Weekly review: dynamic duo of Trump and Boris finally lift market

Market Donald Trump Boris Johnson ASX stocks
WEEKLY MARKET REPORT

They might be an unlikely dynamic duo but US President Donald Trump and UK Prime Minister Boris Johnson finally combined to put a smile on the dial of share market investors in Australia.

Positive news on the prospect for a US-China trade deal and signs of progress on an Irish deal for Brexit helped to propel the Australian share market higher for the week.

It was the first time in three weeks that the ASX 200 ended higher – up 1.4% – as the index jumped 59.7 points, or 0.9%, on Friday alone to close at 6606.8 points.

That 1.4% rise for the week followed broad gains across most sectors which propelled the market.

Trump tweets and markets respond

A Trump tweet that negotiations with China were going “very well” brightened the mood, even though many similar messages have disappointed in the past.

Traders are now hoping that at the very least a partial trade deal may be reached between the two sides if talks between President Trump and Chinese Vice-Premier Liu He are successful.

Progress in Brexit negotiations were also welcomed by investors following a meeting between Johnson and his Irish counterpart Leo Varadkar.

Both leaders issued a statement saying that they “could see a pathway to a possible deal”, which many saw as some hope that there could be another delay to the UK-EU divorce date so that a hard Brexit at the end of October could be avoided.

Broad based gains on the ASX

Most of the major sectors were involved in the Australian share rally with miners, banks and healthcare stocks all showing strong gains.

All sectors apart from industrials finished higher on Friday, with strong gains in commodity markets pushing resources stocks up by 1.4%, while healthcare and materials were also up 1.3%.

Hopes of a Brexit deal around the Irish backstop pushed up CYBG Group (ASX: CYB), which operates UK’s Clydesdale Bank, by 9.4%.

All of the other big banks were at least 0.6% higher with ANZ (ASX: ANZ) the standout performer adding 1.1%.

Vaccines and blood products giant CSL (ASX: CSL) was also adding some much needed weight to the ASX 200 index with a 1.97% jump.

Higher commodity prices including crude oil and iron ore added at least 2% to the big miners including Rio Tinto (ASX: RIO), BHP Group (ASX: BHP) and Fortescue Metals (ASX: FMG).

Fortescue pleased investors with an announcement that is would extend its share buy-back program for a year, returning another $500 million to shareholders.

Defensives getting less expensive

As you would expect it was the defensive stocks and gold stocks that suffered during the bout of optimism with Toll road giant Transurban (ASX: TCL) falling by 2.2% and most gold stocks also sliding.

The notable exception among gold stocks was Silver Lake (ASX: SLR) which added an impressive 11.5% after investors embraced a positive production report.

Even the Australian dollar was heading upwards – reaching US67.74c.

Small cap stock action

The Small Ords index finished the week up 0.43% to close on 2857 points.

ASX 200 Small Ords October 2019 chart
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Konekt Group (ASX: KKT)

Advanced Personnel Management agreed to acquire Konekt for a cash price of $0.49 per share, sending the shares in Konekt up 67.2% this week.

Konekt said it has entered into a scheme implementation deed with human services organisation APM, the deal is a significant premium to the prior closing price of $0.29 per share.

APM has assisted more than 1 million Australians since 1994 and operates a range of programs in 10 countries that deliver allied health, assessment services, psychological intervention, employment assistance, vocational rehabilitation and community-based services on behalf of governments and private clients.

Dimerix (ASX: DXB)

Dimerix plans to target the development of what it calls “an important new discovery” in the treatment of chronic obstructive pulmonary disease (COPD).

The DMX-700 drug was discovered using Dimerix’s proprietary Receptor-HIT cell-based assay and if successful, will meet a significant unmet medical need in the pharmaceutical industry.

The company also this week received a $1.18 million research and development tax incentive rebate for activities during the 2018/19 financial year.

