Weekly review: holidays spur Australian share market to an 11-year high

Australian stock market 11 yeah high ASX 2019
WEEKLY MARKET REPORT

A string of non-trading days helped the Australian share market to rocket to an 11-year high with a strong across the board performance.

Every trading session was a winner with the market closing at the highest level since December 2007 on Friday.

ASX 200 11 year high April 2019
The ASX 200 climbing towards pre-GFC highs.

The ASX 200 closed the week up 125.8 points, or 2% at 6,385.6 points as investors returned from the Easter and Anzac Day breaks much more optimistic as a series of solid US earnings lifted Wall Street to a record high.

Chances of a rate cut causes share rally

The disappointing inflation number on Wednesday also propelled the local share market as investors lifted the chances of a Reserve Bank interest rate cut as early as May, improving the potential yield differential of shares over fixed interest.

An example of that yield effect came in the form of the local banks which were all much stronger, with Westpac (ASX: WBC) leading the charge with a 3.4% rise to $27.74.

Property, banks, technology and Bellamy’s all stronger

The same effect could be seen across the entire property trust sector which was broadly higher and infrastructure stocks were also higher, with shares in toll road owner Transurban (ASX: TCL) up 4.1% to $13.73.

It was a similar picture across local health and technology stocks after a strong performance by US technology players with Wisetech Global’s (ASX: WTC) 6.8% rise just one standout example.

Another flyer was Bellamy’s Australia (ASX: BAL), with shares closing out the week a fancy 16.8% higher after a Chinese market regulator approved the sale of a new Bellamy’s powdered milk product range, moving the company one step closer to restarting sales of its infant formula products in China.

The Australian dollar has also been wilting this week, briefly dipping below US70¢ for the first time since January on Thursday on the back of the weak inflation numbers and speculation the RBA will cut rates a couple of times this year.

Traders believe if the US GDP numbers due out today are stronger than expected, the Aussie dollar could once again dip below the US70¢ level.

Oil price strengthens over Iran sanctions

Crude oil prices hit the US$65 per barrel (A$91/bbl) mark for the first time in close to six months after the United States threatened to impose sanctions on any nations that continue to buy oil from Iran after 1 May.

Iran fired back with its ‘trump’ card threatening to disrupt global oil supplies in response by blocking the Straight of Hormuz.

The oil price and the Middle East, in general, remain a wild card for the global economy as tensions in the region oscillate on a weekly or tweet by tweet basis.

Microsoft hits the $1 trillion mark

In a feat first achieved by Apple, Microsoft this week reached the $1 trillion market cap milestone.

The software giant beat sales and earnings expectations, largely due to its cloud services and applications.

Microsoft saw its revenues increase 14% to US$30.6 billion, exceeding the analyst estimates of around $29.84 billion.

The company’s share price is up 40% over the past 12 months.

Fellow tech companies Amazon and Facebook also received a boost after announcing better than expected earnings.

Small cap stock action

The Small Ords index enjoyed a boost this week closing at 2,856.8 points, up 0.94%, and closing in on key resistance levels from both a long and short term standpoint.

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

Among the companies making headlines this week were:

Bryah Resources (ASX: BYH) and OM Holdings (ASX: OMH)

Bryah Resources is set to unlock the manganese value of its Bryah Basin project after OM Holdings agreed to earn up to 70% in the project by spending $7.3 million on exploration.

OM’s payments will be broken down in various stages and milestones, with the duo anticipating developing a near-term commercial manganese mine at the project.

“The execution of this agreement with the highly regarded OM Holdings Group is a game-changing event for Bryah and its shareholders,” Bryah managing director Neil Marston said.

Mr Marston said the joint venture de-risked Bryah’s strategy to become a manganese miner while it firms up the copper and gold potential across its tenements.

CropLogic (ASX: CLI)

In the US, CropLogic has increased its hemp trial farm by 350 acres, bringing the Oregon-based hemp farm to 500 acres.

CropLogic secured a hemp growers licence in March this year, which allows it to legally participate in Oregon’s 2019 hemp growing season, with a harvest pencilled in for September.

With the increased acreage, CropLogic hopes to demonstrate how it can vertically integrate its agronomy expertise, digital ag-tech, extensive knowledge of local growing conditions and foothold of the US’ Pacific North West states including Washington, Idaho and Oregon.

CropLogic expects to produce up to 1.1 million pounds of industrial hemp, which, based on a current selling price of A$65 per pound, will generate sales revenue of  around A$70 million.

Laneway Resources (ASX: LNY)

Earlier this week, Laneway Resources impressed investors with its first gold pour from its Agate Creek project in north Queensland.

Mining began at the project’s Sherwood deposit two weeks ago, with the ore treated at Maroon’s nearby Black Jack processing plant.

The maiden gold pour comprised three dore bars weighing 22kg after 1,300t of ore was processed with an average grade of 15g/t gold.

Maroon has agreed to process up to 100,000t of Laneway’s Agate Creek ore.

Alexium International (ASX: AJX)

Chemicals company Alexium International has received US EPA approvals to manufacture and sell its flame retardant Alexiflam NF technology in the US.

The EPA greenlight allows the company to produce its patent-pending chemical treatment which affords flame retardancy to cotton and cellulose-based textiles.

Alexium claims the US is the world’s largest market for flame retardant cotton, with the company targeting the country’s military and industrial sectors.

Meanwhile, under a recent MoU, specialty minerals and chemicals company ICL has been granted sole global marketing and sales rights for Alexiflam NF.

Tinybeans (ASX: TNY)

Not long after securing an advertising contract with global toy giant Lego, Tinybeans has launched its updated content platform worldwide.

The updated web-based platform connects parents with information and resources and includes parenting tips, articles and the ability to create and share personalised photobooks and gift cards.

“We’re really excited to launch our new content platform to the world,” Tinybeans chief executive officer Eddie Geller said.

“Not only will this new platform serve our audience of over 3.2 million registered members, but it will be available for anyone in the world to see,” he added.

Tinybeans’ revenue is generated from advertising, premium subscriptions and printed products and Mr Geller anticipates the updated platform will attract new brand partnerships.

The week ahead

Judging by the last week the US profit reporting season should be the most influential market mover and there is plenty of that still to come.

Some of the big companies reporting this week include Google owner Alphabet, Apple, ConocoPhillips, Corning, General Motors, Groupon, Mastercard, McDonald’s, Merck, Pfizer, Avis Budget, Estee Lauder, Fitbit, Hilton, Hyatt, Kraft Heinz, Molson Coors, Yum! Brands, CBS, Cigna, Expedia, Herbalife, Kellogg and Celgene.

Technology companies have been outperforming on profit so it will be interesting to see if this trend is interrupted or continues to gain strength.

Locally there are plenty of economic releases with the quarterly CommSec State of the States out on Monday and a range of other releases during the week including private sector credit, purchasing managers and manufacturing sector gauges, CoreLogic home prices, building approvals and new vehicle sales.

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.