The Australian markets had a roller-coaster week, reacting to a mix of good and bad news. However, the ASX200, ASX300, and the Ordinaries all ended the week down 0.2%.
The centrepiece news was the massive tumble in iron ore prices owing to actions from China.
On the other hand, markets were comforted by the RBA’s stance not to raise interest rates even to cool rampant house prices, as well as respectable vaccination progress.
Table of Contents
ASX Stocks Last Week
The biggest losers this week were from the mining sector. Mining is by far Australia’s most important industry and its biggest export.
Iron ore prices tumbled as much as 20% over the week and about 50% from this year’s peak due to China’s steel production cuts and weak real-estate market.
Given that China is one of Australia’s largest mining markets and its steel industry is one of the country’s biggest coal customers, coal miners took a beating after a great run over the past few weeks.
On the other hand, oil companies had a stellar week due to a multitude of factors.
For starters, the worsening hurricane Ida in the USA is expected to cause short-term supply issues due to disrupted production in North America.
Further, a fire on Mexico’s oil platform is expected to exacerbate the supply problem.
Another big winner this week was the lithium segment. Lithium and exotic metals miners were boosted due to the ever-improving prospects of electrification of mobility and rising lithium prices.
Miners Orocobre (ASX:ORE), Pilbara Minerals (ASX:PLS), Lithium Australia (ASX:LIT), Liontown Resources (ASX:LTR), Core Lithium (ASX:CXO), and Sayona Mining/Diamonex (ASX:SYA) closed the week higher 3.09%, 11.17%, 12.5%, 30.38%, 33.82%, and 22.58%, respectively.
Bullish lithium prices and brightening electrification prospects had a splash-on effect on rare-earth miners as these metals have extensive uses including in turbines, electric motors, solar panels, and wiring.
Australia’s commitment to a low-interest policy till 2024 is working to the advantage of rapidly-growing BNPL major AfterPay, which enjoyed a stellar week closing higher by 3.53%.
The real estate sector was also a bright spot, being another beneficiary from dovish interest rates.
Scentre Group (ASX:SCG), Goodman Group (ASX:GMG), Stockland (ASX:SGP), Mirvac Group (ASX:MGR), Vicinity Centres (ASX:VCX), and Dexus (ASX:DXS) ended the week up 6.41%, 2.46%, 5.8%, 6.1%, 2.37%, and 3.32%, respectively.
The move is motivated by Wesfarmers’ desire to strengthen its retail segment and expand into the pharmacy segment.
The deal is still subject to closure but it looks like Wesfarmers has it in the bag as API’s biggest shareholder, Washington Soul Pattison, has agreed to vote in its favour.
Australian Pharmaceuticals Industries closed the week 10.15% in the green while Wesfarmers ended 1.18% higher.
Pan-Australia retailer Myers reported a return to profitability with a A$46 million bottom line for the financial year following a A$172 million loss in the PCP.
The recovery was mainly on account of online sales, which grew 27% YoY and drove up overall sales by 5%.
However, in light of the pandemic, the company will not be paying a dividend this year.
Myers has been in the news over the past few years as institutional investors questioned management over its consistent poor performance.
The return to profitability sent its stock soaring 11.65% for the week.
Sydney Airport (ASX:SYD) acquisition talks suddenly moved forward last week.
A revised offer from SAA (Sydney Aviation Alliance) was sweet enough for SYD to allow due diligence.
While the deal is still far from finalized, it could prove to be a shrewd one for the acquirer given that progress in vaccination is increasing the chances for Australian borders to reopen.
Sydney Airport shares bounced up 4.62% on Monday following the news but gave up most of those gains to close 1.19% down for the week.
Next Week in ASX Stocks
Annual Earnings Reports
Australia-New Zealand apparel and sports equipment retailer, Kathmandu Holdings (ASX:KMD) is scheduled to report earnings on Tuesday.
While lockdowns have hit the business hard, the company managed to report a net profit of nearly NZ$11 million in the first half of the year.
The impact of the delta variant on business is yet to be seen.
Premier Investment Holdings (ASX:PMV), the investment company that owns retail brands such as Portmans, Jay Jays, Myers, etc. is due to report earnings on Thursday.
