Wall Street ended sharply higher on Thursday, priming the Australian market for late week gains as new data showed cooling US inflation and a loosening labour market.
All three major American stock indexes jumped more than 1%, with several megacaps sensitive to interest rates — Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) — leading the charge.
The number of Americans filing new claims for unemployment benefits increased more than anticipated last week, suggesting labour market conditions in the US were slowly easing even as higher borrowing costs weigh on economic demand.
And though analysts at ANZ are sticking to their prediction that Australia’s Reserve Bank will hold the cash rate at 3.6% in May, other economists have suggested our labour market — which is much tighter — could give way to further rate hikes down the track.
On Friday, the Australian share market opened slightly lower but quickly pivoted to follow Wall Street and by lunch time had gained roughly 0.2%.
Gold miners lift ASX
Much of the ASX’s gains came down to major gold producers, helping to offset the impact of iron ore futures, which slumped overnight due prevailing pessimism around Chinese steel demand.
Silver Lake Resources Ltd was up 7.2%, Regis Resources Ltd (ASX:RRL) gained 5%, Northern Star Ltd was 3.9% higher, Evolution Mining made 3.5% on the week and Gold Road Ltd was up 3.6%.
Gold prices have been moving higher in recent weeks as the US dollar and new economic data sparked bets that the US Federal Reserve may be nearing the end of its rate-hike cycle.
The precious metal is typically considered a hedge against inflation and economic uncertainty, but higher interest rates tend to dim non-yielding bullion’s appeal.
Gold prices surged on Thursday to a one-year high of $2042.50 per ounce — roughly $30 short of the all-time high it reached in 2020.
Lithium lags
While gold steams ahead, analysts are warning that the decline in lithium prices is not over yet as underwhelming demand for electric vehicles in China clashes with steady supply growth.
The collapse has given way to a sell-off among Australian lithium stocks, with Pilbara Minerals Ltd (ASX:PLS) down 25%, Core Lithium Ltd (ASX:CXO) down 23%, Allkem Ltd (ASX:AKE, OTC:OROCF, TSX:AKE) down 15%, and Lake Resources Ltd down 40% since February.
Prices for Chinese lithium carbonate have dropped 67% so far to roughly US$25,704 (A$38,338) per tonne — a level not seen since the third quarter of 2021.
Though some analysts expect China’s EV sales to pick up over the rest of this year, lithium prices are still expected to slide another 42% to US$15,000 per tonne over the next 12 months, according to Goldman Sachs (NYSE:NYSE:GS).
Changes to the ASX 200
S&P Dow Jones Indices announced this morning that it will remove OZ Minerals Ltd from the S&P/ASX 200 list, replacing it with Bellevue Gold Ltd (ASX:BGL).
The change comes after a meeting in Adelaide on Thursday, during which shareholders voted in favour of the $9.6 billion takeover of OZ Minerals by BHP (ASX:BHP). The board of OZ Minerals had previously recommended shareholders accept the offer, which was rejected in August before BHP bumped its bid from $25 per share to $28.25 in December.
Though the takeover remains subject to final court approval, S&P Dow Jones Indices said it expects to remove OZ Minerals prior to the start of trading on Wednesday, April 19.
As for Bellevue, 2023 is shaping up to be a milestone year. In February, the company unveiled a suite of management changes in preparation for the start of production. Then, at the start of April, Bellevue announced that mining had begun at the Vanguard open pit within its Bellevue gold project in Western Australia.
The Vanguard pit is expected to provide 10,000 ounces of gold, which Bellevue anticipates starting to process in the middle of this year.
Kazia regains Nasdaq compliance
Drug developer Kazia Therapeutics has received notice that it has regained compliance with the Nasdaq’s minimum bid price requirements.
On December 9, 2022, the company was informed that its American Depository Shares (ADSs) had closed at a price less than US$1.00 per share for 30 consecutive business days.
Though such notice does not immediately affect a company’s listing, companies in breach of the minimum bid price requirement have 180 days to rectify the deficiency or may face de-listing.
Should a company achieve a closing price of at least US$1.00 per share for ten consecutive days during this time, it is considered to have regained compliance. Kazia was presented with a notice to this effect on April 13.
Smallcap snapshot
As of 2pm on Friday, the biggest gainers on the ASX included Zuleika Gold Ltd which jumped 38.5%, PolarX Ltd (ASX:PXX) with 30.8%, Taruga Minerals Ltd (ASX:TAR) with 28.6%, 4DMedical Ltd with 22.2%, and Future Metals Ltd with 21.1%.
Those that had a less enjoyable day include Hexima Ltd which fell 26.7%, Happy Valley Nutrition Ltd which fell 16.7%, Corum Group (ASX:COO) Ltd which fell 15.9%, Carbine Resources (ASX:CRB) Ltd which dropped 15.4%, and Roots Sustainable Agriculture Ltd which fell 14.3%.
Written by Oliver Grey.