Weekly review: mixed market signals makes it tough for investors

Mixed signals stock market ASX investors
WEEKLY MARKET REPORT

It has been another tough week for Australian investors who have had their hopes alternately dashed and then raised as a wide variety of influences pushed them around.

On the positive side, the dovishness of the US Federal Reserve has been strongly reinforced after the president of the Federal Reserve Bank of New York, John Williams, said that it was better to cut rates early in the face of economic problems rather than wait for confirmation in economic statistics.

Those remarks were hosed down in a later clarification but that didn’t stop a bullish reaction on US markets which are now hopeful that after nine straight interest rate rises, US rates might be cut by 50 basis points later this month rather than 25 basis points.

That bullishness proved contagious in the Australian share market which enjoyed a positive session on Friday, despite a fairly forgettable week before that.

By the time the dust settled the market had risen 51 points on Friday to 6,700.3 points on the ASX 200 index, overcoming the lacklustre week that had gone before to eke out a weekly rise of just 0.1%.

Gloomy macro news

There was a plethora of reasons for investors to be gloomy with slowing Chinese growth due to the ongoing US/China tariff war one of the big concerns.

The Chinese economy slowed to a 27-year low, while its debt-to-GDP soared to 300%.

Although that seemed to be overtaken by the easing policy of the US Federal Reserve.

Also providing a negative on the outlook side was the minutes of the July Reserve Bank board meeting which well and truly left the door open for further official interest rate cuts this year below the current 1%.

Employment numbers gives room for concern

The minutes showed that the RBA remains worried about the state of the jobs market and the lack of wages growth experienced by Australian workers, even after cutting the cash rate to an all-time low of 1% at the July meeting, following an identical 0.25% reduction in June.

The RBA also seems worried about the forward indicators for employment such as job advertisements and business employment intentions which are all pointing to a slowing in jobs growth for the rest of this year.

Reinforcing those concerns was June employment numbers which saw Australia add just 500 jobs in the month with signs of a slow down across the national employment market.

That is happening even after two interest rate cuts and some tax cuts so it is hardly a cheery signal.

Nickel, uranium and silver shine

Among the commodities experiencing a boost this week was nickel, rising 7.91% on depleting stockpiles at the LME and threats from Indonesia to ban exports.

Uranium companies in Australia welcomed the news from Donald Trump that the US won’t impose punitive measures on imports.

Now that the initial section 232 investigation has been officially closed, US utilities have been freed up to re-engage with global uranium suppliers regarding potential contracts.

The silver price looks to have broken out of its trading pattern, following in gold’s footsteps. The precious and industrial metal surged 5.41% higher this week.

Market action in detail

Once again gold miners were in favour this week after the price of the yellow metal rose further.

Northern Star Resources (ASX: NST) jumped 16% to end the week at $13.47, Newcrest Mining (ASX: NCM) was up 4.1% to $33.15 and Evolution Mining (ASX: EVN) was up 10.5% to $4.83.

Some of the other big gold gainers included Saracen Mineral Holdings (ASX: SAR) which rose 11.6% to $4.15, Regis Resources (ASX: REG) was up 13.5% to $6.38, St Barbara (ASX: SBM) was up to $3.55, up 13.4 % and Resolute Mining (ASX: RSG) ended the week’s trade 16% higher at $1.74.

Some good June quarter results from Western Areas (ASX: WSA) plus the fact that it could get $33.1 million for its shares in Wesfarmers takeover target Kidman Resources saw its shares rise 20.2% to $2.44.

Among other stocks Elders (ASX: ELD) added 19.9% for the week to $7.26 after the agricultural company announced it was buying Australian Independent Rural Retailers for $187 million.

It was a terrible week for fund management group AMP (ASX: AMP) which shed 16.5% to $1.80 after the Reserve Bank of New Zealand blocked the sale of its life insurance business to Resolution Life.

That forced AMP to scrap its interim dividend and has created a lot of uncertainty and an expectation that it will need to get more funds from shareholders to continue its shaky recovery after a bruising encounter at the Royal Commission.

There was better news for shareholders in ship builder and defence contractor Austal (ASX: ASB) with the shares rising 17.3% to $4.13 after it predicted 2019-20 pre-tax earnings would be up at least 14%.

There was also some rare good news for National Australia Bank (ASX: NAB) shareholders after former Commonwealth Bank retail boss Ross McEwan was announced as its new chief executive officer. NAB shares rallied on the news, up 2.2% to $27.51.

Small cap stock action

The Small Ords index continued its rally this week to close up 1.12% on 2,927.6 points.

Small Ords July 2019 ASX 200
ASX 200 vs Small Ords

Small cap companies making headlines this week included:

Alt Resources (ASX: ARS)

WA gold explorer Alt Resources had more good news this week after drilling at the Tim’s Find prospect encountered gold in 63 of the 73 holes drilled.

