Rising bond yields keep the Australian market in sell mode

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WEEKLY MARKET REPORT

The ongoing showdown between bond investors and central banks shows no signs of abating, with growing concerns that central banks could be on the losing side and be forced to raise interest rates earlier than expected.

This view was reflected in three consecutive days of falling the ASX 200, which fell 0.9% for the week and 0.6% on Friday alone to close at 6708.2 points.

Iron ore, oil and Wall Street all sources of weakness

Some of the themes that were winners earlier in the year have now been sold, with large iron ore miners continuing to lose ground as oil prices fell 7.1% on the possibility of new ones. COVID-19 lockdowns in Europe, pushing energy stock prices down.

Wall Street weighed on the local market as well, as accommodating comments from the U.S. Federal Reserve were not enough to calm bond markets as long-term bonds rose on inflation fears causing extensive collateral damage, especially for technology companies.

Ten-year US Treasury bonds yielded 1.75%, reflecting inflationary fears and in another worrying sign, the Bank of Japan lowered its annual target for stock purchases, which was surprisingly considering given his insatiable appetite for bonds for many years.

Falls come despite promising employment figures

The local sell-off occurred despite some very promising data releases – in particular the better-than-expected increase of 89,000 jobs in Australia in February, which pushed the unemployment rate down from 6.3% to just 5.8 %.

There is still a long way to go in employment to get some wage growth through the system, but it’s a promising start, not that you know it from the stock market.

BHP (ASX: BHP) took top honors as iron ore’s worst player, its oil division only adding to the pain, producing a 1.7% loss for the week to $ 44.90.

Rio Tinto (ASX: RIO) was also down 1.5% for the week, closing $ 109.06 as the third force in iron ore – Fortescue (ASX: FMG) – also fell 1.4% to $ 20.01.

Even once reliable banks have been disappointing amid inflationary fears, with Commonwealth Bank (ASX: CBA) down 2.1% over the week and NAB (ASX: NAB) 0.7% less.

ANZ (ASX: ANZ) was flat for the week but the recovery Westpac (ASX: WBC) broke the trend, up 0.3%.

If there was a bright spot, it was healthcare stocks, which rose 1.3% on the week despite Friday’s declines.

This indicates some rotation to more defensive areas of the market as everything else fades.

Small Cap Equity Action

The Small Ords index rose 0.8% over the week to close at 3,206.5 points.

March 2021 ASX 200 Small Ords Chart
ASX 200 against small orders

Small-cap companies that made the headlines this week were:

Creso Pharma (ASX: CPH)

Creso Pharma kicked off the week with the announcement acquisition of the Canadian company Halucenex Life Sciences, which is an established psychedelic assisted psychotherapy company.

Halucenex is focused on developing therapies for treatment-resistant depression in people with post-traumatic stress disorder and other illnesses.

Creso followed the news of the acquisition with a announces that Halucenex is preparing for phase two clinical trial which tests the effectiveness of psilocybin (the active ingredient in magic mushrooms) in veterans and first responders suffering from PTSD.

As part of this, Halucenex has appointed True North to act as lead investigator in the trial which is scheduled to begin in June.

Creso ended the week with news from his The Canadian subsidiary Mernova continues its strong sales growth supported by three new purchase orders including one for its pre-rolled cannabis joints which are sold under the Ritual Sticks brand.

De.mem (ASX: DEM)

Another small cap to announce a strategic acquisition this week was the water treatment company De.mem acquires Capic, a chemical company in Perth – allowing De.mem to develop in WA.

In total, the acquisition values ​​Capic at $ 5.1 million, with De.mem due to pay $ 3.4 million in cash and 1 million shares.

Further future milestone payments of up to $ 750,000 are also part of the agreement, these to be divided into three lots of $ 250,000 and payable 50% in cash and 50% in shares.

Capic already serves 50 of WA’s Blue Chip Resources customers, including BHP, Northern Star Resources and Pilbara Minerals.

Sparc Technologies (ASX: SPN)

Sparc Technologies’ Graphene additives have been found to have “exceptional” antimicrobial properties when incorporated into an epoxy coating.

Researchers at Flinders University performed tests on various graphene additives, with one of the additives evaluated being shown to cause complete destruction of E-Coli bacteria when included in a coating.

Sparc Managing Director and CEO Mike Bartels said the antimicrobial results were “outstanding” and encouraged the company in its plans to develop a graphene additive product for a host of antimicrobial coating applications that have multi-billion dollar markets.

