The Australian markets continued their two-week winning streak by closing in the green on Friday.
Staying loyal to the prevailing themes, the market gyrated as inflation, recession fears, rate hikes, and events in China dictated its direction and pace.
Sectorally, Metals and Energy accounted for most of the market’s gains.
The ASX200, ASX300, and ASX Ordinaries closed higher by 0.78%, 0.75%, and 0.8%.
Table of Contents
Last Week ASX In Stocks
ASX Materials Sector (ASX:XMJ)
The ASX Materials Sector (ASX:XMJ) had a solid week gaining 3.83% as China continued to ease off on COVID restrictions.
Major miners BHP (ASX: BHP), Rio Tinto (ASX: RIO), Fortescue Metals (ASX:FMG), and South32 (ASX:S32) ended higher by 5.67%, 1.1%, 8.32%, and 5.6%.
However, investors took new energy miners to the cleaners, and IGO (ASX:IGO), Allkem (ASX:AKE), Lynas Rare Earths (ASX:LYC), Liontown Resources (ASX:LTR), Mineral Resources (ASX:MIN), and Pilbara Minerals (ASX:PLS) slumped by 2.11%, 16.6%, 2.15%, 8.96%, and 20.52% respectively.
The trigger – bearish medium-term consensus issued by major institutions.
Gold miners Northern Star Resources (ASX:NST), Evolution Mining (ASX:EVN), and Gold Road Resources (ASX:GOR) closed up 0.46%, 1.89%, and 3.79% on upbeat gold prices.
ASX Energy Sector (ASX:XEJ)
The ASX Energy Sector (ASX:XEJ) also closed strong gaining 4% for the week.
Sector heavyweights Woodside Energy (ASX:WDS), Santos (ASX:STO), and Beach Energy (ASX:BPT) ended up 5.05%, 0.48%, and 11.29%.
Beach Energy’s outperformance was driven by solid guidance and a trading update highlighting substantial capacity growth over the next two years.
Coal snapped back with Whitehaven Coal (ASX:WHC), New Hope Corporation (ASX: NHC), Yancoal (ASX:YAL), and Coronado Global (ASX:CRN) closed higher by 6.08%, 5.14%, 3.02%, and 0.47%.
Australian coal miners focussed on exports to China clearly had the upper hand.
ASX Industrials Sector (ASX:XNJ)
The ASX Industrials Sector (ASX:XNJ) closed up by a comparatively modest 0.89%, much in line with the broader market.
Declining new home sales and softer property values hurt construction materials makers Boral (ASX:BLD), ADBRI (ASX:ABC), and Brickworks (ASX:BKW) which closed down 5.79%, 4.61%, and 4.25%.
Industrial majors Amcor CDI (ASX:AMC), Reece (ASX: REH), and Brambles (ASX:BXB) also closed in the red by 0.70%, 1.42%, and 1.62%, while Reliance Worldwide (ASX:RWC) ended up 1.91%.
Infrastructure majors Transurban Group (ASX:TCL) and Qube Holdings (ASX:QUB) ended at 2.2% and 1.34% in the green while airlines Qantas (ASX:QAN) and Air New Zealand (ASX:AIZ) closed at 0.90% and 3.31% in the red.
ASX Financials Sector (ASX:XFJ)
The ASX Financials Sector (ASX:XFJ) was an underperformer this week as it lost 1.30%.
ABS data showed a decline in home loan commitments, both from buyers and investors, sparking fears of a slowdown in a major revenue source for banks.
Over the week, ANZ was pulled up by the ASIC for allegedly misleading credit card customers.
The major banks Commonwealth Bank (ASX:CBA), National Australia Bank (ASX:NAB), Australia New Zealand Bank (ASX:ANZ), and Westpac (ASX:WBC) all closed lower by 1.55%, 1.61%, 3.33%, and 0.7% respectively.
Smaller banks Bendigo Adelaide (ASX: BEN) and Bank of Queensland (ASX:BOQ) followed suit and were down 0.09% and 0.66%.
Wealth managers Magellan Financial (ASX:MFG) and Platinum Asset Management (ASX:PTM) ended 1.65% and 2.17% in the red though AMP Ltd. (ASX:AMP) gained 1.36%.
Lastly, insurance providers Insurance Australia Group (ASX:IAG), QBE Insurance (ASX: QBE), and Suncorp (ASX: SUN) also gave up 4.91%, 3.69%, and 9.78%.
ASX Consumer Discretionary Sector (ASX:XDJ)
The ASX Consumer Discretionary Sector (ASX:XDJ) continued its slide from last week, ending lower by 1.50%.