St Barbara (ASX: SBM) and Alice Queen (ASX: AQX)

St Barbara and junior explorer Alice Queen have completed a soil and rock chip geochemical sampling program at the Horn Island gold project in Queensland’s Torres Strait.

The sampling program is part of maiden works for the joint venture, which was formed in June when St Barbara signed a deal to earn a 70% stake in the project by sole funding $4 million of expenditure in three years.

Rock chip samples revealed a zone of quartz veins extending 2km from the existing gold resource at Horn Island.

A total of 407 soil and 174 quartz vein rock chip samples were collected with assay results expected within the next month.

Orthocell (ASX: OCC)

Orthocell announced positive interim clinical results for CelGro, a clinical follow-up of the first twelve participants 12 months after surgery found voluntary muscle movement was restored in 96% of nerve repairs.

All quadriplegic patients saw increased movement and power of affected muscles following CelGro nerve regeneration treatment.

86% of patients that previously required prescription pain medication, including opioid-based medications, were able to significantly reduce or stop their medication completely.

K-TIG (ASX: KTG)

K-TIG made its ASX debut this week following a reverse takeover of Serpentine Technologies, raising $7 million in the process.

The technology was originally developed by the CSIRO, in which K-TIG uses a single pass, full penetration keyhole technology to provide significant advances over conventional welding techniques.

Its proprietary and patented technology won the Australian Industrial Product Of The Year award in 2014 and the DTC Defence Industry Member Award in 2015.

Phylogica (ASX: PYC)

Biotechnology company Phylogica achieving a major milestone in its human ‘retina in a dish’ study and is now one step closer to finding a treatment for the leading cause of childhood blindness, retinitis pigmentosa, which impacts between 4,000-8,000 people in the western world.

The company reported results from its flagship drug program, in which its proprietary drug delivery technology was used on a 3D model of a retina created from human stem cells.

According to Phylogica, the study achieved greater than 90% effectiveness after a single dose.

Buddy Technologies (ASX: BUD)

Buddy Technologies this week launched pre-sales for the world’s first multi-colour (in a single bulb) smart light, the LIFX Candle Colour.

The LIFX Candle Colour product features 26 customisable light zones.

The smart light is compatible with smart home and voice assistant technologies provided by the likes of Amazon, Google and Apple, and can be controlled via an app or even voice command.

ASX floats this week

Small Caps readers who want to view upcoming IPOs or see the performance of stocks that have listed in 2019 can now do so.

The latest company to make its way onto the ASX this week was:

Magellan High Conviction Trust (ASX: MHH)

Listing on Friday was Magellan High Conviction Trust, following a raise of $861.8 million at a net asset value of $1.50 per unit.

The company was founded in 2006 by Hamish Douglass and Chris Mackay, with offices now in Australia, New Zealand and the United States.

Magellan claims to have 32 highly qualified and experienced investment professionals managing over $92 billion in funds, investing in global equities and global listed infrastructure for its clients.

Shares in Magellan finished flat at $1.50.

The week ahead

We can look forward to a relatively quiet week for fresh economic news in Australia this week but there are plenty of offshore signals to keep an eye on.

The local highlight is probably the jobs data which is out on Thursday, which should give some indication of how the jobs market is responding to the latest interest rate cuts by the Reserve Bank.

The RBA cited as a main goal of its rate cuts getting the unemployment rate down.

The RBA will be providing some more information itself with the Reserve Bank Board minutes released on Tuesday and Reserve Bank Deputy Governor Guy Debelle giving a speech on Thursday.

Some more minor data such as credit and debit debit card lending, CBA household spending intentions and tourist arrivals and departures are the only other things to attract local attention but the continuing situation around US-China trade and Brexit will be more important in forming market atmosphere.

China is the other offshore highlight with a plethora of data releases including economic growth (GDP), monthly production, investment and retail sales, inflation and trade while in the US retail sales and industrial production will jostle for attention as the September quarter company earnings season kicks-off as the major banks report.

This week’s top stocks