Australia outperforms as US flirts with bear market
As the US stock market played with a drop large enough to signal a bear market, the Australian market once again held up stronger in the face of widespread weakness.
This may be due to our relative lack of tech listings and our preponderance of “old world” mining and banking giants, but whatever the reason, Australia is holding up better than the US.
The S&P/ASX 200 closed 1.2% or 81.1 points higher at 7,145.6 points, 6.7% or 487.2 points lower than the index’s all-time high of 7,632, 8 points established in mid-August of last year.
In contrast, by the end of Thursday’s session, the broadest US index, the S&P 500, had fallen 18.7% from the all-time high it had reached earlier this year – very close to the 20% mark that typically defines a bear market.
Lower Chinese interest rates key to market recovery
Australia’s rally came after Chinese banks slashed the key interest rate for long-term loans by a record amount – cutting mortgage costs and potentially boosting weak loan demand as China faces a housing slump and continued crippling COVID-19 lockdowns.
The five-year prime lending rate, a benchmark for home loans, was cut to 4.45% from 4.6%, according to the People’s Bank of China – the biggest cut since a rate overhaul in 2019.
The lower rate will apply immediately to new mortgages, while existing mortgages will not be reassessed until next year at the earliest.
Miners and banks are recovering well
This news was greeted with gratitude by Australian investors who actively piled into big miners and banks.
BHP (ASX: BHP) rose 2% or 95c to $47.18, shares of Rio Tinto (ASX: RIO) rose 1.5% to $108.35 and shares of Fortescue Metals (ASX: FMG) jumped nearly 3.9% to $20.15 as investors believed Chinese news would be good for iron ore demand and prices.
Similarly, Banks were also higher with Commonwealth stocks (ASX:CBA) up 0.8% at $104.60, NAB stocks (ASX:NAB) up 0.7% at 31.07 $, ANZ (ASX:ANZ) shares rose 0.9% to $25.50 and Westpac (ASX::WBC) shares rose 0.5% to $23.57.
Even some of the big retail giants such as Coles (ASX:COL), Woolworths (ASX:WOW) and Wesfarmers (ASX:WES) managed to stage a comeback after being hammered on Thursday after shares of American retail came under fire after the actions in the United States. giants Walmart and Target after inflation cut retail spending.
The biggest gains in the Australian market, however, were in the IT, Materials and Consumer Discretionary sectors with Block (ASX:SQ2) up an impressive 9.9% to $127.64 and Computershare ( ASX: CPU) up 3% to $24.36.
Crown shareholders approve sale
In some stock-specific news, Crown shareholders approved the group’s $8.9 billion sale to Blackstone, with shares of Crown (ASX:CWN) firming 0.2% to $12.84.
Mike Cannon-Brookes, a major shareholder of AGL (ASX: AGL) and IT billionaire, also outlined his vision for the company, which includes changing the composition of the board of directors, phasing out production faster coal-fired power plant and the sabotage of the company’s planned split.
Retail giant Woolworths also announced that it had spent $243 million to buy a majority stake in ASX-listed online marketplace MyDeal (ASX: MYD) for $1.05 per share.
While there was some shareholder skepticism about Woolworths’ ability to take on e-tailers such as Kogan (ASX:KGN), Amazon and Catch, it was great news for MyDeal shareholders, who benefited from a price of 55.8% to rise to $1.00 per share.
Small Cap Stock Action
The Small Ords index rose 1.43% this week to close at 3049.4 points.
The small cap companies that made headlines this week were:
After receiving its monepantel (MPL) tablets, PharmAust is preparing to start its Phase 1 clinical trial of MPL in motor neurone disease (MND) later this month.
Australian non-profit organization FightMND provided funding to help the trial with a commitment of $880,000 in 2020, which will be paid in installments once PharmAust reaches various milestones.
As PharmAust prepares for the MPL trial at MND, the company revealed that it received a prepayment of $210,000 from a research and development tax incentive application scheduled for fiscal year 2022.
Radium Capital has agreed to provide early access to 80% of PharmAust’s expected FY2022 rebate.
Resource Base (ASX:RBX)
Widespread clay REE has been identified in the recently granted Resource Base building EL007646, which forms a small part of the company’s wider Miter Hill project which spans the Victorian and South Australian border.
