The three ASX indices (200, 300, and Ordinaries) closed last week higher by 1.23%, 1.28%, and 1.36% respectively.
Trading for the week was impacted by global cues such as a soft jobs report, hawkish minutes of the FOMC meeting, and rising inflation in the US, all of which were steamrollered by solid earnings reports emanating from Wall Street.
Reopening agendas in Australia also helped reverse the sentiment. not to mention burgeoning energy prices that are likely to offset Australia’s iron ore travails.
The ASX made a U-turn from Thursday onwards, and the gains on the last two days of the week were enough to push it into a net green weekly close.
Table of Contents
Last Week in ASX Stocks
Technology stocks wheeled around in the latter part of the week.
Afterpay (ASX: APT) participated in the turnaround with a vengeance, clocking a net weekly gain of 2.47% after bearish blues during the first two days.
However, Computershare (ASX: CPU) sat out, losing 1.26%.
Strike Energy (ASX: STX) announced that it has delivered its maiden Perth Basin Gas Reserve only 24 months after its first exploration operations in the Basin.
About 300 PJ 2P and up to 372 PJ 3P gross gas Reserves have been certified at the West Erregulla gas field in the Kingia Sandstone alone.
Westpac (ASX: WBC) was down 1.55% for the week after it warned of a A$965 million writedown of its overseas corporate banking arm that would impact its second-half profitability.
Bank of Queensland (BOQ) also lost nearly 4% despite announcing that full-year cash earnings rose 83% amidst a robust housing market.
Telstra was flat at (-) 0.52% though it announced that it was on track to deliver its $2.7 billion productivity target by the end of the financial year, $7.5-$8b in underlying EBITDA by the financial year 2023, and a mid-single-digit annual growth rate from FY21-FY25.
A Reuters report said last week that Telstra was close to completing a deal to buy the Pacific operations of telecommunications firm Digicel Group in partnership with the Australian government.
Digicel is the largest mobile phone carrier in the Pacific with operations in Papua New Guinea, Fiji, Samoa, Vanuatu, and Tahiti.
Other telecoms were flat too, though SEEK Limited (ASX:SEK) was a standout, gaining 3.34%.
Miners trod a bullish path last week after prices of metals rose sharply.
Copper prices closed in on a 10-year high on Friday, zinc rose as much as 10% to hit a nearly 15-year high, and aluminium traded at levels nearing those prevailing at the time of the 2008 financial crisis.
BHP Ltd (ASX: BHP) was +2.94%, Fortescue (ASX: FMG) +1.39%, and Newcrest Mining (ASX: NCM) +4.93%. South32 (ASX: S32) was up 7.91%, after it announced the acquisition of a 45% stake in a Chilean copper project for US$1.55 billion.
However, Rio Tinto (ASX: RIO) was marginally in the red, -0.40% after it lowered its outlook for iron ore exports and announced delays to new mines in Western Australia’s Pilbara region.
In healthcare, CSL Limited (ASX: CSL) gained 3.32% on the week after reporting that it was being able to collect more plasma for its therapies following higher payments and vaccinated donors. Ramsay Health Care (ASX: RHC) was up 0.93%
Australia has started to ease virus restrictions.
Australian flag carrier Qantas (ASX: QAN) was up 1.79% based on improving prospects for international travel to Australia.
Star Entertainment (ASX: SGR) shares were under pressure from media reports that alleged the company had lax anti-money laundering controls.
However, the company in its defence described the reports as misleading.
The stock closed the week down 19.43% from its October 6, (and year-to-date) high of A$4.58.
Milk and infant formula also was bullish. Bubs Australia (ASX: BUB) rose sharply by 31.94% after it reported that first-quarter sales had nearly doubled.
Particularly interesting was the revelation that sales across the Chinese daigou, CBEC, and general trade channels increased 156% over the prior corresponding period.
That triggered a sympathetic spike in A2 Milk Company (ASX: A2M) which continued its rally after hammering out a bottom in September.
A2M shares were up 12%.
This week in Stocks
Upcoming Listings between 18-22 Oct
On Monday, October 18, NickelSearch Limited (ASX: NIS) will debut on the ASX its fully paid shares of A$0.20 each from its IPO of A$10 million.
The company is pursuing nickel and precious metal discoveries in the highly prospective Ravensthorpe Greenstone belt in Western Australia.
It has exposure to an emerging green energy materials supplier, leveraged to the global EV and low carbon economy transition.
On Wednesday, October 20, Activeport Group Ltd (ASX: ATV) will list ordinary fully paid shares at A$0.20 each from its IPO of A$15 million.
The company is an Australian company that provides a software-defined networking tool and SD-WAN, to help companies run their technology their way and facilitate global connectivity.
Using ActivePort’s SD-WAN, customers can connect, configure and activate end-to-end global connections in minutes.
On Wednesday, October 20, Dragonfly Biosciences Limited (ASX: DRF) will debut on the ASX with a listing of ordinary fully paid shares at A$0.20 each issued to raise A$11 million.
The company is the proprietor of the “Dragonfly CBD” brand, the leading cannabidiol brand in the United Kingdom, supplying premium CBD products to national retail chains and international markets.
On Wednesday, October 20, Ram Essential Services Property Fund (ASX: REP) will list fully paid units stapled securities of A$1.00 each aggregating A$356.9 million.
REP is an Australian Real Estate Investment Trust (REIT) and invests in Australian medical and essential retail real estate assets, leased to essential services tenants.
Investors get exposure to a high-quality, defensive portfolio of assets with favorable sector trends.
On Thursday, October 21, iTech Minerals Ltd (ASX: ITM) will list ordinary fully paid shares at A$0.20 each.
