During the past week, ASX 200 closed for the first time in the red on a monthly basis after an unbroken stint of 11 months of gains.
Plunging iron ore prices and fears of the US Fed’s tapering action delivered a one-two punch to the index, which shed 2.69% for September.
All the three ASX indices (200, 300, and Ordinaries) closed the week lower by 2.14%, 2.13%, and 2.13% respectively, pressured by a host of bearish factors.
In addition to the iron ore and tapering bugbears, Australian stocks were on the back foot due to global cues such as hardening US bond yields that routed tech stocks on the Nasdaq; fears of a US credit default amid a debt ceiling row; energy shortages in China that took a toll on its economic activity; and the looming spectre of rising inflation caused by surging energy prices and production bottlenecks.
Meanwhile, the Evergrande crisis in China continues to cast a pall on global markets.
Amidst all the gloom, Australia’s reopening moves and travel relaxations that said Australians could travel overseas once an 80% vaccination rate is reached were a bright spot.
Table of Contents
ASX Stocks Last Week
Travel stocks cheered moves to open up international travel.
Webjet (ASX:WEB), Helloworld (ASX:HLO), and Flight Centre Travel Group (ASX:FLT) surged 4.35%, 8.87%, and 8.76% for the week respectively.
Amidst a technology rout, biotech major CSL Limited (ASX:CSL) lost nearly 7%, Xero (ASX:XRO) plunged 6.3%, NextDC (ASX:NXT) declined 9.13%, and Freelancer (ASX:FLN) fell 5.66%.
Fintech and BNPL darling Afterpay (ASX:APT) gave up 9.71%.
However, salary packaging firm Smartgroup Corp (ASX:SIQ) gained 18.68% for the week after it received a takeover bid from private equity firms TPG Capital and Potentia to buy all shares in the business at $10.35 each.
Miners continued their bearish run.
BHP Group (ASX:BHP), Fortescue Metals (ASX:FMG), Rio Tinto (ASX:RIO), and James Hardie (ASX:JHX) gave up 2.51%, 6.60%, 2.87%, and 6.81% respectively on the week.
Fortescue’s Solomon Hub iron ore mine in Western Australia is shut after a worker’s fatality.
However, South32 (ASX:S32) gained 2.03%.
It announced the acquisition of up to an additional 25% shareholding and related rights in Mozal Aluminium, from Mitsubishi.
In doing so it will match a headline purchase price of US$250m to acquire the interest, taking its ownership of the smelter up to 72.1%.
Rare earth company ViaGold (ASX:VIA) vaulted 60% on the week and received a query from ASX for the market activity in its stock.
At A$0.48, the stock is up a massive 1,100% year to date.
Energy stocks were mostly higher this week too amid reports of shortages in Europe and China.
Woodside Petroleum (ASX:WPL) +5.56%, Santos Ltd (ASX:STO) +3.88%, and Oil Search (ASX:OSH) +5.94% were firm.
Oil prices touched a three-year high last week.
Meanwhile, Origin Energy Limited (ASX:ORG) was up 5.54% after it announced it will invest an additional £38 million (~A$70 million) in Octopus Energy Group Limited to maintain its 20% equity interest in the latter.
A fund managed by leading sustainable investor Generation Investment Management (GIM) will invest £211 million to acquire approximately 7% of Octopus.
GIM’s investment values Octopus at approximately £3 billion (A$5.5 billion).
Coal producers Yancoal (ASX:YAL) and Whitehaven Coal (ASX:WHC) shot up 18.11% and 5.66% respectively.
Real estate continued its bearish skew from the week prior.
Mirvac Group (ASX:MGR), Vicinity Centres (ASX:VCX), Dexus Group (ASX:DXS), Stockland Group (ASX:SGP), and Goodman Group (ASX:GMG) closed the week lower by 6.43%, 1.20%, 3.06%, 5.03%, and 4.81% respectively.
Among banks, Commonwealth Bank (ASX:CBA) lost 2.16%.
However, ANZ (ASX:ANZ) , NAB (ASX:NAB), and Westpac (ASX:WBC) were nearly flat.
The NSW Ministry of Health released an update on 30 September 2021, announcing that it will allow day surgeries to take place at 20 hospitals in Greater Sydney [seven of which are Ramsay Health Care (ASX:RHC) owned hospitals] from 5th October.
Ramsay, nevertheless, closed the week 1.67% lower.
