While higher rates sent US tech stocks into the stratosphere this year, Australian investors watched juliette from across a moat of iron ore. No longer. BHP has fallen 25% from an April peak. In a little more than three weeks, Rio has dropped 15%. Commodity prices fall as investors wager central bank rate increases will smother demand for raw materials. Iron ore is hovering around the US$100 figure (US$109.75 the morning). Oil hovers just shy of pre-invasion levels. A Chinese stimulus could help sustain prices in the short run but, twenty plus years into the China boom, the iron ore fundamentals are nowhere near as strong. The miners are aware of this and are investing billions in acquiring what the industry refers to as “future facing metals”.
Queensland is asking for a lump of coal in its stocking
Queensland is rewriting tax law to cash in on record coal prices. Coal prices are still hovering near all-time highs, which were reached around $400 a tonne, and first seen after Russia invaded Ukraine. Miners collecting the freak windfall will have to pay up for the coffers. Three other tiers will have royalties gradually increase based on coal prices to a cap of 40%. The current ceiling is 15%. Miners blamed the government for risking jobs and investment. He said coal royalties had been capped for 10 years. Norway, meanwhile, taxes its oil and gas sector 78% (of net profit), depositing the revenue in its US$1.2 trillion-dollar sovereign wealth fund.
"Boomer fantasy"
And with inflation expected to reach 7 percent this year, unions are demanding that wages keep up. That's despite businesses and Reserve Bank Governor warning meaty wage hikes will impoverish workers. They worry about a 1970s style wage-price spiral, that would drive inflation and push rates (and unemployment) up. Australian Council of Trade Unions Secretary Sally McManus dismissed fears of a 1970s wage-price spiral as “Boomer fantasy,” in an interview on Thursday, saying she “looked forward to the day when people start calling for caps on profit until inflation is under control.”
Facebook is now a value stock
Mark Zuckerberg is getting kicked out of growth stock heaven. Facebook parent Meta Platforms will not be present when the FTSE Russell 1000 Growth Index reconstitutes on Friday. The Zuck is being shuttled onto the Russell’s sister index: The FTSE Russell 1000 Value. Netflix and Visa could join Facebook after hair-raising plunges. Once-glitzy FAANGs will now sit alongside plebs like Berkshire Hathaway, Pfizer and the grubby oilmen of Exxon Mobil.
Packer up boys
Crown on Friday departed the ASX boards to head into the arms of US private equity behemoth Blackstone. Major shareholder James Packer will pocket $3.3 billion in return for his troubles (of which two Royal Commissions are one). The exit comes two days after state regulators tentatively approved an opening of the gaming floors atop the giant glass gherkin that is Sydney’s Barangaroo Tower. Those who want a taste of Crown will now have to do it from a roulette table.
Lithium runs out of charge
Just days after muscling out Platinum Asset Management for a place on the S&P/ASX 200, lithium play Lake Resources is flaming out. Shares have been cut in half in just over a week. Shares were sold down early Monday following the unexpected exit of managing director Steve Promnitz. On the way out the door he reportedly sold his ~10.2 million share holding. Nothing to see here. The stock has been pitched aggressively to retail investors, many of whom are now sitting on big losses. You live by the hype, you die by the hype.
ASX wrings out a weekly gain: Market recap with AAP
The local share market has capped off the week with a flair, strong gains by tech stocks and lithium players alleviating weakness in the energy sector.
The benchmark S&P/ASX200 index climbed 0.77% on Friday to end up 1.6% on the week, its best performance since the week ended March 18. The index is down 8.8 percent in June, heading for its worst monthly performance since March 2020, with four trading days still to go.
“Our first bumps for the month and our first back-to-back ones as well,” said CommSec market analyst Steven Daghlian. “But we’re still in that correction territory.”
Tech stocks gained from a drop in bond yields, making the risky high-growth sector look more enticing.
Australian 10-year bond yields reached an eight-year high of 4.1% last week after hawkish remarks by Reserve Bank governor Philip Lowe in an interview with the ABC but fell to 3.7% this week amid concerns the speed of rate hikes will spark a recession.
Elsewhere, Vulcan Energy surged 26.8% on news Fiat and Chrysler owner Stellantis N.V. would acquire an 8% stake in the fledgling lithium producer for $76 million.
It marks the first such investment in a lithium company by a top tier automaker, with the funds going toward expanding Vulcan’s zero-carbon-footprint lithium project in Germany’s Upper Rhine Valley.
A slightly weaker Australian dollar helped bolster earnings potential for companies with overseas operations, including Qantas, which dipped 1.6% after the airline said it anticipates a “significant” full year loss while potentially earning up to A$550 million in underlying operating profit in the second half. The flagship is also reducing capacity predominantly on high frequency routes to better weather high fuel prices, all while announcing also moving new flights from Perth to both Jakarta and Johannesburg.
Betmakers jumped 20% after the wagering technology firm announced a buyback of as much as 10% of its shares.
