WEEKLY MARKET REPORT
The Australian share market enjoyed its best week since March, posting a 2.8% gain for the week despite a slightly lower result on Friday.
While a 2.8-point fall in the ASX 200 to 6,791.5 points might have been a slightly disappointing finish, it was still a very strong week as the local bourse followed up a 5.4 % in the S&P 500 since last Thursday.
The positive tone was even more remarkable when you consider that the European Central Bank (ECB) has just raised its interest rates by 50 basis points – the biggest rate hike since 2000 and the first since 2011
Key to the resilience, apart from some lower commodity prices that dragged down major miners and energy stocks, were earnings at US companies, which were surprisingly strong against the ‘increase in inflation and increases in interest rates.
It could be wishful thinking, but traders began to believe a Cinderella ending was possible with less need to raise US interest rates as weaker US economic data coupled with higher corporate profits stronger than expected led to speculation that the rise in interest rates could be more moderate than expected. .
Back in Australia that led to declines in most sectors on Friday, with the exception of gains in finance, real estate and also IT.
Banks on the rise
Banks were generally stronger with Commonwealth Bank (ASX: CBA ) up 0.2% to $97.80, Westpac (ASX: WBC ) up 1.1% to $21.07, National Australia Bank (ASX: NAB) 0.7% to $29.88 and ANZ (ASX: ANZ) rose 3% to $22.59.
Property trusts also enjoyed a rare moment in the sun, shown by a 1.8% rise in Scentre (ASX: SCG) shares to $2.84 and a rise of 1.8 % of GPT (ASX: GPT) shares to $4.50.
In the IT sector, Xero (ASX: XRO) rose 0.8% and Block (ASX: SQ2) rose 0.6% to $107.71 after tech-heavy Nasdaq rose courtesy of lower bond yields.
Energy stocks in particular were weaker as oil fell below $100 a barrel and communications also fell, with Telstra (ASX: TLS ) down 1.3% to $3.96
Of particular note was the ASX Small Ords’ impressive weekly rise of 5.8%, with small businesses enjoying their best week since October 2020.
ZIP runs higher
Another individual stock that performed very well was buy now pay later company Zip Co (ASX: ZIP), with shares up 54.4% for the week and doubling this month.
The rise in the share price followed the announcement of a 27% increase in its revenue to $160.1 million and plans to reduce cash burn to accelerate the company’s search for profitability.
IAG loses ground
In other individual share moves, insurer Insurance Australia Group (ASX: IAG) saw its shares fall 1.4% to $4.21 after announcing its preliminary results for the fiscal year a profit of $347 million, up from a loss of $427 million a year earlier.
Gross written premiums grew 5.7%, but the company’s underwriting profit margin of 7.4% ($586 million) was a big drop from a year earlier.
Another stock that suffered individual circumstances was Coronado Global Resources (ASX: CRN), with its shares down 8.1% after the coal miner revealed that its average mining costs per tonne sold grew to to $79-81 per tonne, due to cost pressures, plus a 22.5% reduction in marketable coal due to wet weather in Queensland.
Small cap stock
The Small Ords index rose 5.84% to close the week at 2,869.4 points.
ASX 200 vs Small Ords
The small-cap companies that made headlines this week were:
ioneer (ASX: INR)
The up-and-coming lithium-boron producer hit a major milestone this week after announcing a binding purchase agreement with motor vehicle giant Ford.
Ford has agreed to buy 7,000 tpa of lithium produced from Rhyolite Ridge starting in 2025. This represents 34% of the planned 20,600 tpa lithium carbonate production from the ioneer project.
The price will be set quarterly using an agreed formula based on the market.
Oneer Executive Chairman James Calaway said the deal with Ford was a “significant milestone” for the company and highlights Rhyolite Ridge’s mature stage and its “ideal position” to serve the US domestic market for critical battery materials.
Credit Clearing (ASX: CCR)
The June quarter announced record revenue of $8.63 million for accounts receivable management technology provider Credit Clear.
4Q FY2022 revenue was 41% higher than 3Q FY2022 and 160% higher than the prior corresponding period.