Growthpoint Properties (ASX:GOZ) will buy more than $50 million worth of stapled securities in industrial property trust APN Industria REIT (ASX:ADI).
The stocks were down 5.80% and 3.72% respectively.
Next week in ASX Stocks
Upcoming Listings
Mineral exploration company Alvo Minerals will raise A$10 million on Wednesday, October 6, by issuing ordinary fully paid shares at A$0.25 each.
Alvo has secured over 30 km of strike of a high-grade copper-zinc VMS belt in central Brazil.
Australian nickel sulphide explorer NickelSearch Limited will debut on Wednesday, October 6, raising A$10 million through the issue of fully paid ordinary shares of A$0.20 each.
Investors get exposure to an emerging green energy materials supplier, leveraged to the global EV and low carbon economy transition.
E79 Gold Mines Limited will hit the market on Thursday, October 7, with a A$7 million issue of shares at A$0.20 each.
It is an Australian gold exploration company with approximately 683 sq km of highly prospective ground in two proven gold-producing greenstone belts in the Western Australian Goldfields.
Economic News And Market Outlook
Australian household spending reported lower for the third month on the trot in August.
Data from ABS showed that retail sales dropped 1.7% in August, month on month.
Retail turnover was negatively impacted by lockdown restrictions, particularly in the eastern mainland states, an official said.
The CoreLogic home value index rose by 1.5% in September, the slowest growth in eight months.
However, prices rose in all capital cities in September, as well as over the quarter and year.
High and bullish home prices could cause policymakers to tighten credit conditions.
Though growth in home prices appears to be tapering on a monthly horizon, they have now grown by more than 20% in the past year, the fastest pace since mid-1989.
Meanwhile, regulators are concerned that high home prices may be stretching the budgets of home borrowers.
New home loans where debt is at least six times greater than income rose to a record 22% in the June quarter – up from 16% a year earlier.
“A period of credit growth materially outpacing growth in household income would add to the medium-term risks facing the economy,” regulators warned in a statement last Wednesday.
The AiGroup purchasing managers index (PMI) for manufacturing fell from 51.6 to 51.2 in September.
“Manufacturing activity and sales continued to be severely disrupted in NSW and Victoria in September due to ongoing lockdown,” noted AiGroup.
“Outside of NSW and Victoria, respondents continued to report strong demand for a wide range of locally manufactured products, including demand from customers in the construction, agricultural and transport sectors.”
Australian Prime Minister Scott Morrison on Friday announced that an 18-month ban on Australians travelling abroad will be lifted from next month.
People would be eligible to travel when their state’s vaccination rate hits 80%.
Next week, Tuesday, October 5 is a data-heavy day for Australia with trade balance (August), NAB Business Confidence (September), and the RBA interest rate decision due to be released.
On Friday, the RBA will issue its Financial Stability Review.
Also on Friday, data will release on the US non-farm payrolls for September.
Forex Outlook
AUD/USD plumbed a mid-week low of 0.7172 but then quickly U-turned and plotted a series of higher-highs and higher-lows for the rest of the week, closing at 0.72664.
The AUD/USD pair rebounded after U.S. bond yields cooled off a bit and the USD was under a cloud due to the debt ceiling and potential credit default.
The Aussie was also bolstered by COVID relaxations, rapid progress on vaccinations, easing of travel norms on international travel, and the prospect of China, now facing an energy crunch, resuming imports of coal and LNG.
Tightening energy prices bolstered the AUD because Australia is a major exporter of energy and the surge in prices has helped offset weakness in iron ore prices.
Prices for Australia’s Newcastle coal, an Asian benchmark, have surged near to a record.
These factors, and the RBA’s expectations of a strong recovery in the Australian economy after easing lockdown restrictions, are keeping the AUD well-bid.
Meanwhile, the AUD/NZD pair kept up a bullish charge for the first four days of the week, touching a high of 1.04860, but stalled in that range thereafter.
It closed the week at 1.04644, well above the previous week’s close of 1.03454.
On October 6, the RBNZ will issue its interest rate decision, and there is a consensus that it will go for a 0.25% hike, so the upside in NZD may already have been priced in.
AUD/CNY maintained its negative momentum for the first four days of the week but staged a sharp rally on Friday off its low of 4.6367 to close at 4.6815 – only a shade below its previous weekly close of 4.6894.
