ASX Weekly Report For 1 April to 5 April 2024
An Easter holiday shortened week saw equity markets around the world pull back from record highs.
The exception to this was China that has now rallied 7 out of the last 8 weeks. We alerted readers to the possible turning point back on the 9th of February as China headed to its New Year break. After a 30% fall its main share index has now bounced 12.5%. Last week it closed up 1.94%. Hong Kong followed suit rising 1.10%.
The US sharemarket took a breather with the Dow Jones falling 1.56%, $Nasdaq (NDAQ.US)$shedding 0.80% and the S&P500 losing 0.95%.
Japan’s Nikkei lost 3.41% and European shares ended 1.19% lower.
The driver of sentiment was increasing US bond yields as signs of US manufacturing activity came in well above expectations. In addition to this we saw a jump in US employment that also outstripped market expectations.
Both of these ‘surprises’ indicated a healthy US economy but clouded the picture for the timing of interest rate cuts.
In Australia, the Minutes from the recent meeting of the Reserve Bank indicated a slight softening in tone suggesting that rate rises were not considered at the March meeting and that the RBA was possibly winning the battle against inflation.
The Australian Dollar gained almost 1.00% to close the week at $US0.6581. Australian 2 year bonds jumped 12 basis points to 4.75% and Australian 10 year bonds rose 17bps to 4.16%. In the US 2 year bonds rose 12bps to 4.75% and 10 year bonds rose 19bps to 4.40%.
In commodity news there were some key moves in the Oil price that saw both Brent Crude and the West Texas Intermediate price shoot higher (6.11% and 4.39% respectively). Oil prices rose amid increased tensions in the Middle East after several top Iranian military officers were killed in Damascus and seven humanitarian aid workers (including one Australian) were killed in Gaza.
The Energy sector was one of the few sectors of the Australia market to rise last week. It gained 1.33%. $Ampol Ltd (ALD.AU)$rose +3.74%, $Santos Ltd (STO.AU)$ lifted +2.32% and $Karoon Energy Ltd (KAR.AU)$ gained 5.09%.
$APA Group (APA.AU)$ rose +1.43% while electricity and gas provider $TPC Consolidated Ltd (TPC.AU)$ gained 42% after the company entered into a binding takeover Scheme of Arrangement with a subsidiary of Beijing Energy International.
Gold has been the major commodity mover however with the precious metal rising 5.90% over the week to close at $US2349 per ounce, another record close. Gold has risen 13.9% year-to-date. $Gold Road Resources Ltd (GOR.AU)$gained 5.69%, $Northern Star Resources Ltd (NST.AU)$ rose 2.76% and market heavyweight Newmontcharged 5.54% higher. Gold has been rallying strongly on the back of central bank buying, currency debasement and projected falls in US interest rates. Falls in US rates mean a lower US Dollar which generally means the gold price (which is priced in US Dollars) rises to maintain an equivalent price.
Iron Ore prices have been volatile with prices dropping sharply and then rebounding over the Easter break. Ore prices closed last week just below the key $US100 a tonne level. $Rio Tinto Ltd (RIO.AU)$ (-0.99%) and $Fortescue Ltd (FMG.AU)$(-3.58%) were weaker but $BHP Group Ltd (BHP.AU)$ gained +1.53% on more positive sentiment from the Copper price which rose 6.00% to $US4.24 a pound and from the divestment of two Queensland coal mines to Whitehaven Coal
In other sector news, IT was the hardest hit falling 4.76%, followed by Real Estate Trusts (-3.98%), Consumer Discretionary (-2.96%), Health Care (-2.86%) and Communications (-2.24%). Financial stocks were weaker by a modest 1.03%.
In individual stock news packaging giant Orora was punished by the market for an earnings downgrade after their recent acquisition of French bottle manufacturer Saverglass. Shares fell 18.75% on the week. Its shares were trading at $3.45 back in August last year before undertaking a large capital raising for the company purchase. They closed last week at $2.21.
Mesoblast shares have had a rocket under them after it announced it was gearing up for a third attempt to gain approval on one of its key drugs that assist children with life-threatening complications from bone marrow transplants. Since March 25 shares have rallied 162%.
China’s Ministry of Commerce announced it would end crippling tariffs for Australia’s wine industry and that saw gains from Treasury Wine Estate (+3.29%) and Australian Vintage (+2.5%).
Synlait Milk shares fell 16.29% after the company posted an after tax loss of $NZ96.2m. Its deteriorating outlook is also causing concerns for debt holders.
Luxury goods online retailer, Cettire, hit record highs of $4.83 at the start of March but have since been dogged some poor publicity about its marketing and product exchange policies as well as an analyst downgrade. Also not helping would be the project large fall in sales from luxury goods retailer Gucci. First quarter sales are forecast to be down 20%. $Cettire Ltd (CTT.AU)$ fell 19.26% last week.
Finally, the CBoE VIX Index, which provides a volatility measures of how ‘fearful’ investors are and how much they are prepared to pay for portfolio insurance, has risen 25% since March 27. The VIX has been relatively benign since November 2023 but has started to pick up in the past few weeks. This signals that investors might be getting nervous about record levels of share market prices and are seeking to buy insurance against sharp falls.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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