The highlight assay from the latest batch of results was 2m at 32g/t gold, including 1m at 62.9g/t gold from 26m.

Other notable assays were 2m at 19.95g/t gold from 42m; 4m at 9.6g/t gold from 17m; 11m at 4.86g/t gold including 2m at 24.68g/t gold from 22m; 14m at 4.34g/t gold, including 1m at 25.9g/t gold and 1m at 30.4g/t gold from 8m; and 17m at 3.6g/t gold including 6m at 9.15g/t gold from 18m.

Overall, Alt completed 3,000m of reverse circulation drilling at Tim’s Find, which is part of a larger 5,200 RC program across the wider Mt Ida project.

Medibio (ASX: MEB)

Health tech company Medibio has secured a second commercial agreement with Compass Group for its ilumen product, which screens for early symptoms of depression, anxiety and stress.

Compass Group operates in 45 counties and has workforce of around 600,000.

The company’s strategy is to support and improve the mental well-being and physical health of its workforce and Medibio’s ilumen product fits in with this strategy.

Using biometric data and subjective assessments, ilumen provides users with a “well-being snapshot”.

Senetas Corporation (ASX: SEN)

Senetas announced this week that Thales recently acquired Gemalto and the newly combined company would continue as Senetas’ exclusive global distributor.

Thales will distribute Senetas’ high-speed network encryption product portfolio, including the virtual network encryptor CV1000 under the brand SafeNet High Speed Encryptor.

“I congratulate Thales on the acquisition of Gemalto and the seamless integration of the company and its products into the Thales business,” Senetas chief executive officer Andrew Wilson said.

“The opportunity now presented to Senetas through this global distribution giant is massive and very exciting for Senetas’ growth prospects,” Mr Wilson added.

Imagion Biosystems (ASX: IBX)

The US Food and Drug Administration has informed Imagion Biosystems its MagSense test for staging HER2 breast cancer had been granted breakthrough device designation.

Breakthrough designation will enable Imagion to expedite development and commercialisation of the device.

Imagion’s MagSense test eliminates unnecessary surgeries and concomitant morbidity resulting from biopsy procedures, which is the current standard of care for staging HER2 breast cancer.

MagSense is based on non-radioactive and safe diagnostic imaging technology and Imagion is currently in discussions with the FDA regarding the first-in-human study using the test.

Oventus Medical (ASX: OVN)

It was a big news week for Oventus Medical which inked its first material contract with an American sleep medicine group for its O2Vent obstructive sleep apnoea device.

The American group will adopt the O2Vent platform and use it to treat obstructive sleep apnoea across eight clinical sites.

Oventus followed up the news by securing material agreements with VirtuOx, Carestream Dental and Lyon Dental in the US to underpin the widespread adoption of Oventus’ lab-in-lab business model.

According to Oventus, the lab-in-lab model will place digital scanning technology in sleep facilities.

Integrated Payment Technologies (ASX: IP1)

Integrated Payment Technologies has been awarded industry-standard ISO accreditation, which is a significant global information security standard.

“This is an important external validation of InPayTech’s information security credentials. Information security is clearly a bedrock requirement for InPayTech, its clients and business partners,” InPayTech chief technical officer Robin Beauchamp said.

InPayTech has secured patents for its payments process in the US, South Africa, New Zealand, China, Japan, Hong Kong and Singapore.

“Our clients trust us with highly sensitive data. Each demands compliance with industry standards. We are confident InPayTech has the necessary controls in place to meet this expectation and the pre-requisites for the commitment to high levels of security,” Mr Beauchamp said.

Rhinomed (ASX: RNO)

Rhinomed has secured CE Mark approval for its Pronto rechargeable, dual actual, vapour release devices, which help clear stuffy noses and promote better sleep.

CE Mark approval now allows Rhinomed to sell its Pronto range in the EU and adds to existing approvals in Australia and the US.

The Pronto range is based on Rhinomed’s BreatheAssist nasal dilator technology and includes an Airstream release system that allows a continuous flow of essential oils into the nasal airstream.

The technology improves nasal airflow and the essential oils help clear stuffy noses and promote better sleep.

The week ahead

It is a fairly skinny week for new data in Australia this week with some of the releases including skilled internet job vacancies, business sales, consumer confidence and flash services and manufacturing gauges for July.

Potentially more influential will be some speeches coming out of the Reserve Bank – Governor Philip Lowe will be speaking at the annual Anika Foundation luncheon and Assistant Governor Christopher Kent is speaking as well.

There are several offshore releases that should be monitored including US economic growth, durable goods orders, housing and manufacturing data along with Chinese industrial profits and IMF World Economic Outlook Report.

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.