The Australian markets rose last week in line with the US market but the period was marked by heavy turbulence.
Market participants found themselves in the intricate game of second-guessing inflation and rate hikes, reacting to new information with bouts of volatility.
Nevertheless, with the previous week’s bumper Fed hike in the rear view mirror, encouraged investors pushed the ASX200, ASX300, and Ordinaries higher by 1.6%, 1.58%, and 1.49%, respectively for the week.
Table of Contents
Last Week In ASX Stocks
ASX Materials Index (ASX: XMJ)
Amidst a rising market, the ASX Materials Index (ASX: XMJ) was a heavy underperformer, losing 4.88% as rate hikes sparked fears of a global slowdown.
Mining heavyweights BHP (ASX:BHP), Rio Tinto (ASX:RIO), South32 (ASX:S32), Fortescue Metals (ASX:FMG), and Mineral Resources (ASX:MIN) all ended in the red at 4.7%, 2.79%, 1.73%, 4.49%, and 5.58%, respectively.
However, new energy miners Pilbara Minerals (ASX:PLS), Vulcan Energy Resources (ASX:VUL), Allkem (ASX:AKE), Lynas Rare Earths (ASX:LYC), and Iluka Resources (ASX:ILU) bucked that trend and closed in the green at 8.33%, 15.66%, 0.15%, 3.81%, and 0.62%.
Gold producers Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST), and Evolution Mining (ASX:EVN) had a reversal of fortunes from last week and gave up 3.62%, 5.01%, and 3.22%.
ASX Energy Index (ASX:XEJ)
The ASX Energy Index (ASX:XEJ) also underwhelmed compared to the broad market and ended 4.5% in the red after slowdown fears induced weakness in energy commodities.
Sector majors Woodside Energy (ASX:WDS), Santos (ASX:STO), and Beach Energy (ASX:BPT) ended down by 0.62%, 3.93%, and 1.25%, respectively.
Coal producers New Hope Coal (ASX:NHC), Whitehaven Coal (ASX:WHC), Coronado Global (ASX:CRN), and Stanmore Resources (ASX:SMR) closed 8.99%, 7.42%, 3.49%, and 4.21% in the red; however, Yan Coal (ASX:YAL) closed 3.2% higher.
ASX Financials Index (ASX:XFJ)
The ASX Financials Index (ASX:XFJ) turned around sharply after its poor performance in the last few sessions, chalking up gains of 3.69%.
It appears the sector entered a relief rally. Big banks Commonwealth Bank (ASX:CBA), National Australia Bank (ASX:NAB), Australia New Zealand
Banking Corp (ASX:ANZ), Macquarie Group (ASX:MQG), and Westpac (ASX:WBC) closed up by 1.67%, 3.84%, 2.53%, 2.14%, and 0.67%, respectively.
Wealth management firms Magellan Financial (ASX:MFG), AMP Ltd. (ASX:AMP), and Platinum Asset Managers (ASX:PTM) gained 9.5%, flat, and 2.3% up respectively.
Insurance firms IAG (ASX:IAG), QBE (ASX:QBE), and Suncorp (ASX:SUN) also closed higher by 3.81%, 6.43%, and 1.49%.
ASX Industrials Sector (ASX:XNJ)
The ASX Industrials Sector (ASX:XNJ) outperformed the market moving up 2.71% for the week.
Industrial materials makers Boral (ASX:BLD), ADBRI (ASX:ABC), and Brickworks (ASX:BKW) ended the week higher by 3.76%, 3.43%, and 6.92%.
Industrial product makers Amcor (ASX:AMC), Brambles (ASX:BXB), and Reece (ASX:REH) closed up by 3.54%, 5%, and 3.79%, respectively.
Infra players Transurban Group (ASX:TCL) and Qube Holdings (ASX:QUB) gained 2.84% and fell 1.6%. In big news from the sector, Qantas announced a 15% cut in routes to grapple with rising fuel and labor costs.
Qantas (ASX:QAN) and Air New Zealand (ASX:AIZ) closed 0.22% and 1.94% in the red.
ASX Consumer Discretionary Index (ASX:XDJ)
The ASX Consumer Discretionary Index (ASX:XDJ) turned a new page after last week’s bloodbath, closing higher by 3.54%.
Travel stock Webjet (ASX:WEB) ended up 1.15% while peers Corporate Travel Management (ASX:CTD) and Flight Center (ASX:FLT) lost 1.14% and 0.96%.
Entertainment and hospitality stocks Star Entertainment (ASX:SGR) and SkyCity Entertainment (ASX:SKC) ended 4.28% and 3.43% in the green.
