Australia outperforms as US flirts with a bear market

Weekly Market Report

With the US stock market tumbling with a big enough drop to signal a bear market, the Australian market once again held out stronger in the face of widespread weakness.

This can be explained by our relative lack of technology slates and by our superiority in mining and banking giants in the “old world” but whatever the reason, Australia holds up better than the US.

The S&P/ASX 200 closed up 1.2%, or 81.1 points, to 7145.6 points – 6.7%, or 487.2 points, from the index’s all-time high of 7632.8 set in mid-August last year.

By contrast, at the end of Thursday, the broader US benchmark, the S&P 500, was down 18.7% from its high early this year — very close to the 20% mark that defines a bear market overall.

China’s interest rate cut is pivotal in market transformation

The Australian rally came after Chinese banks cut their key long-term loan rate by a record amount – lowering mortgage costs and possibly boosting weak loan demand as China grapples with a housing slump and continued crippling COVID-19 lockdowns.

The five-year base loan rate, a reference for mortgages, was lowered to 4.45% from 4.6%, according to the People’s Bank of China — the largest reduction since the rate was renewed in 2019.

The lower rate will be applied to new mortgages immediately, while existing mortgages will not be re-priced until next year at the earliest.

Miners and banks are recovering well

The news was greeted with gratitude by Australian investors, as they busied themselves with returning to the big miners and banks.

BHP (ASX:BHP) shares rose 2%, or 95 cents, to $47.18, Rio Tinto (ASX:RIO) shares rose 1.5%, to $108.35, and Fortescue Metals (ASX:FMG) shares jumped nearly 3.9% to $20.15 as investors realize Chinese news. It will be beneficial to iron ore demand and prices.

Likewise, banks were also higher, with Commonwealth ASX:CBA shares up 0.8% to $104.60, NAB ASX:NAB shares up 0.7% to $31.07, and ANZ (ASX:ANZ) shares up 0.9% to $25.50, Westpac (ASX) shares rose. : WBC) rose 0.5% to $23.57.

Even some of the big retail giants such as Coles (ASX:COL), Woolworths (ASX:WOW) and Wesfarmers (ASX:WES) were able to post a rally after being battered on Thursday after US retail stocks were hit hard after US stocks. Giants Wal-Mart and Target after inflation cut retail spending.

The biggest gains in the Australian market were in the IT, materials and consumer appreciation sectors with Block ASX:SQ2 shares up 9.9% to $127.64 and Computershare ASX:CPU 3% to $24.36.

Crown shareholders agree to sell

In some stock news, Crown shareholders gave approval for the $8.9 billion group sale to Blackstone, with Crown ASX:CWN shares flat 0.2% to $12.84.

Major AGL shareholder ASX: AGL and IT billionaire Mike Cannon-Brooks also outlined his vision for the company which includes changing the board’s composition, phasing out coal power generation faster and canceling the company’s proposed separation.

Retail giant Woolworths also announced that it has spent $243 million buying a majority stake in the ASX-listed MyDeal Market: MYD for $1.05 a share.

While there was some shareholder skepticism that Woolworths would be able to compete with e-retailers such as Kogan ASX: KGN, Amazon and Catch, it was great news for MyDeal shareholders, who enjoyed a 55.8% share price. It rises to $1.00 per share.

small stock actions

The Ords Small Index rose 1.43% this week to close at 3,049.4 points.

2022 May ASX 200 Planned All Orders
ASX 200 vs. Small Ords

Small cap firms made headlines this week:

Farmmost (ASX: PAA)

After receiving monepantel (MPL) tablets, PharmAust is preparing to begin its phase 1 clinical trial of MPL in motor neuron disease (MND) later this month.

Australian not-for-profit FightMND has provided funding to help the trial with a commitment of $880,000 in 2020, which will be paid in installments once Farmoust has completed several milestones.

As PharmAust prepares to trial MPL at MND, the company revealed that it has received $210,000 upfront for a claim tax incentives expected for research and development in fiscal year 2022.

Radium Capital has agreed to provide early access to 80% of PharmAust’s projected discount for fiscal year 2022.

Resource Base (ASX: RBX)

Widespread REE mud has been identified in the recently awarded Resource Base Building EL007646, which forms a small part of the company’s broader Miter Hill project that straddles the Victorian and South Australian borders.

