The Australian market continued to show weakness on the back of the Evergrande crisis and the plunge in iron ore prices from their highs of more than US$200 earlier this year.
However, parts of Victoria have lifted lockdowns and there are signs of the easing of virus concerns in major regions like Sydney or Melbourne.
These gave investors cause for positivity.
After being down as much as over 2%, the ASX indexes (200,300, and Ordinaries) closed the week lower 0.37%, 0.4%, and 0.42%, respectively.
However, after 11 months of gains, the ASX 200 may close September in the red, given the index is down 2.55% for the month and four trade sessions are left.
Table of Contents
ASX Stocks Last Week
Miners enjoyed strong momentum this week as iron futures ticked higher in a relief rally, and the pandemic situation in Australia showed noticeable signs of improvement.
Mining majors Rio Tinto (ASX:RIO), Fortescue Metals (ASX:FMG), and South32 (ASX:S32) closed the week up 3.21%, 8.03%, and 2.11%, respectively.
Energy stocks were blessed with the same sentiment as oil prices inched up and the threat from COVID appeared to wane.
Energy companies Santos Limited (ASX:STO), Oil Search (ASX:OSH), AGL Energy (ASX:AGL), Beach Energy (ASX:BPT), AusNet Services (ASX:AST), and Woodside Petroleum (ASX:WPL) ended the week up 6.27%, 5.77%, 8.94%, 11.79%, 7.19% ,and 6.23%, respectively.
The bullish sentiment on energy had a spillover impact on the coal sector and Whitehaven Coal (ASX:WHC), New Hope Coal (ASX:NHC), Coronado Global Resources (ASX:CRN), and Yan Coal (ASX:YAL) closed the week 12.5%, 7.69%, 5.68%, and 4.53% higher, respectively.
The alleviation of pandemic fears drove bullish sentiment in the travel and hospitality sector.
Qantas (ASX:QAN), Webjet (ASX:WEB), Flight Center (ASX:FLT), Sydney Airport (ASX:SYD), Star Entertainment Group (ASX:SGR), Corporate Travel Management (ASX:CTD), and Red Cape Hotel Group (ASX:RDC) ended the week up by 1.99%, 4.24%, 7.09%, 0.36%, 1.87%, 11.48%, and 0.45%, respectively.
Property majors Mirvac Group (ASX:MGR), Scentre Group (ASX:SCG), Vicinity Centres (ASX:VCX), Dexus Group (ASX:DXS), Stockland Group (ASX: SGP), and Goodman Group (ASX:GMG) closed the week lower 0.32%, 2.68%, 2.33%, 0.74%, 2.74%, and 1.72%, respectively.
The IMF warned Friday on runaway Australian housing prices and their significant risk to economic stability in the event of a correction.
Property trust Charter Hall (ASX:CHC) is leading a group buying all the securities in ALE Property Group (ASX:LEP).
Westpac (ASX:WBC), Australia’s second-largest lender, confirmed it will no longer sell its Pacific businesses to Kina Securities (ASX:KSL).
Papua New Guinea’s competition watchdog recently blocked the A$420 million sale of Westpac Fiji and Westpac PNG.
Buy now, pay later provider Zip (ASX:Z1P) is paying $US50 million for a minor stake in Indian BNPL player and fintech ZestMoney.
ZestMoney is one of the largest and fastest-growing BNPL platforms in India with 11 million registered users, over 10,000 online merchants on the platform, and a point of presence in over 75,000 physical stores.
Sydney Transport Partners, a consortium that includes the Transurban Group (ASX:TCL), and global institutional investors, has acquired the remaining 49% of the Sydney toll road, WestConnex, for A$11.1 billion.
Transurban is raising A$4.22 billion in new equity to fund the acquisition comprising A$3.97 billion in a fully underwritten rights issue and a strategic placement of A$250 million to AustralianSuper.
APA Group (ASX:APA) has offered to buy all shares of Victorian electricity operator AusNet (ASX:AST) for $2.60 each.
The transaction would create the nation’s largest energy distributor worth $35 billion.
Next week in ASX Stocks
Earnings Reports
Boss Energy (ASX:BOE), a uranium explorer and producer, is set to report full-year earnings on Wednesday.
Enjoying a breakneck rally in recent weeks in the wake of skyrocketing uranium prices, the company has announced plans to restart its mothballed South Australia mine after nearly nine years.
Neo Metals (ASX:NMT), a producer of EV metals and titanium is due to report full-year earnings on Wednesday.
Aside from producing metals, the company is also a major lithium-ion battery recycler, a rapidly growing space.
Bowen Coking Coal (ASX:BCB), a producer of coking coal, which is used as a reduction agent in steel and cement production, is due to report earnings on Tuesday.