Shallow tenement drilling intersected clay REE concentrations up to 1,421 ppm TREO from 3m, with 70% of the holes reaching TREO grades above 500 ppm.
Resource Base says the grades it had intercepted were comparable to the Red Tail and Yellow Tail deposits near Australian Rare Earths, which have a combined resource of 39.9 Mt at 725 ppm TREO.
The company will carry out further drilling on EL007646 to test where the mineralization remains open, as well as on nearby properties once granted.
Crowd Media (ASX: CM8)
As part of its 2022 go-to-market, Crowd Media has secured two deals for the integration of its AI-powered Talking Head platform.
Israeli data technology company SourceFlare Ltd will integrate Crowd’s technology into its own platform to optimize customer acquisition and lead generation.
SourceFlare will pay Crowd approximately $7,100 per month for access to the Talking Head platform as well as ongoing service and support.
The second deal is with AI-powered Impssbl Corporation, which will apply Crowd’s Talking Head technology in the form of a series of interactive NFTs.
NFT series profits will be split 70% on Impssbl and 30% on Crowd.
Provaris Energy (ASX:PV1)
The development of Provaris Energy’s compressed hydrogen vessel is progressing, with several work packages now complete.
The company’s team has completed hull design optimization, finite element modeling, onboard security systems, general arrangement drawings and an outline specification of the vessel.
Provaris is sharing work packages with shipyards to refine construction schedules and capital cost estimates, which will feed into the construction approval application, which is scheduled for the middle of next year.
In the meantime, the scoping and feasibility studies should be completed in July.
Havilah Resources (ASX:HAV)
OZ Minerals has signed an option to acquire Havilah Resources’ Kalkaroo copper-gold project in South Australia for $205 million.
The companies signed a conditional binding term sheet on Tuesday, in which Oz will conduct a study program on Kalkaroo to confirm and expand existing resources and optimize the project over 18 months.
Kalkaroo has a current resource of 245Mt at 0.45% copper and 0.39g/at gold.
Subject to OZ exercising its option to acquire Kalkaroo and achieving certain milestones, additional contingency funds in the potential amount of $200 million may be payable to Havilah.
As a result, Havilah could receive up to $405 million for Kalkaroo over time.
MyDeal (ASX: MYD)
Major retailer Woolworths Group will acquire 80% of MyDeal in an all-cash transaction valued at $1.05 per share.
This represents a 62.8% premium to MyDeal’s last closing price of $0.65 per share and values equity at $271.8 million and indicates an enterprise value of $242.6 million. dollars.
Woolworths CEO Brad Banducci said the acquisition of MyDeal will expand the retail giant’s offering beyond groceries.
“The addition of MyDeal to Woolworths Group represents a further step towards a more holistic customer experience around food and daily needs and significantly expands our market capabilities, particularly in the area of general merchandise,” he said. -he declares.
“It will also support the growth of MyDeal by accessing [our] capabilities in e-commerce, supply chain, retail, loyalty and more,” added Banducci.
Calculate (ASX: RKN)
Under a deal announced this week, Reckon will sell its account management group to UK subsidiaries of The Access Group for $100 million.
Subsidiaries Access Software Australia, Access Workspace NZ and Access UK will purchase Reckon’s assets, including its APS and Reckon Elite practice management products.
Reckon will return the majority of the after-tax proceeds of the transaction to its shareholders via a partially franked special dividend.
The company retains its business groups that provide accounting and payroll software, wealth management solutions and legal practice management.
In fiscal 2021, these divisions generated combined revenue of $50 million and EBITDA of $17 million.
After the sale, Reckon will continue to focus on expanding its cloud-based software technology in high-growth markets in Australia and the United States.
The week ahead
Once again, US releases, including economic growth and inflation readings, are likely to be the most important factors in the markets, but there are some things to watch here in Australia.
Two Reserve Bank personalities – Deputy Governor Christopher Kent and Deputy Governor Luci Ellis deliver speeches and there will also be a range of local data.
Household spending, consumer confidence, construction work and retail spending should combine to see if Australian consumers follow the US path or resist in their spending habits.
The best actions of the week