The Australian market suffered one of its worst weeks this year after the delta variant of COVID-19 spooked investors with its relentless spread.
Losses were exacerbated by a slide in oil and iron ore prices due to geopolitical issues.
Sectorally, there were no gainers for the week, with materials, REITS and consumer staples being the worst hit.
The ASX200, ASX300, and ASX Ordinaries each closed the week about 1.7% lower.
Table of Contents
Last Week in ASX Stocks
Miners were the biggest losers this week after fears of a sustained clampdown on steel manufacturing by the Chinese Communist Party (CCP) due to next year’s Winter Olympics sunk in.
Australia’s top ore miners including BHP (ASX:BHP), Rio Tinto (ASX:RIO), and Fortescue Metals (ASX:FMG) ended the week down 2.94%, 4.68%, and 2.51%, respectively.
On the other hand, South32 (ASX:S32) and Alumina Ltd. (ASX:AWC) ended higher by 2.7% and 1.40%, respectively, because prices of aluminium, their core product, touched a 13-year high.
South32 was also boosted by favourable price moves of its other products like nickel and coal.
Coal stocks enjoyed bullish support from investors for a second week running with leading producers Yan Coal (ASX:YAL), Whitehaven Coal (ASX:WHC), Coronado Global (ASX:CRN), and New Hope (ASX:NHC) rising 1.66%, 4.14%, 1.63%, and 2.69%, respectively.
The oil sector had a volatile week after China decided to tap into its state oil reserves for the first time ever in a move to cool off prices.
The other big news in the sector was the completion of due diligence by Santos (ASX:STO) and Oil Search (ASX:OSH) and the finalisation of their $21 billion agreement to merge.
However, there are apprehensions that Papua New Guinea may block the deal citing protection of national interests.
The Santos-Oil Search merger is the second major deal this year after BHP (ASX:BHP) demerged its oil business into Woodside Petroleum (ASX:WPL).
This highlights a larger trend as oil companies feel the heat of climate action and move to build stronger balance sheets through consolidation.
Santos, Oil Search, BHP, and Woodside Petroleum ended the week down 3.04%, 1.06%, 2.94%, and 2.43%, respectively.
The banking sector too felt the heat from the resurgence in pandemic fears.
Investors turned bearish after banks like the National Australia Bank (ASX:NAB) stated that while the economic damage from the delta variant was lower than the first wave last year, it has nevertheless damaged business across the country.
Commonwealth Bank (ASX:CBA), Australia New Zealand Bank (ASX:ANZ), Westpac (ASX:WBC), and National Australia Bank (ASX:NAB) closed the week lower 0.22%, 0.61%, 0.89%, and 0.21%, respectively.
Gold miners had a forgettable week after the yellow metal ended the week in the red.
A range of factors contributed to gold’s sharp mid-week selloff, including USD strength, higher US debt yields, and a technical failure to break above the $1,830 resistance.
Major gold miners Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST), and Regis Resources (ASX:RRL) ended the week down 3.92%, 7.58%, and 11.89%, respectively.
Next week in ASX Stocks
New listings
Legacy Minerals (ASX:LGM) is a developer of copper and gold assets in New South Wales.
The company had a very successful pre-IPO raise earlier in the year which was oversubscribed.
It plans to raise A$7 million from shares priced at A$0.20. The company is due to list on Monday.
Heavy Minerals Ltd. (ASX:HVY) is a developer of heavy minerals projects like garnet and ilmenite.
The company owns assets in Mozambique and Western Australia.
The company aims to raise A$5.5 million in its market debut on Tuesday. Shares are priced at A$0.20 each.
Dalaroo Metals Ltd. (ASX:DAL) is an exploration and development company that owns copper, nickel, platinum, and zinc assets in Western Australia.
The company aims to raise A$5 million from shares priced at A$0.20 to drive the development of its mines. The company will list on Wednesday.
Star Minerals Ltd. (ASX:SMS) is a mining company that owns gold assets in Western Australia.
Star aims to raise A$5 million for shares priced at A$0.20 each to further develop and commercialize their assets. The company will launch on Thursday.
Pearl Gull Iron Ltd. (ASX:PLG) is an iron-ore miner that owns three sites in Western Australia.
The company aims to raise A$4 million from shares priced at A$0.20, to fund further development of their sites. The company will make its market debut on Thursday.
Koonenberry Gold Ltd. (ASX:KNB) is a gold miner with assets in NSW.
The company has eight drill-ready sites that it plans to fund with its A$10 million from shares priced at A$0.20. The company lists on the markets on Friday.
Way 2 VAT Ltd. (ASX:W2V) is an Israel-based Software-as-a-Service (SaaS) company that uses AI to process VAT and GST refunds at scale across multiple verticals.
The company aims to raise A$7 million from shares priced at A$0.20 each to bring its product to market. W2V lists on Friday.
Economic and Market Outlook
The US’ weekly unemployment data over the week showed a sharp decrease in jobless claims.
While this should be good news, markets were did not take it well on fears that the Fed may be encouraged towards tapering.
However, this led to investor bullishness on the USD.
The ASX looks weak at best, on pandemic fears, and especially after bearish comments from banks like the NAB.
Further, the downturn in iron ore prices, the country’s biggest export, is bad news for the markets.
Ore prices sank to an eleven-month low on Thursday as investors questioned the global recovery.
Europe made it clear over the week that their central bankers will hold rates steady at 0.25% for collateral-based lending, 0% for refinancing, and 0.5% for deposits.
At best, the ECB would only minimally reduce bond repurchases (“recalibration,” not taper) – however, the stimulus would largely remain in place.
Meanwhile, Europe recently reported a decade-high inflation level of 3%.
The RBA’s Monetary Policy meeting last Tuesday decided to leave monetary policy unchanged with QE being continued at current levels till at least early next year.
The central bank said its decision was spurred by the “delay in the economic recovery and the increased uncertainty associated with the Delta outbreak.”
Crucial next week is Australian data on employment for August is due out Thursday.
The report will give more insight into the pandemic’s latest impact on the economy.
According to analysts at Commonwealth Bank the data will show around 300,000 job losses with the unemployment rate rising from 4.6 per cent to 5.2 per cent.
Forex Roundup
The RBA missive on the pandemic and the economy reflected on the AUD/USD pair, which fell from a high of 0.7464.
Since then the pair has repeatedly plumbed lows in the region of 0.73490, where it closed the week.
Meanwhile, the USD has likely gotten a “risk-off” benefit from delta and growth jitters.
The AUDNZD left no doubt that the December 2020 bottom of 1.04293 was in the rear-view mirror and that it was rolling further downhill in a continuation of the plunge from its March high.
It closed the week at 1.03254.
At least one bank, MUFG, foresees further strength in the Kiwi versus the Aussie (“widening policy diversion”) and recommends shorting the pair for a target of 1.0250.
AUDCNY closed the week at 4.7377, reacting poorly to the RBA meeting on Tuesday with a slide to 4.7517.
It fidgeted around that level for the rest of the week but broke sharply down on Friday towards the close.
In the coming week, on Thursday, a boatload of Chinese economic data is scheduled to release, including unemployment, production and retail sales.
If the data is good, AUDCNY may grind lower.