Credit Clear noted that the record Q4 FY2022 had been supported by an all-time monthly high of $3.12 billion in June.
This brought the company’s annualized revenue rate to $37.44 million.
The record growth has been attributed to Credit Clear’s “disciplined approach to continued investment in technology”.
Blue Energy (ASX: BLU)
The second well in Blue Energy’s pilot appraisal program has been drilled in the Sapphire Block in ATP 814.
Located in Queensland’s northern Bowen Basin, Blue’s Sapphire Block is just 2km from Arrow Energy’s Moranbah operation, which is one of Australia’s oldest gas fields and geographically the country’s largest .
The second well, Sapphire 6V, is expected to take three days to complete and reach a total depth of 900m.
The first well of the Sapphire 5V program was completed earlier this week and reached a total depth of 850m. It crossed 45 m of clean coal through the coal measure target formations, which was 20% thicker than expected.
TNG Ltd (ASX: TNG)
TNG Ltd now has $600 million in conditional letters of support to finance its integrated mining and processing operation downstream of Mount Peake.
The company disclosed on Tuesday that German export credit agency Euler Hermes had provided key indicative terms for a $300 million financing package to develop the project that would produce vanadium, titanium dioxide and iron products for in global markets.
This letter of support follows one issued to TNG earlier this month by Export Finance Australia for $300 million.
TNG managing director and chief executive Paul Burton said Euler Hermes’ commitment marks an “important and exciting milestone” in a multi-fund funding strategy for Mount Peake.
The company followed up the funding news with an agreement with Ultra Power Systems to explore opportunities for vanadium redox flow batteries in Australia.
TNG and Ultra will collaborate on the identification, development and deployment of a combined VRFB renewable energy generation and storage system for the Australian market, which includes the production of high performance mixed acid vanadium electrolyte d ‘Ultra.
iTech Minerals (ASX: ITM)
REE potential continues to increase at iTech Minerals’ Caralue Bluff prospect, which is part of the company’s Eyre Peninsula tenement package in South Australia.
On Friday, iTech reported that it had received assays from 27 holes at the prospect, with 12 of them containing “significant” REE at grades greater than 350 ppm TREO.
From this test batch, the outstanding results were 12 ma at 2,343 pm TREO from 9 m; 17m at 1,774ppm TREO from 4m; 12m at 1,326ppm TREO from 6m; and 16m at 776ppm TREO from 2m.
iTech managing director Mike Schwarz said REE has now been identified in a 10 by 9 km area at Caralue Bluff.
Friday’s results followed positive tests reported earlier in the week of 18m 2,050ppm TREO from 4m; 32m at 1,223ppm TREO from 4m; 13m at 1,027ppm TREO from 23m; and 4m at 1,810 ppm TREO from 18m.
Drilling to date at the prospect has intercepted numerous extensive, high-grade zones of mineralization.
Next week
The main events this week that will move the markets are the US Federal Reserve’s decision on interest rates and inflation numbers.
After a two-day meeting, the US Fed’s decision is due on Wednesday and most observers expect a 0.75% hike, which would take official interest rates to a range from 2.25 to 2.5%.
The increase is to counter rising inflation and, in an interesting counterpoint, personal income and expenditure data for June is released on Friday, with the closely watched personal consumption deflator (PCE) expected to rise by 0, 5% in July.
Inflation will rise in Australia
In Australia, inflation numbers out on Wednesday are expected to be big, with June quarter CPI expected to rise 1.9% to an annualized 6.2%, the highest since 1990.
These inflation figures are expected to prompt the local Reserve Bank board to raise the cash rate by 0.5% to 1.85% on August 2.
Apart from a federal budget update from Treasurer Jim Chalmers on Thursday, the other big market news is expected to be corporate earnings reports with a start to the season featuring many familiar names.
They include many miners such as Oz Minerals, South 32, Rio Tinto, Regis Resources, St Barbara, Fortescue Metals and Mineral Resources, with other reporting companies including Cogstate, Janus Henderson, Unibail-Rodamco-Westfield, Origin Energy and Insignia. holdings
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