Investor sentiment is bullish as the stock popped 2.73% over the week following Myers’ return to profitability.
Premier Holding’s 2H’21 put FY21 EBIT guidance at between A$340 million and A$360 million, up to 82%-92% YoY and 103%-115% on pre-pandemic levels.
Holding company Washington H. Soul Pattison (ASX:SOL), which has significant investments in core sector companies like TPG Telecom, New Hope Coal, Brickworks, etc. is due to report earnings on Thursday.
The company expects NPAT for FY21 to be between A$316 million – A$336 million, up between 85.8% – 97% YoY. WHSP closed the week down 8.25%.
Construction materials manufacturer Brickworks (ASX:BKW) is scheduled to report FY21 earnings on Thursday.
The company has given EBIT guidance of A$240 million – A$260 million, up between 86% – 101% YoY.
New ASX Listings
Alvo Minerals (ASX:ALV) is a developer of a copper-zinc project in Brazil. The company plans to raise A$10 million from shares priced at A$0.25/share.
Alvo makes its market debut on Friday. Forrestania Resources (ASX:FRS) is an exploration company that aims to find/develop gold, nickel, and lithium assets in Western Australia.
The company makes its market debut on Thursday and pans to raise A$5 million from shares priced at A$0.2.
Pearl Gull Iron (ASX:PLG) is an iron ore asset development and exploration company based in Western Australia.
The company plans to raise A$4 million from shares priced at A$0.2 and will debut on the exchange on Monday.
Revolver Resources (ASX:RRR) is a mining company that owns two copper assets in Northern Queensland. Revolver plans to raise A$15 million from shares priced at A$0.2.
The company aims to be a key supply-chain player in the electrification of mobility. Revolver debuts on Thursday.
Economic News And Market Outlook
The Australian jobs report last week showed that jobs tumbled by a massive 146,300 in August.
Though the unemployment rate fell to a fresh 13-year low of 4.5 percent the data was accompanied by lower participation rates, which is not a healthy sign.
However, over the past week, Australian investors were cheered that the RBA remained committed to its policy guidance that interest rates won’t be raised until 2024 at the earliest.
Things looked good in the US too as August retail sales numbers were positive.
However, higher unemployment benefit claims dimmed some of that glow.
In New Zealand, the country’s GDP numbers grew by a solid 2.8% QoQ, significantly outperforming the consensus of 1.1%.
The positive GDP figures have greatly furthered the prospect of a 50-basis point rate hike and consensus puts the probability of that happening at 44%, as shown by swap data.
Last week, data out from China showed that the economy was affected negatively in August due to virus controls and curbs on the property markets.
Muted retail sales growth, a slowdown in construction investment, and industrial production all disappointed against consensus estimates.
The numbers cast a pall over the prospects of a global recovery from the pandemic.
Next week’s main Australian economic events include the latest RBA Meeting’s Minutes on Monday, the Westpac-Melbourne Institute Leading Indicators Index along with the RBA Assistant Governor’s address on Tuesday and Purchasing Manager’s Index of Services and Manufacturing on Wednesday.
In New Zealand, Credit Spending figures are due on Monday followed by Trade Balance figures including Imports and Exports for August on Thursday.
In the US, the country’s crude inventories, Fed Interest rate Decisions, and interest-rate projections are due on Wednesday.
On Thursday, the country’s jobless claims are scheduled to publish along with Fed Chair Jerome Powell’s address and the Manufacturing PMI (Purchasing Manager’s Index).
The AUD lost ground last week against all three currencies of USD, NZD, and CNY, closing at 0.72625, 1.03132, and 4.6968, respectively.
Australia’s deteriorating optics on its economic performance, continued delta concerns and a dovish RBA all contributed.
Meanwhile, the USD has maintained an upward bias since June, as evidenced by the US Dollar Index, which is currently stationed at 93.246, up from its June low of 89.659.
Rising 10-year treasury yields are underpinning strength in the greenback.
New Zealand posted solid GDP numbers last week, triggering fresh chatter about a rate hike and resulting strength in the NZD.
China’s data last week was nothing to write home about but did not help the AUDCNY.
All things said, the bearish outlook for the AUD is likely to continue next week.