Driving assessment

The market continues to climb due to rising energy prices

WEEKLY MARKET REPORT

It was another strong week for the Australian stock market which, despite flat trading on Friday, posted a solid 1.2% for the week after chasing US markets higher.

It’s been five straight weeks for the current rally with the ASX 200 index sitting at 7114.5 points after hitting a new 10-week high of 7137.5 points in Friday’s trade.

Along with more positive earnings from a range of companies, the main driving force appears to be the theory that central banks such as the US Federal Reserve and Reserve Bank of Australia will be able to slow the pace of rate hikes. interest when inflation indicators start to decline. down, even though the inflation rate remains very high.

Rising energy prices drive stocks higher

Rising oil prices also helped the Australian market amid a lingering energy crisis in Europe, with big names in mining and especially energy stocks enjoying strong trades.

Shares of Woodside (ASX:WPL) rose 4.2% while Santos (ASX:STO) topped that with a 6.5% rise.

It was a similar but more muted scene for the big miners with Rio Tinto (ASX:RIO) up 1.5% to $98.53 and BHP (ASX:BHP) up 1%.

Some encouraging indications from Newcrest (ASX:NCM) saw shares of the major gold miner jump 3.6% while soaring coal prices saw Whitehaven Coal (ASX:WHC) hit a record closing high of $7.36, up 6.2%.

The same rise in coal prices helped Coronado Global Resources (ASX:CRN) to a 5.1% rise in share price and New Hope Corp (ASX:NHC) to a 4% rise in share price. ‘stock.

It’s not all positive news, but specific factors are pushing certain stocks back.

Rising costs helped chicken farmer Inghams (ASX:ING) tumble 9.4% while ANZ (ASX:ANZ) dragged banks lower with a 2% drop after completing a bookbuild to fill a shortfall in its retail stock offering to buy Suncorp Bank.

Shares of electric and gas utility AGL (ASX:AGL) fell 3.9% after its underlying profit fell below analysts’ estimates.

How long is this stock market rally?

As always with a stock market rally following a big fall, there remain dissenting voices warning that there could be another leg down with Clifford Bennett, chief economist at ACY Securities, one of those warning on the sustainability of the current rally.

He pointed to the sharp drop in US house sales, double-digit inflation and very low consumer confidence in the UK, a dark winter for Europe due to energy shortages and the rise in Japanese inflation as harbingers of a more cautious approach.

“The price of inflation isn’t just on the sticker,” Bennett explained.

“This is leading to an inevitable downturn in consumer and business activity. Which inevitably brings us to reduced earnings and yes, the question of still overvalued equity markets.

Mr Clifford said a lot of economic hardship was poised to befall the US, Europe and possibly Australia as well.

“Corporate profits continued to rise during the first phase of inflation, because this inflation was largely caused by the increase in profit margins.

“This latest wave of inflation will prove destructive even for the tall towers of Wall Street.”

Whether or not this bearish valuation turns out to be accurate, it is a sampling of some of the cautionary tales that are beginning to be told by seasoned market watchers.

Small Cap Stock Action

The Small Ords index fell 0.77% for the week to close at 3026.9 points.

August 2022 ASX 200 Small Ords Chart
ASX 200 vs small orders

The small cap companies that made headlines this week were:

Gateway Mining (ASX:GML)

Junior explorer Gateway has announced new high-grade drill results at the emerging Julias oxidized gold deposit at the Gidgee project in Western Australia.

Consistent high-grade mineralization was found throughout the strike and all results will be used in the calculation of an initial mineral resource estimate.

The main dosages were 11 m at 6 g/t from 58 m; 4m at 6.1g/t gold from 30m; 8m at 3.2g/t gold from 60m; 4m at 4g/t gold from 57m; 13m at 2.6g/t gold from 71m; 10m at 2.7g/t gold from 52m; and 11m at 2.2g/t gold from 43m.

Gateway Managing Director Mark Cossom said Julias is quickly emerging as one of Gidgee’s exciting new discoveries.

Gascoyne Resources (ASX: GCY)

This week, Gascoyne Resources announced the discovery of the high-grade Never Never vein system at its Dalgaranga gold operation in Western Australia.

The vein is part of an extension of the Gilbey mineralized system and was considered a “major exploration breakthrough”.

