian COVID-19 crisis which continues to swamp hospitals.

The tug of war was evident even within Friday trade with stocks moving up and down due to individual factors.

The one certainty was falling oil prices leading to falling energy stocks, with Santos (ASX: STO) shares down 0.29% after first quarter output fell by 2%, leading the way down for the whole sector.

Iron ore continued to be a bright spot as the price continued to hover around $US190 a tonne, with Rio Tinto (ASX: RIO) up 0.5% and Fortescue Metals (ASX: FMG) 1.6%, although BHP (ASX: BHP) fell 0.2%, possibly due to its oil exposure.

CSL (ASX: CSL) and the big four banks all rose but there were some notable big stocks that fell, including the retail giants Wesfarmers (ASX: WES) and Woolworths (ASX: WOW), along with toll road owner Transurban (ASX: TCL) and BNPL technology leader Afterpay (ASX: APT).

AMP saga writes a new chapter

Fund manager AMP (ASX: AMP) once again wrote a new chapter in its ongoing transformation strategy, with the failure of a sale of its Capital markets business to Ares Management leading to a decision to split the company.

AMP Capital’s private markets investment management business will now be hived off, with AMP Capital’s global head of infrastructure equity, Boe Pahari, also leaving the business.

Mr Pahari was originally promoted to head AMP Capital, but was demoted following the publication of sexual harassment allegations last year.

AMP’s wealth management division reported $1.5 billion in net cash outflows, while the AMP Capital division saw a $2.9 billion of funds outflow.

AMP’s share price ended 0.9% higher at $1.135 as investors concluded that the split was a better option than a sale at a bargain price.

Vitamin company Blackmores (ASX: BKL) forecast weaker sales into 2022 before regular travel patterns resume, with a mild cold & flu season resulting in surplus pharmacy stock.

The bad news sent Blackmores shares down 4.32%.

Small cap stock action

The Small Ords index fell 0.53% to close the week on 3313.8 points.

Small Ords vs ASX 200 chart April 2021
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Deep Yellow (ASX: DYL)

Latest drilling at Deep Yellow’s Nova joint venture in Namibia has intercepted uranium in the majority of holes within the Barking Gecko prospect and uncovered two new zones: Barking Gecko North and Barking Gecko South.

The company drilled 13 holes for 3,211m to test extensions to mineralisation that was identified in July last year.

Highlight assays were 14m at 404ppm uranium equivalent from 81m, including 4m at 1,067ppm uranium equivalent from 85m; 45m at 222ppm uranium equivalent from 120m; 6m at 270ppm uranium equivalent from 196m; and 15m at 168ppm uranium equivalent from 206m.

AssetOwl (ASX: AO1)

Property management platform developer AssetOwl has raised $1.5 million to boost deployment of its inspector360 property inspection technology throughout WA and then Australia-wide.

AssetOwl’s cloud-based platform uses virtual tour technology to create an internal view of a property for tenants and managers. It can be integrated with client reporting platforms PropertyTree and PropertyMe.

It is designed to improve the efficiency and quality of real estate inspections.

Sovereign Metals (ASX: SVM)

Mineral sands explorer Sovereign Metals has demonstrated environmental benefits in studies using its rutile mineralisation from its projects in east Africa.

UK-based consultancy Minviro conducted research comparing Sovereign’s natural rutile to synthetic rutile and titania slag, which are usually upgraded from the lower grade titanium mineral ilmenite.

The study found Sovereign’s rutile from the Kasiya and Nsaru deposits could eliminate “significant” levels of carbon dioxide emissions form the global titanium sector by displacing the need for upgraded ilmenite.

Zenith Minerals (ASX: ZNC) and Rumble Resources (ASX: RTR)

At its Split Rocks project in WA, Zenith Minerals has extended current gold, while uncovering multiple new zones at the project.

The company released final 1m assay resample results from a recent 32-hole reverse circulation program.

Assays identified gold extends 500m further south at the Dulcie laterite pit extension, while also confirming new zones at Dulcie North and Water Bore.

Meanwhile at the Earaheedy joint venture where Zenith has a 25% free-carried stake and Rumble is exploring, latest drilling unearthed 34m at 4.22% zinc and lead, including 17m at 6.5% zinc and lead.

Matador Mining (ASX: MZZ)

Eight new priority targets have been uncovered at Matador Mining’s Window Glass Hill deposit in Newfoundland, Canada.

The targets were identified after a ground magnetics survey was completed last year and are under shallow cover.

Matador noted the targets have similar geophysical characteristics to the Angus to discovery at the project where drilling hit 20m at 3.28g/t gold at 82m from surface.

Lion Energy (ASX: LIO)

Another junior to chase the clean energy revolution this week was Lion Energy which revealed it was raising $2.8 million to assess clean energy opportunities in Australia.

The proceeds will also fund the company’s hydrogen production studies on Seram Island in Indonesia.

Lion’s directors backed the capital raising with a combined $350,000 of their own cash.

Peak Asset Management lead the placement, with Lion executive chairman Tom Soulsby saying Peak has a “wealth of experience” in supporting Australian companies with green hydrogen and renewable energy businesses.

The week ahead

One of the big things to watch out for arrives on Wednesday in the form of the quarterly inflation numbers which will be an acid test on how the Reserve Bank’s attempts to get inflation higher are tracking.

Other things to watch out for during the week include consumer sentiment, international trade, business conditions and private sector credit.

Potentially the biggest influence of the week will be the meeting of US Federal Reserve policymakers, with a rates decision due to be announced on Thursday morning, Melbourne time.

There is no expectation of a change in policy but any clues on future policy directions will be welcomed.

Other US data releases include home prices, consumer confidence, economic growth and personal income and spending.

Chinese purchasing manager indices complete the international data picture.

The continuation of the US corporate reporting season will also be very closely monitored, with some of the bigger names reporting including Phillips, Tesla, 3M, BP, Corning, Eli Lilly, General Electric, Novartis, UPS, Microsoft, Pinterest, Starbucks, Visa, Boeing, Carnival, Moody’s, Apple, eBay, Facebook, Ford, Caterpillar, Kraft Heinz, MasterCard, McDonald’s, Merck, Atlassian, Twitter, AstraZeneca, Chevron and Exxon Mobil.

If results continue to be strong in general, that will tend to support share market valuations.

This week’s top stocks

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