Iron ore collapse causes equity market weakness

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WEEKLY MARKET REPORT

The collapse in the price of iron ore continued to depress the Australian equity market.

The ASX 200 fell another 0.76% to 7403.7 points on Friday, although things could have been worse with the market down just 2.9 points for the week.

There was, however, nowhere to hide for the big miners, as the price of iron ore continued to fall below US $ 110 per tonne, settling at US $ 107.21.

Andrew “Twiggy” Forrest’s Fortescue Metals (ASX: FMG) was the most notable victim, with stocks falling 11.5% to $ 15.27 as brokers including UBS downgraded the credit rating. company.

Rio Tinto (ASX: RIO) shareholders were not spared, as the stock fell 4.7% to $ 98.8 while the more diversified stock BHP (ASX: BHP) lost 3.4% to end at $ 39.06.

Analysts were surprised at the speed of the weakness in the price of iron ore, which in May was above US $ 220 per tonne.

The iron ore market could be heading for a surplus

However, no one expects much of a price recovery from here after the price was more than halved with lower steel production in China, which could drag the market into a excess supply.

Bearish UBS research has predicted that China’s steel production will peak by 2023 in part due to pollution concerns, with the price of iron ore expected to fall below US $ 100 per tonne by now by the end of this year and averaging just US $ 89 per tonne in 2022.

Gold stocks also feel pain

It was not only the iron ore miners who suffered from the falling price of gold, pushing down the prices of gold miners.

Northern Star (ASX: NST) shares were down 2.8% to $ 9.27 while Newcrest (ASX: NCM) shares were down 3.1% to $ 23.78, dragging the sector to the decline.

There has been positive news to offset the gloom in the mining and gold sectors with the pharmaceutical wholesaler’s API (ASX: API) adding an impressive 10.1% for the week to $ 1.46 after deciding to clear the claiming Wesfarmers (ASX: WES) to do due diligence. on his books.

Our biggest phone company Telstra (ASX: TLS) also added 1.3% to $ 3.92 for the week after chief executive Andy Penn revealed a promising business strategy for the next four years.

Myer jumps but AMP keeps falling

Even the struggling Myer department store (ASX: MYR) jumped 11.7% to 58c per share after unexpectedly returning to profit but failed to declare a dividend.

However, some things never change, with shares of fund manager AMP (ASX: AMP) falling to a new low below $ 1 to just 99c – down 5.7% for the week and down to 36.5%. % This year.

The eternal disappointment has now dropped by more than 81% in the past five years.

In other stock-specific news, shares of financial software provider IRESS (ASX: IRE) fell 11% after suitor EQT Funds Management pulled out of its potential buyout.

EQT had offered up to $ 15.91 per share for the acquisition, but the two parties were unable to agree on a deal, with IRESS reiterating its profit forecast of $ 164 million to $ 168 million for 2021 .

Small Cap Equity Action

The Small Ords index managed a slight gain of 0.31% over the week to close at 3519.6 points.

ASX 200 stock chart for September 2021 Small Ords
ASX 200 vs small orders

Small-cap companies that made the headlines this week were:

ionier (ASX: INR)

North America’s only lithium-boron project is set to be developed after the ioneer owner announced Thursday that it is partnering with Sibanye-Stillwater.

Under the agreement, Sibanye-Stillwater will pay ioneer US $ 490 million for a 50% stake in the project with both parties to jointly advance Rhyolite-Ridge to production.

Once in production, Rhyolite-Ridge will be the largest lithium mine in the United States.

Argenica Therapeutics (ASX: AGN)

Argenica Therapeutics is preparing for clinical trials of its neuroprotective peptide candidate ARG-007 in the treatment of tissue death in stroke patients.

The company hired two manufacturers to produce batches of the candidate drug, both demonstrating that they could generate the drug on a large scale while maintaining GMP quality and grade.

Argenica CEO Dr Liz Dallimore said the achievements of the manufacturers (AusPep and AmbioPharm) allow the drug’s development to move into clinical trials with increased confidence in manufacturing and safety.

Legacy minerals (ASX: LGM)

ASX debut this week, Legacy Minerals, has been busy – reporting visible gold in drill core a few days after listing during the first drill on its Harden project in the Lachlan Pleated Belt in Nova Scotia. South Wales.

Harden is the most advanced of Legacy’s projects and is home to many historic gold mines.

The exploration news follows the company’s ASX listing on Monday after a “strongly supported” $ 5.8 million IPO.

At the time of listing, Chief Executive Officer and CEO of Legacy, Chris Byrne, said the company had “many discovery opportunities” in its “exciting portfolio”.

Metal Hawk (ASX: MHK)

Drilling at Metal Hawk’s Berehaven project in Washington state uncovered massive nickel sulphides, which the company compared to the Kambalda komatiite nickel deposits in the area.

A portable XRF was used to analyze drill core from the project’s first reverse circulation program.

Analyzes of the program are expected within four weeks and Metal Hawk plans to complete downhole electromagnetic surveys to identify the strongest conductive areas for follow-up drilling.

Toro Energy (ASX: TOE)

Toro Energy is currently integrating the vanadium resource with the uranium resource block model in the first phase of a reengineering study for its Lake Maitland deposit, which is part of its Wiluna project in WA.

The company plans to re-optimize the design of the deposit so that it can be economically mined for uranium and vanadium while lowering cutoffs.

Toro will then use the data to refine the project processing flow and ultimately increase the value of Wiluna’s project.

Vintage Energy (ASX: VEN)

Gas explorer Vintage Energy has recorded a “remarkable” 190% increase in material gas resources for its Odin field in Queensland’s Cooper Basin.

ERCE undertook the independent estimate resulting in 2C contingent resources of 36.4 Bcf, including 16 Bcf net for Vintage.

“We were convinced that Odin would deliver too much gas once extensive gas emissions across a number of target areas were observed, but for this to be confirmed and independently certified by ERCE is a huge boost for everyone involved, “said Vintage Managing Director Neil Gibbins.

A resource calculation is in progress for the Vali field next to Vintage.

The coming week

Once again, central banks will be the focus of investor attention with our own Reserve Bank board report from the September 7 meeting, the main event,

We already know that the Board of Directors has kept official interest rates at 0.1% and that it will reduce bond purchases from $ 5 billion to $ 4 billion per week to reflect the “delay in”. economic recovery ”due to continued lockdowns in Sydney and Melbourne for the Delta COVID-19 outbreak.

However, market watchers will want to see more details on the move, given that bond purchases could decline at a faster rate if the economy begins to recover when lockdowns are eased as immunization coverage increases. .

It’s a similar situation in the United States with the Federal Reserve’s Open Market Committee starting a two-day political meeting.

The surge in COVID-19 Delta infections in the United States has caused a slower recovery in the labor market and the Fed may choose to delay reducing its asset purchases until the November meeting.

Even the People’s Bank of China is rallying to the deed, but it is generally expected to keep the one- and five-year prime rates at 3.85% and 4.65%.

Other local publications to watch out for include Consumer Confidence Surveys, Purchasing Manager Indices, Salaried Jobs, Skilled Jobs, and Wealth Numbers which should provide a measure of how the economy is doing. Australian is facing the pressures of the lockdown.

This image is quite complex to read, with Commonwealth Bank data showing Australians saving money during the pandemic, due to government support payments and the inability to spend freely during lockdowns.

This has brought Australia’s overall savings to $ 230 billion, although there are obviously some groups of people who are getting a financial beating while others are thriving.

Such a high level of savings could lead to a spending rush once lockdowns finally start to ease.

The best actions of the week


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