Light the furnace: The metal in your 5-cent coins is going through the roof. The coins are three parts copper and one part nickel. Nickel prices surged to $100,000 a tonne on Tuesday in a short squeeze that brought the 145-year-old London exchange to its knees and halted trading. Those prices make the nickel in your 5-cent coin worth a dime. The other 3 cents is for the remaining copper, which ranges from 70¢ to $1.80 a lb over the same period, or a jump of nearly 60% since the pandemic.
For would-be smelters this is unfortunate: the minimum lot is 6 tonnes (or 6 horses, roughly), the weight just on the low side of all 5 cent coins struck in 2021.
Chasing non-profitability
Afterpay-acquirer Block has been booted from the S&P ASX 20 an index of Australia's largest 20 companies after a run of poor performance. Shares of the US payments giant listed locally (ASX: SQ2) have fallen 17% this year, a wild ride that has included four changes of more than 10% in less than seven months. Replacing the technology innovator is old-world energy firm Santos, which has risen 14% this year. The times, they are changin’.
Reserve Bank breaks up the band
Reserve Bank deputy governor Guy Debelle, who moonlights as drummer/lead singer for the central bank’s house band “the GFC”, has walked. He’s been lured from Martin Place by Andrew Forrest and will now head to Fortescue Future Industries, the clean energy arm of Fortescue Metals, as chief financial officer. Fortescue Future Industries is investing in zero-carbon green hydrogen, a fuel that is the leading hope for phasing out fossil fuels in steel production and other industrial processes.
My my Myer
The shares of David’s Jones arch-rival Myer jumped by 27 per cent to 51 cents on Thursday after it delivered higher-than-forecast sales and profit. Markets also greeted the board’s decision to reinstate dividends for the first time since fiscal 2018 several years ahead of estimates. The leap is more good news for shareholders who saw their shares trade as low as $0.10 in the Covid-19 selloff. Business will be able to move more sales online as anticipated. On Friday shares closed at $0.52 cents, a thirty-six percent discount to fair value.
AGL bidders bid adieu
Tech billionaire Mike Cannon-Brookes and Canadian asset manager Brookfield are “pens down” after AGL’s board dismissed an improved bid on the basis it was “well below” fair value. The $8.25 per share proposal represented a 15% premium to the closing price of $7.16 on the day before the offer and 35% above the 7 December closing figure. AGL shares have recovered alongside rising wholesale electricity prices; the spot price in NSW was up 12% since late February. The board is pressing on with its plan to demerge AGL’s fossil fuel assets, which is expected to be put to a vote in mid-June 2022.
Rate hike expectations build
Reserve Bank Governor Philip Lowe left analysts in a tissy after saying a rate hike this year is “plausible” on Wednesday. Markets in derivatives are now pricing a cash rate of 1.3% by December with six possible rate hikes as fuel prices climb. That’s an increase from about 1.1 percent earlier in the month. Trading on a wide spread between the Governor and traders. In his speech to the AFR Business Summit, Lowe reaffirmed the risk of acting too early, and noted that the bank has time to digest incoming data before taking a decision.
Aluminium prices round trip
Aluminium prices joined world commodity prices this week in taking a breath after the breakneck rally of last week. Prices soared 20 percent in the days after Russia invaded Ukraine as traders fretted about how sanctions would affect one of the world’s top aluminium producers. Cash rates on the London Metal Exchange were 8% lower on Thursday compared with last week’s close. In a potential sign that longer-term problems linger, futures contracts for December of 2023 were down just 2% over that time.
Shares of alumina heavyweight Alumina (ASX: AWC), used in the production of aluminium metal, sunk 4% lower this week. Rio Tinto (ASX: RIO), which derived 12% of underlying earnings from the metal in 2021, is also down. In 2019-2020, aluminium and its ore precursors were Australia's seventh-largest export at a value of $12.6 billion.
ASX: Market recap: Oil drives volatile week
Australia’s share market has whipsawed between higher and lower this week against a backdrop of wild swings in oil markets and stop-start progress in peace negotiations between Russia and Ukraine.
The benchmark S&P/ASX 200 finished down 0.94% on Friday, after closing up more than 1% the previous two days. The index ended 0.66% lower for the week. All sectors finished the week in the red except for consumer staples and financials, which added 0.3% and 2.2%, respectively. The materials and information technology sectors fell 3.4% and 1.8%, respectively.
Wild swings gripped markets as surging energy prices scramble predictions for economic growth, inflation and schedules of central bank rate hikes. Soaring oil prices are resurrecting the prospect of stagflation, a toxic mix of slowing growth and inflation, just as central banks are readying to lift interest rates for the first time in years.
“One of the big things that has come into focus this week was the concern that the rise in energy prices was going to lead to demand destruction and a recession,” says Aaron Binsted, a portfolio manager at Lazard. There have been a few down days for cyclicals with defensives rebounding,” he said. And then you had people betting, “Well, if growth is down because we’re facing a slowdown, then rates might not go up.”
Bets that interest rates would be lowered also unwound on Friday after US inflation rose to its highest levels in 40 years overnight, and following a European Central Bank decision to bring forward the end to its bond-buying programme in the face of inflation.
The S&P/ASX 200 All Technology index shed 3.1% on Friday after rising 14% on Tuesday and Wednesday.
Markets were given a mid-week boost on Wednesday (Europe) by comments from Russia’s foreign ministry spokeswoman that the country would prefer to reach its objectives through talks. Hopes of a negotiated peace were frustrated a day later when talks between the foreign minister for Ukraine and Russia’s foreign minister stalled in Turkey.
Resource heavyweights BHP, Rio Tinto and Fortescue Metals gave up last week’s blockbuster gains to close down between 5.4% and 10.9%. Rio Tinto was further weighed down by its going ex-dividend Thursday.
Oil prices retreated after a torrid week, losing 11.8 percent from Monday’s close of US$123.2, finishing at US$108.6 as of 4pm AEST on Friday.