Retail stocks Kogan (ASX:KGN), Temple and Webster (ASX:TPW), JB Hi-Fi (ASX:JBH), and Harvey Norman (ASX:HVN) ended 7.17%, 16.98%, 3.42%, and 1.07% in the green.
Without news, Kogan and Temple and Webster likely entered an upside correction after their recent losses.
ASX Consumer Staples Sector (ASX:XSJ)
The ASX Consumer Staples Sector (ASX:XSJ) continued to be a favorite of investors given its safe-haven stability, ending up by 5.28%.
Sector majors Wesfarmers (ASX: WES), Woolworths (ASX:WOW), and Coles Group (ASX:COL) ended 4.65%, 7.31%, and 5.89% in the green.
Staple producers GrainCorp (ASX:GNC), Elders (ASX:ELD), Costa Group Holdings (ASX:CGC), and Bega Cheese (ASX:BGA) closed down 2.68%, 3.41%, 2.67%, and 9.22% while Tassal Group (ASX:TGR) ticked up 7.26%.
Melbourne-based investment banker David Williams, who founded Tassal years ago, has picked up a nearly 5% stake in the company.
Processed food makers A2m Milk (ASX:A2m) and Bubs (ASX:BUB) closed up 5.2% and down 0.75%, respectively.
A2m has been bid up on reports that the Abbott Laboratories infant formula manufacturing plant in Michigan has shut down due to flooding.
Maybe the US Government will tap A2m for supplies?
ASX Real Estate Index (ASX:XPJ)
The ASX Real Estate Index (ASX:XPJ) shrugged off rate hike woes and came back with a vengeance, closing higher by 7.33%.
Major players from the sector that cover sub-sectors like retail, commercial, and industrials all ended up as Goodman Group (ASX:GMG), Mirvac Group (ASX:MGR), Scentre Group (ASX:SCG), and Dexus (ASX:DXS) closed 8.23%, 3.23%, 6.35%, and 3.14% in the green.
Analysts at Citi have Goodman on a Buy Rating and a price target of $29.50, an upside of about 57% from current levels.
ASX All Technology Sector (ASX:XTX)
The ASX All Technology Sector (ASX:XTX) which went from market favorite to the market’s whipping boy made a comeback of sorts too, closing up 8.23% by Friday.
Platform companies REA Group (ASX:REA) and Carsales.com (ASX:CAR) ended higher by 18.24% and 7.38% while SaaS companies Xero (ASX:XRO), Nuix (ASX:NXL), and Appen (ASX:APX) ended up 11.43%, 1.27%, and 17.2%.
Datacenter and semiconductor players NextDC (ASX:NXT) and Altium (ASX:ALU) closed up 10.19% and 9.89%.
Lastly, BNPL players Block (ASX:SQ2) and Zip Co. (ASX:Z1P), who is facing a secular headwind from rising rates, ended up 17.79% and 0.94%.
Over the week, Zip Co. management stated in a press release that their business remains fundamentally strong and that their Sezzle acquisition will be put to vote later in the year.
ASX Healthcare Index (ASX:XHJ)
The ASX Healthcare Index (ASX:XHJ) also outperformed with a 4.11% gain. Health services providers Ramsay Healthcare (ASX:RHC), Healius (ASX:HLS), and Fisher Paykel (ASX:FPH) closed up 0.97%, 1.51%, and 3.77%.
Healthcare equipment makers Cochlear (ASX:COH), Sonic Healthcare (ASX:SHL), Resmed (ASX:RMD), and CSL Ltd. (ASX:CSL) ended higher by 1.97%, 1.25%, 6.25%, and 4.55%.
Biotech firm Immugene (ASX:IMU) shot up 17.86% while peers Polynovo (ASX:PNV) and Mesoblast (ASX:MSB) tanked 12.32% and 3.47%, respectively.
ASX Telecom Sector (ASX:XTJ)
The ASX Telecom Sector (ASX:XTJ) closed higher by 3.94%.
Big players such as Telstra (ASX:TLS) and TPG Telecom (ASX:TPG) closed 1.57% and 6.41% in the green while smaller contemporaries Chorus (ASX:CNU) and Uniti Group (ASX:UWL) ended 7% up and flat, respectively.
Telecom infrastructure provider Spark Infrastructure (ASX:SPK) closed up 4.26%.
ASX Utilities Sector (ASX:XUJ)
The ASX Utilities Sector (ASX:XUJ) underperformed opposite the broad market and was down 0.20% for the week due to power issues.
