Weekly wrap: rumours of wars send the ASX 200 tumbling

It is the Bible that talks about not being alarmed by “wars and rumours of wars” but Australian share market investors weren’t quite so sanguine, pushing down the ASX 200 sharply.

By the close of trade on Friday 55.2 points or 0.7% had been erased from the ASX 200 as the reality of a worsening conflict in the Middle East decisively snapped a three-week winning streak that had set new records.

The weekly loss of 0.8% to 8150 points was the first since early September, with nine of the ASX’s 11 sectors dropping in response to missiles continuing to fly in the Middle East.

Oil prices one of the few things going up

Unsurprisingly following US President Biden’s comments that the US was “discussing” a potential retaliatory attack on Iranian oil assets by Israel, oil prices were one of the few things heading up.

They surged more than 5% after the comments and maintained that rise, sending the energy sector up 1.8%.

Woodside (ASX: WDS) shares rose 2.2% to $26.64 and Santos (ASX: STO) shares were 2.1% higher at $7.30.

Even shares in smaller oil and gas producers were higher, including Horizon Oil (ASX: HZN) which was up 7.5% to 21.5c, Strike Energy (ASX: STX) was up 9.5% to 23c, Karoon Energy (ASX: KAR) was up 2.2% to $1.65 and petrol retailer Viva Energy (ASX: VEA) was up 3.1% to $3.02.

Miners and banks feel the pain

That’s about where the good news ended, with the recovering mining shares hit hard as the prospect of Chinese stimulus lost ground to war worries.

BHP (ASX: BHP) fell 1.7% to $44.58, Fortescue (ASX: FMG) fell 1.1% to $19.76 and Rio Tinto (ASX: RIO) fell 1.9% to $123.68.

At the other end of the traditional Australian big cap barbell, the banking sector also lost ground with shares in market leader Commonwealth Bank (ASX: CBA) down 1.4% to $132.74 while Westpac (ASX: WBC) fell 1.9% to $30.14.

Rounding out the banking losses, ANZ (ASX: ANZ) lost 1.5% to $29.64 and NAB (ASX: NAB) fell 1.5% to $36.43.

A few bright lights among the gloom

Other than energy shares, there were a few other war related rises on the market with the most pronounced coming from shares in technology developer Electro Optic Systems (ASX: EOS) up a solid 5.1% to $1.54 as traders took a punt that rising tensions in the Middle East could mean more demand for its defence technology.

Already the company has revealed a fast rise in revenue in the first half due to a rise in weapon systems orders from an undisclosed Middle East client.

Another impressive rise was shares in Light & Wonder (ASX: LNW) which rose 7.8% to $140.69 after the gaming company said it intended to develop a new version of its popular Dragon Train game.

That news followed an intellectual property dispute with Aristocrat Leisure this year.

There was also a bit of action in the find management space with shares in Regal Partners (ASX: RPL)  added 2% to $3.55 after it topped $17 billion in funds under management and it continues to advance takeover talks towards due diligence with fellow wealth giant Platinum Asset Management (ASX: PTM), which also saw its shares jump 1.7% to $1.23.

It wasn’t such a happy story for shareholders in asset manager Magellan Financial (ASX: MFG) with shares losing 3.2% to $9.62 after it reported $200 million in outflows during September.

Small cap stock action

The Small Ords index fell 1.16% to 3102.4 points for the week.

Small cap companies making headlines this week were:

Tambourah Metals (ASX: TMB)

Tambourah Metals has reported promising shallow gold intersections at its Tambourah King target in the Pilbara region, highlighting potential extensions to the lode gold system.

Recent drilling, including RC and diamond holes, revealed a mineralised lode over a 150m strike with notable results, such as 5m at 2.02g/t gold from 53m and 1m at 5.89g/t from 23m.

Structural data from this program will guide future exploration, with the shallow lode depths aiding in targeting extensions.

Tambourah Metals has advanced its gold exploration efforts, supported by rising gold prices and WA government funding.

Lithium Universe (ASX: LU7)

Lithium Universe has advanced its Canadian critical minerals strategy with a positive pre-feasibility study for its Bécancour lithium carbonate refinery, estimating a pre-tax NPV of A$1.5 billion and a payback period of 3.5 years.

The low-risk refinery, modelled on China’s Jiangsu processing technology, is designed to meet North American demand for battery-grade lithium, positioning the company strategically for market growth.

Despite a downturn in the global lithium market, Lithium Universe is leveraging a counter-cyclical strategy to advance its projects.

The refinery will process spodumene feedstock from global sources to address North America’s growing battery manufacturing needs.

Nyrada (ASX: NYR)

Nyrada’s preclinical rat study demonstrated up to 86% efficacy of its lead drug candidate, NYR-BI03, in reducing cardiovascular damage from myocardial ischaemic-reperfusion injury.

This positions NYR-BI03 as a potential novel treatment for myocardial infarction, with a growing global market expected to reach US$3.7 billion by 2032.

The drug showed superior cardioprotective results compared to the current treatment, Captopril, and has also demonstrated neuroprotection in stroke and traumatic brain injury studies.

NYR-BI03 is undergoing safety trials, with a Phase I human clinical trial expected to start soon, targeting both stroke and heart disease.

Island Pharmaceuticals (ASX: ILA)

Island Pharmaceuticals has commenced dosing subjects in the Phase 2a component of its ISLA-101 Phase 2a/b PROTECT trial for dengue fever, utilising a live attenuated dengue virus strain developed by the US Army.

The trial investigates ISLA-101 as both a prophylactic and therapeutic, with results from the Phase 2a portion expected by year-end and the Phase 2b portion starting in the new year.

Island secured $3.5 million in funding to complete the trial and advance due diligence on another antiviral molecule, galidesivir.

The company received strong investor support, marking a pivotal moment in the fight against the growing global dengue epidemic.

Lunnon Metals (ASX: LM8)

Lunnon Metals has identified a new gold zone at the Lady Herial prospect within its Kambalda gold and nickel project in Western Australia, with significant near-surface, high-grade intercepts, including 23m at 16.61g/t gold.

Geological modelling and open-pit optimisations will follow upon receiving the remaining assays, potentially leading to an initial mineral resource estimate.

Lady Herial is considered a priority prospect due to its shallow mineralization and continued discovery of new zones.

This gold find could complement Lunnon’s previous success with the Baker nickel shoot, advancing their strategy of defining commercially viable, shallow high-grade deposits.

The week ahead

Other than continuing developments in the Middle East conflicts, the other main news for share markets will come from central banks.

This week happens to be a big one for this news, with both the local Reserve Bank board and the US Federal Reserve Open Market Committee (FOMC) releasing minutes from their latest monetary policy decisions.

Of course, the US FOMC decided to cut official rates by a large 0.5% at its meeting due to rapidly falling inflation and signs of economic weakness while the RBA took the opposite stance, putting interest rate cuts on hold until next year due to a slower than hoped inflationary decline.

While the bulk of the analysis of the FOMC minutes will focus on the plans for future rate cuts, the local reaction will be looking at whether the RBA board can be shaken from its higher for longer stance and produce some official rate cuts this year as the market is now anticipating.

Adding to the drama, the Reserve Bank of New Zealand is expected to this week announce a 0.5% cut to official interest rates to 4.75%, with plans for a further 0.5% cut in November not out of the question.

Three senior RBA deputy or assistant governors will also be speaking during the week as well.

Inflation figures in the US are expected to be flat while locally the main releases include business and consumer confidence numbers.

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