ASX WEEKLY REPORT FOR 15 APR TO 19 APR 2024

At the start of last week markets were processing the implications of Iran's drone attack on Israel and the possible Israeli response.

Gold and Oil both spiked higher before retreating as markets digested the potential escalation of the current situation. The well-flagged Israeli response later in the week was thankfully relatively small and confined to bombing military targets inside Iran in a move thought to be aimed at de-escalating the conflict. Neither country it seems wants to engage in a full-on conflict at this point in time.

Markets though are on edge with profit taking seen in equities and the US Volatility Index rising to its highest level since October 2023.

The Australian equity market closed the week down 2.84% ( $S&P/ASX 200(.XJO.AU)$ ) and the Australian Dollar weakened 1.83% closing on Saturday morning at $US0.6421*.

The Australian Dollar was sold off as US bond yields rose. US 2y bonds rose 10bps to 4.99% while US 10y bonds rose 12bps to 4.62%. Australian 2y bonds were volatile but remained flat at 3.92%. Australian 10y bonds also remained steady at 4.30%. The Dollar wasn’t helped by comments from US Fed Chair Jerome Powell that pushed rate cut expectations out until later this year at the earliest. Higher US rates mean the $A will likely struggle to rise.

US equity markets were mixed with the $Dow Jones Industrial Average(.DJI.US)$ closing flat, the $Nasdaq Composite Index(.IXIC.US)$ down 5.36% and the $S&P 500 Index(.SPX.US)$ down 3.04% (its 3rd weekly loss in a row). In Europe stocks dropped 1.19% while in Japan the Nikkei fell a heavy 6.21%. Hong Kong was also weak dropping 2.97% but Chinese shares gained 1.52%.

All sectors in Australia except Utilities were in the red. Utilities rose a meagre 0.14% on safe haven buying.
Real Estate Trusts were the hardest hit falling 3.80% on interest rate worries and in part by the Westfield Bondi Junction terror attack. Next hardest hit were Health Care stocks losing 3.77%, IT dropping 3.23%, Consumer Discretionary falling 3.15% and Financials losing 3.09%.

At an individual stock level, $The Star Entertainment Group Ltd(SGR.AU)$ had another poor week falling 16.83% as it battled an inquiry into its eligibility to retain its gaming licence.

That weekly loss was almost matched by $Liontown Resources Ltd(LTR.AU)$ (-14.29%). The stock suffered as analysts forecast the price of Lithium to stay under pressure in 2024. Struggling EV sales are also calling into question the wisdom of spending too much money developing Lithium resource at present.

Rare earth miner $Lynas Rare Earths Ltd(LYC.AU)$ had another good week with shares rising 3.90% after mining billionaire Gina Rinehart lodged a substantial shareholder notice as she acquired an additional $50m of shares last week.

Gold stocks were mostly in demand as the yellow metal surged to new record highs over $US2400 an ounce. $Silver Lake Resources Ltd(SLR.AU)$ rose 3.99%, $Northern Star Resources Ltd(NST.AU)$ gained 1.31% and $Evolution Mining Ltd(EVN.AU)$ rose 2.26% (to a 52 week high) as it announced a strong March quarter update. One gold stock that performed poorly was $Gold Road Resources Ltd(GOR.AU)$ . The company announced a March quarter update that wasn’t received well by markets. Shares closed the week down 11.54%.

$Newmont Corp(NEM.AU)$ managed to close above $60 as it solidified its gains after reaching a low of $45.30 in late February.

$Rio Tinto(RIO.US)$ gained 1.27% over the week as base metals prices jumped sharply in London on the back of new sanctions against Russia that ban deliveries of any Russian supplies. The rise in Rio shares was despite weather disruptions to its port shipments in WA and the RBA forecasting slowing steel demand from China. $BHP Group Ltd(BHP.AU)$ shares fell 1.96% on the week. $Fortescue Ltd(FMG.AU)$ shed 4.47%.

IT stocks were sold off heavily following falls in their US counterparts. $WiseTech Global Ltd(WTC.AU)$ shed 2.08%, $Xero Ltd(XRO.AU)$ lost 4.22%, $Megaport Ltd(MP1.AU)$ fell 7.11% and $Nextdc Ltd(NXT.AU)$ fell 4.74% to $15.74 after completing a $1.3 billion capital raise. The raise was well supported and the company said its forward order book was looking very healthy.

$Telstra Group Ltd(TLS.AU)$ shares had a poor week closing down 2.93% when it should have been seen as a ‘safe haven’ stock. The stock is down 14.7% in the past year and is somewhat friendless as it trades down at levels last seen in June 2021.

$Seek Ltd(SEK.AU)$ shares were also out of favour falling 4.89% on the week and with the shares down over 11.2% year-to-date.

One bright spot was $Telix Pharmaceuticals Ltd(TLX.AU)$ that saw its shares jump 5.26% last week as it announced March quarter revenues hitting a record high.

Financial stocks were pounded last week with $CommBank(CBA.AU)$ falling 3.77%, $National Australia Bank Ltd(NAB.AU)$ dropping 3.19% $Westpac Banking Corp(WBC.AU)$ losing 2.00% and $ANZ Group Holdings Ltd(ANZ.AU)$ falling 2.42%. $Bank of Queensland Ltd(BOQ.AU)$ bucked the trend however rising 4.42% as the company results beat market forecasts. Some analysts warned however that the results were of ‘poor quality’ being based on cost cutting and lower bad debt charges rather than sustainable business increases.

Elsewhere, $Seven Group Holdings Ltd(SVW.AU)$ fell again after another costly court case went against the company. Shares fell 6.01%.

This week we will be watching March business conditions in Australia, US, Europe and Japan. US March quarter GDP will be released on Thursday, Private Consumption numbers will follow on Friday. The Bank of Japan meets on Friday, and in Australia the March quarter CPI will be released on Wednesday. Markets forecast that annual inflation will show a fall to 3.4% year-on-year.

*The data sheet has the Friday Australian market closing prices rather than closing US prices.