Minerals of Navarre (ASX: NML)

Aircore drilling at Navarre Minerals’ Glenlyle project in western Victoria generated “exceptional” gold and silver results.

The company’s latest assays come from expansion drilling on the project’s Morning Bill prospect and have yielded notable results of 38m at 7.8g / t silver over 73m, including 1m at 41.5g / t silver; 65m at 0.3g / t gold from 16m, including 1m at 3.1g / t gold; and 16m at 2.7g / t silver from 29m, including 1m at 18.3g / t silver and 1m at 18.0g / t silver.

Navarre chief executive Ian Holland said that while he was still in his early stages of exploring Morning Bill’s mineral system, the company theorizes that this prospect could become one of its best mineral discoveries in Victoria.

Resources for Investigators (ASX: IVR)

Explorer Invesigator Resources’ Paris project continued to generate very high grade silver results.

The company received the latest results from a 20,500m drill program completed late last year, with a hole including a 15.7m intersection grading 1,084 g / t silver, in a intersection 26 m wider at 674 g / t silver.

Other notable results were 31m at 336g / t silver from 44m, including 22m at 453g / t from 51m; 20m at 134g / t from 107m, including 12m at 177g / t; 2m at 191g / t from 82m; and 10m at 144g / t from 104m, including 6m at 211g / t silver.

Investigator chief executive Andrew McIlwain said the flow of positive drilling results continued to support the company’s confidence in the project.

Blue Energy (ASX: BLU)

Queensland and Northern Territory gas player Blue Energy has signed a non-binding agreement with Origin Energy (ASX: ORG) to supply 300 petajoules (PJ) of gas over 10 years, the second such contract which represents the base gas volume for a new pipeline proposed from the North Bowen Basin.

In December, the company signed a similar deal with Energy Australia covering 100 PJs over a 10-year supply period.

Blue Energy has been at the forefront of efforts to build the new pipeline to supply the east coast market.

This plan would see the North Bowen basin connected to Queensland’s main gas hub at Wallumbilla.

Queensland state government supports preliminary study and federal government calls for basin development.

Crowd Media (ASX: CM8)

Crowd Media has reached a commercial milestone after revealing that he had signed an agreement giving owned entity Forever Holdings a license to use his conversational AI platform.

This is the first time that Crowd has granted another company commercial access to its platform, the license paving the way for Forever to use the technology for 12 months under a SaaS contract worth 215 $ 000 over the period.

Forever can use the platform for an additional five months for an additional $ 90,000.

Crowd chairman Steven Schapera said the licensing deal with Forever was a “milestone” for the company as it moves forward with its marketing plans.

Matador Mining (ASX: MZZ)

Explorer focused on Canada Matador Mining continued to find gold while drilling at its Cape Ray gold project in Newfoundland.

On the Window Glass Hill target, drilling widened the known mineralized zone and returned recent results of 8 m at 5.5 g / t gold over 43 m; 1m at 14.7g / t gold from 19m; and 21m at 1g / t gold from 92m.

Matador executive chairman Ian Murray said testing at Window Glass Hill “continues to impress” and highlights the potential for increased resources.

Mr Murray said the company is finalizing its next exploration plans and will provide an update on them at the start of the June quarter.

The coming week

There is nothing in the upcoming economic releases over the next week that stands out as a potential circuit breaker, so the odds of a market turnaround likely hinge more on a change in sentiment.

There’s still a lot to watch for when it comes to credit and debit card spending, consumer confidence, and some business numbers that will likely be worth the wait.

One that might appeal to a larger audience is the national accounts for the December quarter, which track household wealth, which has strengthened despite headwinds from the pandemic.

In the September quarter, total household wealth (net worth) rose 1.7% to a record high of $ 11,351.1 billion, up 3.5% from a year ago is one year old, so any improvement on this will be welcome.

A quick division by the Australian population will let you see which end of the curve you are occupying.

Overseas, the main action will continue to spotlight the delicate and troubled relationship between the United States and China, with China’s decision on its prime lending rate currently sitting at 3.85% for one year, due Monday.

On the US side, there is a flurry of housing numbers that should paint a full picture of the US housing market, while the December quarter GDP numbers and jobless claims will be interesting.

With a focus on inflation, personal finance data will be carefully monitored as it contains an estimate of inflation.

The best actions of the week

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