Shallow surface drilling in the intercepted REE concentrations of up to 1,421 ppm TREO of 3 m, with 70% of the holes reaching TREO degrees above 500 ppm.

Resource Base says the grades it intercepted were comparable to the nearby Red Tail and Yellow Tail deposits near Australian Rare Earth, which has a combined resource of 39.9 million tons at 725ppm TREO.

The company will conduct further drilling on EL007646 to test where the mineralization remains open, as well as across adjacent dwellings once awarded.

Crowd Media (ASX: CM8)

As part of the 2022 marketing campaign, Crowd Media has secured two agreements to integrate the AI-powered Talking Head platform.

Israeli data technology company SourceFlare Ltd will integrate Crowd’s technology into its own platform to improve customer acquisition and lead generation.

SourceFlare will pay Crowd about $7,100 per month for access to the Talking Head platform as well as ongoing service and support.

The second agreement is with AI-based company Impssbl, which will implement Crowd’s Talking Head technology as a series of interactive NFTs.

The profits from the NFT series will be split 70% into Impssbl and 30% Crowd.

Provaris Energy (ASX: PV1)

Provaris Energy’s pressurized hydrogen vessel development is progressing, with several work packages now completed.

The company’s team completed hull design optimization, finite element modeling, onboard safety systems, general arrangement drawings, and ship outline specifications.

Provaris is sharing work packages with shipyards to improve construction schedules and capital cost estimates, which will feed into a request for construction approval, which is targeted for the middle of next year.

Meanwhile, the scope and feasibility studies are scheduled to be completed in July.

Havilah Resources ASX: HAV

OZ Minerals has signed an option to acquire Havilah Resources’ Kalkaroo copper and gold venture in South Australia for $205 million.

The companies signed a conditional binding terms sheet on Tuesday, in which Oz will conduct a study program on Kalkaroo to confirm and expand existing resources and improve the project over an 18-month period.

Kalkaroo has a current resource of 245 metric tons of 0.45% copper and 0.39 grams of gold.

Subject to OZ exercising its option to acquire Kalkaroo, and achieving certain milestones, additional contingency funds of up to $200 million may be paid to Havilah.

As a result, Havilah may receive up to $405 million for Kalkaroo over time.

MyDeal (ASX: MYD)

The Woolworths Group, a major retailer, will acquire 80% of MyDeal in an all-cash deal of $1.05 per share.

This represents a 62.8% premium over MyDeal’s last closing price of $0.65 per share and values ​​equity at $271.8 million and indicates the value of the enterprise at $242.6 million.

Brad Banducci, CEO of Woolworths, says the acquisition of MyDeal will expand the retail giant’s offering beyond groceries.

“The addition of MyDeal to the Woolworths portfolio represents another step towards providing a more comprehensive customer experience for food and everyday needs and materially expands our market capabilities, particularly in general merchandise,” he said.

It will also support the growth of MyDeal through access [our] Capabilities across e-commerce, supply chain, retail, loyalty and more,” Banducci added.

Reckon (ASX: RKN)

Under an agreement announced this week, Reckon will sell its account practice management group to UK-based The Access Group companies for $100 million.

Affiliates Access Software Australia, Access Workspace NZ and Access UK will buy Reckon’s assets including APS and Reckon Elite practice management products.

Reckon will return the majority of the after-tax revenue from the transaction to its shareholders through a special, partially certified dividend.

The company maintains its own business groups that provide accounting and payroll software, wealth management solutions, and legal practice management.

During fiscal year 2021, these divisions combined brought in $50 million in revenue and $17 million in EBITDA.

After the sale, Reckon will remain focused on expanding its cloud-based software technology to the high-growth markets of Australia and the United States.

next week

Once again, US data that includes readings on economic growth and inflation is likely to be one of the biggest factors in the markets, but there are a few things to watch out for here in Australia.

Two senior Reserve Bank figures – Assistant Governor Christopher Kent and Assistant Governor Lucy Ellis are giving speeches and there will be a batch of local statements released as well.

Household spending, consumer confidence, construction and retail spending must combine to see if Australian consumers are going the American way or are resilient in their spending patterns.

Top stocks this week

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