Entertainment and Hospitality companies Crown Resort (ASX:CWN) and Star Entertainment (ASX:SGR) ended lower by 0.39% and 3.91% while travel-focused ones such as Webjet (ASX:WEB) and Corporate Travel Management (ASX:CTD) closed up 0.33% and 0.55%; however, Flight Center (ASX:FLT) was down 1.34%. Retailers Temple and Webster (ASX:TPW), Nick Scali (ASX:NKS), Harvey Norman (ASX:HVN), and JB HiFi (ASX:JBH) were negative by 1.10%, 3.19%, 0.90%, and 1.58%; however, Breville (ASX:BRG) ended up 1.1%, possibly because of its growing sales to China.
Food brand Dominos (ASX:DMP) ended down 4.96% while gambling-focused companies Aristocrat Leisure (ASX: ALL) and Lottery Corporation (ASX: TLC) were 2.3% and 8.36% in the red.
ASX Consumer Staples Sector (ASX:XSJ)
The ASX Consumer Staples Sector (ASX:XSJ) edged into the green at 0.36%. Sector heavyweights Coles Group (ASX:COL) and Woolworths (ASX:WOW) were up 0.28% and 0.55% while Wesfarmers (ASX:WES) ended 0.56% down.
Food producers Tassal Group (ASX:TGR) and Costa Group Holdings (ASX:CGC) closed 1.65% and 3.53% up while Bega Cheese (ASX:BGA) ended 0.21% down.
Among milk food makers A2M Milk (ASX:A2M) gained 6.01%, but Bubs Australia (ASX:BUB) collapsed by 20.65% despite its huge US order.
ASX All Technology Sector (ASX:XTX)
The ASX All Technology Sector (ASX:XTX) continued to be the market’s whipping boy closing lower by 2.56%.
Platform companies REA Group (ASX:REA), Carsales.com (ASX:CAR), and RedBubble (ASX:RBL) ended 2.04%, 1.74%, and 3.06% down.
SaaS players Xero (ASX:XRO), Appen (ASX:APX), and Nuix (ASX:NXL) closed 5.42%, 1.54%, and 2.50% down while Wisetech Global (ASX:WTC) ended up 1.13%.
BNPL players Block (ASX:SQ2), Zip Co. (ASX:Z1P), and MoneyMe (ASX:MME) were beaten down 4.97%, 11.17%, and 6.61% in the continuing meltdown in this space.
Semiconductor manufacturer Altium (ASX:ALU) closed down 0.55% while data center operator NextDC (ASX:NXT) ended 1.43% lower, both continuing their relative outperformance.
ASX Healthcare Sector (ASX: XHJ)
The ASX Healthcare Sector (ASX: XHJ) edged into the red at 0.47%.
Healthcare providers Ramsay Healthcare (ASX:RHC) and Healius (ASX: HLS) closed lower by 1.35% and 10.75% while Fisher and Paykel (ASX:FPH) ended higher by 4.19%.
Healthcare equipment makers Cochlear (ASX:COH), Sonic Healthcare (ASX:SHL) and CSL Ltd. (ASX:CSL) closed down by 1.7%, 3.40%, and 1.15%; on the other hand, ResMed CDI (ASX:RMD) ended 0.48% higher.
Biotech firms Imugene (ASX:IMU) and Mesoblast (ASX:MSB) lost a chunky 10.53% and 10.89% each.
ASX Telecommunications Sector (ASX:XTJ)
The ASX Telecommunications Sector (ASX:XTJ) ended down 1.07%. Majors Telstra (ASX:TLS) and TPG Telecom (ASX:TPG) ended down 0.25% and up 2.93%, respectively.
Smaller players Chorus (ASX:CNU) and Uniti (ASX:UNW) closed down 0.3% and up the same, respectively.
Telecom infra player Spark (ASX: SPK) ended up 0.93%.
ASX Real Estate Sector (ASX:XPJ)
The ASX Real Estate Sector (ASX:XPJ) gave up 0.74%. Statistics showed slowing loan commitments and a slight decline in property prices across major markets like Sydney, Canberra, and Melbourne for the first time since the pandemic .
Industrial players like Goodman Group (ASX:GMG) and Dexus (ASX:DXS) closed 0.40% up and 1.04% down, respectively.
Retail players such as Scentre (ASX:SCG) and Mirvac (ASX:MGR) were down 3.75% and 0.89%.
ASX Utilities Sector (ASX:XUJ)
Lastly, the ASX Utilities Sector ended 4.71% lower at the end of a very eventful week.
Sector heavyweights APA Group (ASX:APA) and Origin Energy (ASX:ORG) declined 1.78% and 10.47% while AGL Energy (ASX:AGL) was up 0.34%.