While the Evergrande crisis has dampened sentiment on cement and steel, a rapidly improving pandemic situation along the globe is a tailwind for the company.
Toys R Us (ASX:TOY) is a toy retailer and producer that is due to report full-year FY21 earnings on Thursday.
The company is the ANZ subsidiary of the US-based parent company.
Toys R Us has forecasted full-year revenue of A$18.6 million (down 32% YoY).
New ASX Listings
Network technology company Activeport is due to list on the ASX this Thursday. The company aims to raise A$15 million from shares priced at A$0.2.
Koonenberry Gold is an explorer and developer of gold assets in Australia. It will list on the ASX on Tuesday and aims to raise A$10 million from shares priced at A$0.20.
Li-S Energy Ltd. is a developer and producer of lithium-sulfur batteries. The company has developed a proprietary Boron nitride nanotube electrode that is in the process of being commercialized. Li-S Energy is targeting A$34 million from shares priced at A$0.85.
Mitre Mining Corporation (ASX:MMC) is a developer and explorer of lithium and rare earth metal assets in NSW. The company is looking to raise A$5 million from shares priced at $0.20.
Touch Ventures (ASX:TVL) is an investment holding company promoted by BNPL major AfterPay. The company aims to raise A$100 million from shares priced at A$0.40 to invest in early-stage fintech startups.
Economic News And Market Outlook
A noteworthy development last week was the IMF’s comments on Australia’s booming real-estate sector.
The IMF expects 20% further growth in real-estate prices over the rest of the year and warned that could lead to affordability or credit issues.
The Fund also stated that it expects economic growth of 3.5% for FY21 and 4.1% for FY22.
The RBA expressed concerns about the boom in housing loans and stated that regulators are keeping a close watch.
Further, the central bank warned that rising household debt could pose a threat to the economy.
The news of major parts of Victoria exiting lockdowns and returning to normalcy led to optimism and lifted the market, cutting losses of as much as 2.3% for the week on the ASX200 to 0.3%.
Next week’s big events include Australia’s retail sales figures for August, which are due on Monday.
The data is important because it will shed light on the economic damage caused by the pandemic and the resulting lockdowns.
Australia is also due to report building approvals, housing credit levels, private house approvals, and private sector credit levels on Wednesday.
The upcoming week is crucial to global economic sentiment as heads of the ECB, the US Fed, and the Bank of England are due to address the media on recent developments and their respective situations.
ECB President Lagarde will address the media on Monday and Wednesday while Fed Chair Jerome Powell and BoE governor Bailey are scheduled to speak on Wednesday.
The US is due to report crude oil inventories on Wednesday followed by Q2 GDP figures and Initial Jobless Claims on Thursday.
The UK is scheduled to report Q2 GDP figures on Thursday while Canada’s August GDP is due on Friday.
Forex Outlook
Increasingly, from last Wednesday’s meeting, it appears that the Fed could proceed on a taper move as soon as in its next meeting, and new jobs data, even if bullish, is unlikely to affect its hawkish bias.
Higher interest rates could also unveil earlier than expected.
Analysts at ANX Bank said that the Fed is convinced of a “robust economic recovery” that will justify a “gradual normalization in policy rates.”
Post-FOMC, given dollar strength, and also weighed under by Evergrande’s failure to pay bond interest, AUD/USD lost ground from a weekly high of 0.73162 to a low of 0.72368.
It closed the week at 0.72563, marginally lower than the previous week’s close of 0.72625.
Considering Australia’s nexus with the Chinese economy, any unpleasant upheavals in the Evergrande scenario could trigger a resumption of the slide in the AUD/USD.
AUD/NZD spent last week vacillating between a rectangle with an upper boundary in the range of 1.0354 to 1.0359, and a lower line at 1.0300.
An improving situation on delta appears to have delivered some tailwinds to the Aussie while the Fed’s confidence in a robust US economic recovery is also lifting some gloom around the commodity currency.
As a result, in the latter part of last week, the AUD/NZD lifted off from lows of 1.03000 to scale 1.03564.
The pair closed the week at 1.03454, a shade higher than the previous week’s close of 1.03132.
AUD/CNY closed the week at 4.6894, a whisker below the previous week.
Last week, on Wednesday, the People’s Bank of China injected 60 billion yuan via a 7-day reverse repo, boosting a risk-on environment, and benefiting the Aussie.
However, a large part of those gains was given up in the last trading session of the week, likely on Evergrande concerns.
Since mid-September, the pair has been bound between the lower support line of 4.6694 and an upper resistance line of 4.7227.
Any event that pushes AUD/CNY below the lower level could trigger fresh weakness in the direction of the earlier (down) trend prevailing from March 21.