The company is focused on its South Australian halloysite-kaolinite projects and developing the advanced Campoona Graphite Deposit on the Eyre Peninsula to feed the growing battery materials market.
The company informs that due to “overwhelming demand,” it had to close its IPO early.
Economic News And Market Outlook
Coronavirus restrictions eased in New South Wales from Monday, October 11.
Sydney’s cafes, gyms, and restaurants welcomed back fully vaccinated customers after nearly four months of lockdown, as Australia gradually started reopening amid vaccination progress.
This augurs well for the Australian economy, as NSW is its most populous state.
The National Australia Bank business survey for September showed confidence rose 19 points to an index of +13 points, well above its long-run average, on NSW reopening.
Later in October, Victoria and Canberra may also ease pandemic strictures.
“Businesses are really looking forward to reopening, and confidence increased markedly on the back of NSW and Victoria’s reopening roadmaps,” said NAB chief economist Alan Oster.
However, the NAB’s index of business conditions declined 9 points to +5, taking it to a level marginally below its long-term average.
Meanwhile, the IMF last week trimmed its outlook for global economic growth to 5.9% from 6% citing continued pressure from the pandemic pending completion of vaccination.
FOMC minutes for the September meeting showed the US Fed could begin tapering as early as mid-November.
The minutes also revealed members debated raising interest rates given the impact of rising inflation.
Headline US consumer prices rose 5.4% year on year in September, marking the fifth consecutive month of annual increases of 5% or more.
Investors shrugged off this data, and on Thursday drove stocks to their best day since March, enthused by upbeat corporate earnings data.
In Australia, rising energy prices are starting to bite. Petrol prices surged to record highs last week.
“In Sydney alone, prices have soared by more than 10 cents a litre in just three days,” said The Global Herald last Wednesday. “It’s been a big shock for drivers.”
International oil prices surged above $80, and there could be further upside from renewed travel across the globe and the ensuing winter season in the US and Europe.
“The oil price is a huge deal because it adds to everyone’s cost,” said Deep Data Analytics chief executive Mathan Somasundaram.
“We’re now seeing inflation-beating expectation,” he said. “When things go really wrong is when energy prices join the reflation cycle.”
Australian data on Thursday showed that 138,000 jobs were lost in September amid lockdowns.
The jobless rate rose from a 12½-year low of 4.5% in August to 4.6% in September.
The participation rate fell from 65.2% to a 15-month low of 64.5%.
However, it may be the end of the tunnel.
“Even though it does look like a big fall in employment in September I think jobs growth will bounce back once Victoria and New South Wales fully reopen,” said Diana Mousina, senior economist at AMP Capital Investors Ltd.
On Friday, Australian authorities said overseas travellers could re-enter NSW, quarantine-free, from November given its high inoculation rate of nearly 80%.
However, incoming travellers would be prioritized – Australians and family members, migrants with work and study visas, and the “challenge” of tourists – in that order.
Beijing finally broke its silence on Evergrande.
China’s central bank said on Friday that financial risks from China Evergrande Group’s debt problems are “controllable” and unlikely to spill over, amid growing investor concerns that the crisis could ripple through other developers.
However, the debt-laden Chinese developer was rocked on its heels after it failed to sell its single largest asset to state-backed Yuexiu Property – a huge blow to the firm’s efforts to raise the funds it needs to survive.
Guangzhou government-backed Yuexiu Property on Friday dropped a proposed US$1.7 billion offer to buy Evergrande’s 26-story office tower in Wan Chai.
Fears now circle around a massive slowdown in China’s real estate market even as other developers start reporting cash flow issues.
In the calendar for economic events next week, New Zealand will report its Consumer Price Index for QoQ change for Q3 on Monday, October 18.
RBA Meeting Minutes will release on Tuesday, October 19.
Data for September on US building permits and housing starts will be available on the same day.
US data on crude oil inventories will report on Wednesday, October 20.
On Thursday, October 21, the US will release data on the Philadelphia Fed Mfg Index for October, existing-home sales for September, and initial jobless claims.
AUD/USD closed the week at 0.74159 compared to its previous weekly close of 0.73050.
The outlook for the Aussie appears to be improving with lockdown restrictions winding down in Australia, and a resulting uptick in economic activity foreseen.
As a result, the pair had winning ways on every day of last week.
AUD/USD is likely to keep up its bullish ways given that the Chinese government has clarified that the fallout of the Evergrande is likely to be controllable and limited.
Furthermore, global prices of base metals and energy are at multi-year highs, helpful for a resource-driven economy such as Australia.
The Aussie has shrugged off a negative jobs report, maybe because the lockdown-driven figures lack impact as looking forward, the country is relaxing restrictions.
The AUD/NZD pair started to lose ground from Tuesday last, closing the week at 1.04763, well below last week’s close of 1.05447.
The reasons appear to be technical as the pair has receded from a key resistance zone located between 1.05500 and 1.06000, and maybe resuming the downtrend that began in March.
It may also have to do with New Zealand’s change in COVID policy that adopts reopening simultaneously with a rigorous vaccination drive.
AUD/CNY kept up a pattern of higher highs and higher lows during last week, eventually closing at 4.7727, breezing above last week’s close of 4.7087.
The Evergrande crisis appeared to remain in check though last week, culminating with a comforting comment from the Chinese Central Bank as mentioned previously.
This led to some “risk-on” tailwinds for the Aussie.
Technically, it appears more and more that the AUD/CNY pair has put in a double-bottom at the 4.6375 level.
However, the proof of a long-term bullish pudding will lie in a penetration of the 4.8100 level (daily chart).