In major news from the sector, Origin Energy revised guidance downwards by about 25% citing coal supply constraints.
Secondly, AGL shareholders officially voted against the demerger of its generation and distribution businesses, in turn leading to the demerger of several members from the company’s board.
This Week In ASX Stocks
No meaningful earnings announcements are due for next week.
New Listings
| Name | Date | Ticker | Amount | Price/Share | Operations |
|---|---|---|---|---|---|
| Kingsland Minerals | 8th June | KNG | A$5.5M | A$0.20 | Exploration and Development of Copper, Uranium, Gold, Nickel, and Cobalt Assets in Australia |
| Southern Palladium | 8th June | SPD | A$19M | A$0.50 | Exploration and Development of Palladium, Platinum, and Rhodium assets in South Africa |
| Cavalier Resources | 10th June | CVR | A$7M | A$0.20 | Exploration and Development of Gold and Nickel Assets in West Australia |
Economic and Market Outlook
The economic activity in Australia over the week was bittersweet.
On one hand, better than expected GDP growth in the quarter ending March of 0.8% was received enthusiastically by the market; on the other, a slowing real estate market was cause for concern.
Retail sales published last week were strong, strengthening the RBA’s case for rate hikes to control inflation.
Markets are currently factoring a 40 basis point hike at the next meeting.
The US reported better than expected non-farm payrolls along with unemployment steady at 3.6%.
Fed vice chair Lael Brainard expressed her confidence in the economy and said she expected another 50 basis points in rate hikes through September.
The Bank of Canada stunned markets by hiking rates to 1.5%, and hinted at more hikes along the way.
Markets rejoiced that China appeared to be making clear progress towards reopening with Shanghai emerging from lockdown and pockets of Beijing opening up.
The Chinese government also made stimulus moves – these included expedited permits for construction and cash incentives for hiring fresh graduates.
The effects of its lockdown policy are now clearly emerging in the form of lower economic growth projections by leading banks and high inflation.
Over the week, Goldman Sachs joined JP Morgan, Citi and UBS in cutting their GDP growth forecast to 4% from the previous estimate of 4.5%.
While signs of a recovery are underway as shown by the manufacturing PMI growing 4.76% and services PMI growing 14.1%, China’s Producer Price Index came in at a higher than expected 8%, underlining inflation fears.
In Europe, leaders confirmed plans to halt at least 90% of oil purchases from Russia by year-end.
OPEC subsequently announced that it will hike production to meet the shortfall, but oil prices continued to stay elevated.
Next week will see the RBA’s Interest Rate Decision and Statement on Tuesday followed by UK Composite and Services PMI later the same day.
The UK Construction PMI report follows on Wednesday.
On Thursday, a host of data is scheduled from the ECB including the Deposit Facility Rate, Marginal Lending Rate, Monetary Policy Statement, and lastly, the all-important Interest Rate Decision.
Later in the day, the US puts out Crude Oil Inventories and Initial Jobless Claims.
Lastly, US Core CPI (MoM) for May releases on Friday.
Forex Outlook
AUD/USD
AUD/USD closed the week at 0.72066, well above the previous weekly close of 0.71565.
The AUD/USD was boosted by Australia’s better than expected GDP print of 0.8% for the March quarter, solid trade data, as well as strong retail sales growth of 0.9% that touched a record of A$33.9 billion.
These enable a more hawkish attitude from the RBA; however, a hike of 0.40% may be already factored in.
China’s recent moves to ease lockdowns in China also aided sentiment in favour of the Aussie, given the strong trade relationship between the two countries.
However, on the last day of the week, the pair was under pressure with the dollar index rebounding from lows of 101.299 and showing signs of putting its recent correction behind it.
Bulls may also have taken some profits off the table in view of impending US non-farm payroll data.
The macroeconomic odds are turning in favour of AUD/USD, however, and an upside break of 0.72800 could give a strong tailwind to the pair.
AUD/NZD
AUD/NZD ended the week at 1.10733, well above the previous week’s close of 1.09436.
Robust, better-than-expected March quarter GDP growth numbers out of Australia of 0.8% (quarter-on-quarter) and 3.3% (year-on-year) encouraged a bullish trajectory for AUD/NZD last week.
Also helping were trade data and a record retail sales print that showed Australians were welcoming post-COVID times with wallets at the ready.
AUD/NZD has taken off from a support zone in 1.09200 – 1.09300, but is now confronted by a solid resistance area at 1.10800 – 1.11100.
However, the current momentum may enable it to take that zone out, and if that happens, 1.11800 may soon be the new bulls-eye for the pair.