Notable results were 59 m at 12.5 g/t gold from 139 m, including 13 m at 51.1 g/t gold; 39m at 3.09g/t gold from 99m; and 20m at 1.12g/t gold from 156m.

Chief executive Simon Lawson said Never Never had “tremendous potential” to shape the future of the business “very quickly”.

Inannex Healthcare (ASX:DIH)

Clinical-stage biotechnology Incannex Healthcare this week appointed internationally renowned pharmaceutical authority Robert B Clark as non-executive director of the board.

Mr. Clark has over 38 years of strategic regulatory affairs experience with pharmaceutical giants Pfizer and Novo Nordisk.

He has senior-level experience in managing the regulatory aspects of large-scale pharmaceutical acquisitions, material compliance matters and business development due diligence activities.

Mr. Clark will assist Incannex in its mission to bring FDA-approved cannabinoid and psychedelic drugs to market.

PharmAust (ASX:PAA)

Phase 2 canine trials have shown that a combination of monepantel (MPL) from PharmAust and the gold standard drug prednisolone could double the life expectancy of dogs with cancer, while other dosage improvements could potentially allow for an even better survivability advantage.

The company said companion dogs in the trial experienced an average survival extension of up to 24 weeks, more than double the life expectancy provided by palliative corticosteroid therapy alone.

PharmAust is nearing the end of a Phase 2 trial and will soon begin enrollment for a Phase 3 study.

Cobre (ASX: CBE)

Base metal explorer Cobre has announced that a significant intersection of additional copper has extended mineralization at the Ngami Project in Botswana’s Kalahari Copperbelt.

Drilling intersected a large area of ​​visible copper mineralization that extends 69m downhole with 13m of abundant visual chalcocite mineralization noted and confirmed by pXRF (portable X-ray fluorescence).

The mineralization is believed to be associated with hydrothermal breccias, extensive weathering and structural complexity, demonstrating that the target is open and extends further to the northeast than expected.

The known footprint of mineralization at Ngami now extends over 4 km.

Cobre managing director Martin Holland said the drilling was designed to test the first of 57 graded targets across the relatively unexplored northern margin of the Copperbelt.

“The evidence for a significant length of copper mineralization highlights the potential of this district to deliver new discoveries,” he said.

Cobre also confirmed this week that its exploration licenses in the Kalahari copper belt had been renewed by the Botswana government, subject to a commitment agreement with local private explorer Kalahari Metals.

All five licenses are held by Triprop Holdings (Pty) Ltd and have been renewed until September 2024.

Shares of Cobre are up more than 193% for the week on Friday.

Prescient Therapeutics (ASX: PTX)

The Australian biotech Prescient Therapeutics signed an agreement this week with the American Thermo Fisher Scientific to accelerate the development and commercialization of its cell therapy platform OmniCAR.

The agreement should result in an improved product and process that can be decentralized and scaled with high efficiency and replicability.

Prescient chief executive Steven Yatomi-Clarke said he could see the development of other genetic modifications to be incorporated into OmniCAR cell therapies to treat health conditions such as exhaustion and immune suppression.

The agreement with Thermo follows an agreement with Q-Gen earlier in the week to support clinical trials.

Under a five-year agreement, Q-Gen will manufacture OmniCAR-T cells at its Queensland facility.

“This secures a crucial supply of OmniCAR cells for our clinical trials and ensures that we produce the best possible cell therapy products for physicians and patients with difficult-to-treat cancers,” said Yatomi-Clarke.

The week ahead

The main influence on the Australian market this week will continue to be the direction and strength of Wall Street as well as the forest of earnings reports Australian companies release.

Dozens of results are expected to be released in the coming week and if the reporting season so far is any indicator, the results will likely have more to do with the fortunes of particular market sectors than the performance of individual companies.

Along these lines, Thursday will be an interesting day with two great fund managers, Perpetual and Platinum Asset Management.

It’s been a tough time for listed fund managers so far this year, so it will be interesting to see if either or both can turn the tide.

Aside from business results, the main local interest will be detailed July labor force numbers, which will be watched closely for what happens to regional unemployment rates, which hit a record low of 3.7% in June. .

Globally, the most important news is likely to come from Jackson Hole, Wyoming, where many of the world’s central bankers, policymakers and economists will be looking at what’s happening to inflation and, by extension, interest rates. interest.

Also of interest will be the June quarter GDP report for the US, which will indicate whether the technical recession in the US is receding or entrenched further.

The best actions of the week