Weekly review: can the Australian share market successfully decouple itself from the US?

Australian share market ASX decouple United States NASDAQ DOW
WEEKLY MARKET REPORT

It appears so, with yesterday’s fairly solid 52-point bounce on the ASX 200 to 6,251 points following hot on the heels from a day in which both the Nasdaq and Dow closed lower in the US.

Conventionally, the Australian market moves in virtual lockstep with the US market on the way down and usually only manages to rise – albeit much more slowly – when the US rises.

Now it seems that relationship is getting a bit frayed around the edges as the US market awaits earnings reports, which it is feared might show the first slight drop in profits since 2016 – higher profits that have been driving the US market for a long time.

Shares rallying here

It is a very different environment here in Australia with shares heading upwards even with some potentially negative and destabilising factors such as the Australian Federal election.

Despite that the market ended the week on a high, adding 1.13% as most sectors rose, with financial and consumer sectors particularly strong.

All four big banks were higher on the back of reports that the Commonwealth Bank is set to shed costs and jobs to improve margins.

Commonwealth Bank (ASX: CBA) and ANZ (ASX: ANZ) were the top performers, rising almost 2% but there were some general rises of more than 1.5% for big consumer stocks such as Woolworths (ASX: WOW) and Coles Group (ASX: COL).

As might be expected in a rallying market, defensive stocks such as gold and healthcare were lower as traders rotated into growth stocks such as energy and tech sectors.

Even Federal Court action by the ACCC against comparison website iSelect (ASX: ISU) over misleading statements and deceptive behaviour on its energy comparisons wasn’t enough to deter traders who marked up iSelect shares by 2.4%.

Small cap stock action

The Small Ords index enjoyed a 0.86% jump this week, outpacing the larger indexes, to close on 2,806.4 points.

ASX 200 Small Ords chart April 2019
ASX 200 vs Small Ords

Among the companies making headlines this week were:

King Island Scheelite (ASX: KIS)

Ahead of its tungsten mine restart, King Island Scheelite secured its first offtake deal.

The company has entered an offtake agreement where tungsten powder supplier Wolfram Bergbau und Hutten AG will purchase almost 20% of King Island’s proposed production from its wholly-owned Dolphin mine on King Island near Tasmania.

Under the deal with Wolfram, King Island will deliver 140,000t units or 1,400t of tungsten oxide to Wolfram over four years.

King Island chairman Johann Jacobs told Small Caps the company was also in advanced negotiations with other potential offtake parties, which he expects will be finalised by the end of the month. 

Walkabout Resources (ASX: WKT)

Advanced graphite explorer Walkabout Resources has locked in another two offtake agreements for its Lindi Jumbo project in Tanzania.

The agreement follows last week’s first deal with China-based Inner Mongolia Qianxin Graphite, which will purchase up to 50% of Lindi’s planned annual graphite production.

A second offtake deal has now been secured with private China-based entity Qingdao Risingdawn Graphite Technology (QRGT), which will purchase 10,000tpa of flake concentrate to QRGT over three years.

On Thursday, Walkabout reported it had collared another offtake partner – this time with international commodities trading house Wogen Pacific Ltd, where Wogen will take between 10,000tpa and 30,000tpa of graphite from Lindi over five-years.

Wogen will then market and sell the Lindi graphite to its global network.

Renascor Resources (ASX: RNU)

It’s been a busy week for another graphite play Renascor Resources which received in-principle finance support from the Netherlands Government for its Siviour graphite asset in South Australia’s Eyre Peninsula.

Renascor reported it had received a letter of interest from the Netherlands’ government agency Atradius Dutch State Business, which is responsible for administering an export credit agency scheme.

The scheme offers insurance and guarantee products for projects involving the export of capital goods from the Netherlands.

Because Renascor is sourcing Dutch goods through its Netherlands-based partner Royal IHC, Renascor estimates up to 60% of the Siviour’s capital outlay will qualify under the cover.

The news follows Renascor receiving the mining lease for Siviour from the South Australian Government.

Vango Mining (ASX: VAN)

Another resource stock with news this week was Vango Mining which reported “exceptional” intersections from drilling at the Trident deposit within its Marymia gold project in WA.

The program comprised four holes for 1,060.3m and tested key zones at the deposit and returned up to 184g/t gold within a 2m interval.

Other notable results were: 11m at 36.2g/t gold from 213m including 2m at 184g/t gold; and 3m at 15.5g/t gold from 226m, including 1m at 34.9g/t gold.

According to Vango, the latest assays will be incorporated into the resource estimate which is due to be released shortly.

Laneway Resources (ASX: LNY)

Mining operations have begun at Laneway Resources’ 100% owned Agate Creek gold project, with ore currently being mined and stockpiled at site.

The company noted that mining had started in line with previously reported timelines after receiving the mining lease for the project’s Sherwood and Sherwood West gold deposits at the beginning of last month.

Under a deal with private operator Maroon Gold, Laneway will process its 100,000tpa of its ore at Maroon’s Black Jack carbon-in-leach plant near Charters Towers in Queensland.

Recent exploration at Agate Creek has resulted in several intersections grading higher than 100g/t gold, with a peak interval of 564g/t gold.

OpenDNA (ASX: OPN)

Artificial intelligence and e-commerce company OpenDNA has expanded its digital marketing capabilities with an agreement to acquire Blackglass from IncentiaPay (ASX: INP).

OpenDNA will scoop up all the issued capital in Sydney-based Blackglass for $300,000, which it will fund from existing cash reserves.

The company anticipates the acquisition will provide immediate additional revenue as well as complementary digital market capabilities.

Additionally, OpenDNA expects the Blackglass acquisition will extend its capability to service the online marketing and customer acquisitions requirements of its RooLife e-commerce platform.

The week ahead

The real test of the share market rally comes next week, which is shortened by the Good Friday public holiday.

There are still some important releases nevertheless, with the jobs report due out on Thursday.

Those employment and unemployment numbers will be key factors in whether the Reserve Bank starts to move towards official interest rate cuts rather than remaining neutral.

Another indicator will be the minutes from the 2 April RBA board meeting which will be published on Tuesday.

Other stats to look out for include the weekly consumer sentiment index from ANZ and Roy Morgan.

The survey will be closely monitored in the lead up to the Federal election on 18 May.

Internationally, Chinese economic growth and monthly activity data will be released on Wednesday, while in the US there is an array of data to be published including consumer and manufacturing surveys, plus retail and international trade data.

For markets, though, the really big news will be the quarterly earnings reports out of the US, with disappointments and upside surprises sure to move not only the US markets but international markets as well.

This week’s top stocks

John is a highly experienced business journalist and formerly chief business writer for the Herald Sun. He has covered Federal politics in Canberra, was Los Angeles Bureau chief for News Limited and was also chief of staff for the Herald Sun. He has covered a wide range of small and large cap ASX stocks and has a special interest in mining, technology and biotech.