Sector players AGL Energy (ASX:AGL) and Origin Energy (ASX:ORG) ended down 1.33% and flat, respectively while APA Group (ASX:APA) shot up 3.60%.
Next Week In ASX Stocks
There are no significant earnings announcements due for next week.
New ASX Listings
Chalkos Metals (ASX:CKM) is an Australian mineral exploration and development firm with copper assets in Queensland.
The company is raising A$8 million from shares priced at A$0.20/share and will debut on Thursday.
| Name | Ticker | Date | Price/Share | Amount Raised | Operations |
|---|---|---|---|---|---|
| Chalkos Metals | ASX: CKM | 30th June Thursday | A$0.20 | A$8 million | Mineral exploration |
| Bindi Metals Limited | AX: BIM | 28th June Tuesday | A$0.20 | A$4.8 million | Mining and Exploration for Copper-Gold |
| Sarytogan Graphite Limited | ASX: SGA | 30th June Wednesday | A$0.20 | A$8.5 million | The Sarytogan Graphite Project is located in the Karaganda region of Central Kazakhstan |
Economic and Market Outlook
Markets opened strong after the previous week’s sell-off but again turned soft mid-week in anticipation of Fed chair Jerome Powell’s testimony before Congress.
The biggest takeaway from that was the underscoring of the Fed’s commitment to rein in inflation at all costs.
In good news, US Initial Jobless Claims dropped by 2,000 claimants to 229,000.
On the other side of the Atlantic, ECB chairperson Christine Lagarde expressed the intention to raise rates twice in the next few months and outlined plans to deal with the rising debt costs of European nations.
The UK reported a 0.6% rise in retail sales for May, however, the number of goods bought slumped by 0.5%, driven mainly by a drop in food sales.
The UK is grappling with slow growth prospects stemming from low manufacturing and services activity despite a strong job market.
However, inflation forced the BoE into another 25 basis point hike.
Further, its exit from the EU has stemmed issues that economists expect will exacerbate inflation and prolong its effects.
In the APAC region, RBA Governor Philip Lowe addressed the media and added some color to the economic outlook from his perspective.
He expects rate hikes throughout the year and into the next as inflation has not yet peaked.
Rates are expected to go as high as 4%. China decided to keep its interest rates unchanged.
We start next week with US data on Core Durable Goods Orders on Monday.
On Tuesday, we receive the MoM Pending Home Sales from the US followed by a press address by ECB President Lagarde.
On Wednesday, US data will release on CB Consumer Goods Confidence for June, Q1 QoQ GDP, and an address from Fed Chair Powell.
On the same day, Australia will report MoM Retail Sales for May, while ECB President Lagarde will hold another press conference.
Thursday will see data on Crude Oil Inventories and Initial Jobless Claims in the US; UK Q1 QoQ plus YoY GDP; and the very important Chinese Manufacturing PMI for June.
Finally, on Friday, we receive British Manufacturing PMI for June and Eurozone YoY CPI for June.
Forex Outlook
AUD/USD
AUD/USD closed at 0.69429, marginally above the previous weekly close of 0.69363.
During the week, it touched a low of 0.68700, amidst a sequence of lower highs and lower lows, indicating a continuing soft undertone.
The prospects for the pair are clouded by the current question marks over global economic growth arising from rising rates, intolerable inflation, supply chain disruptions, and on-off Covid actions by the Chinese government.
On Thursday, copper prices fell to a 16-month low.
The red metal is a proxy for growth and unsurprisingly, the Materials Sector of the ASX plotted a bearish path last week, even though the broad market ended higher.
However, there was some hope from the BRICS summit where Chinese President Xi underlined his commitment to growth.
But the resource-heavy Australian economy (and its currency) must contend with the global collapse in business confidence and a rising drumbeat citing imminent recessionary conditions.
The outlook for AUD/USD remains weak.
AUD/NZD
AUD/NZD ended the week at 1.09945, a shade above the previous week’s close of 1.09816.
During the week, it touched a low of 1.09533, and made a shooting star pattern at the high of 1.10529.
A pattern is continuing of lower highs and lower lows.
The pair is likely to continue a bearish track given the murky outlook on global growth and the implications for a commodity-oriented country such as New Zealand.
Domestically, inflation and rising mortgage installments are eating into people’s wallets, and protests could induce the RBNZ to maybe ease off on the pedal of rate hikes.
Given common commodity concerns, as of now, the central banks of the two countries could plot the fate of AUD/NZD.
The RBNZ, on current reckoning, appears more hawkish compared to the RBA, and this could impinge negatively on AUD/NZD.
