The Australian stock market is up for the third week in a row, with the ASX 200 rising 1.01% for the week and 5.83% over the past month to close trading on Friday at 7015.6 points.
Whether we witness a bear market rally or just a correction in a big bull market remains to be seen, however positive breakouts are appearing.
RBA raises rates again
The Reserve Bank of Australia (RBA) raised the cash rate on Tuesday by 0.5%, taking the headline rate to 1.85%.
The highest it has been in six years.
RBA Governor Philip Lowe hinted that rate hikes going forward will be more modest, adding that “inflation is expected to peak later this year and then taper back towards the 2-3 range.” %”.
Commercial banks do the same
The main banks in Australia join the RBA rate hike and confirm that they will pass the increase in their variable mortgages by 0.5%.
Even though the Big Four are taking steps to raise rates for borrowers, only a few savings accounts will see an increase. Savers generally continue to be punished for inflation above the banks’ rate of return.
June retail sales saw a surprising 1.4% increase in volume and a 12% year-over-year increase in dollar terms.
However, the increase is largely a reflection of price increases and the end of government-imposed lockdowns.
General sentiment and rate hikes have started to have an impact on the Australian property market, with prices beginning to cool across all major markets.
The risk of recession remains
England’s central bank didn’t pull any punches this week either, raising interest rates by 0.5% to a headline rate of 1.75%.
The biggest rate increase in 27 years.
What drew the most attention was the Bank of England’s (BoE) prediction that a long recession is looming.
The BoE expects inflation to peak at 13.3% in October, indicating that the UK economy will start to contract in the last quarter of 2022 and will contract throughout 2023, making it the longest recession ever. long since the global financial crisis.
Another sign that inflation may be peaking is that the price of oil is now at pre-Ukrainian war levels.
With crude oil trading today at $87 a barrel, significantly down from its recent high of $126 a barrel.
Small cap stock
The Small Ords index rose 2.02% during the week to close at 3016.8 points.
The small-cap companies that made headlines this week were:
ioner (ASX: INR)
emerging lithium producer ioneer signed another binding purchase agreement for lithium carbonate produced from its Rhyolite Ridge project in Nevada.
The five-year agreement was made with battery manufacturer Prime Planet Energy & Solutions, which is a joint venture between Toyota Motor Corporation and Panasonic.
During the term, Prime will purchase 4,000 tpy of lithium carbonate from the operation, which represents about 19% of the expected annual production.
The deal follows other purchase agreements with Ford and EcoPro, which have each agreed to take 34% of the mine’s planned annual lithium carbonate.
ioneer says the three purchase agreements represent the completion of all of its Rhyolite Ridge lithium carbonate pre-production commitments.
BPH Energy (ASX: BPH)
BPH Energy and its investee Advent Energy have completed a 10% acquisition of Clean Hydrogen Technologies.
The deal involved BPH getting US$800,000 worth of Clean Hydrogen shares, giving it an 8% stake.
Advent bought US$200,000 worth of shares, giving it a 2% stake.
Both BPH and Advent have an additional right to decline to acquire another 10% share in Clean Hydrogen for a combined amount of $1.42 million before the end of the year.
Clean Hydrogen has developed technologies to produce hydrogen and carbon black and carbon nanoproducts, using less energy and without emitting carbon dioxide. The technology uses natural gas as raw material.
Border Energy (ASX: FHE)
Emerging clean energy producer Frontier Energy debuted on the US-based OTCQX market this week under the symbol FRHYF.
The US secondary listing is to improve Frontier’s visibility and accessibility to North American investors.
News of the US listing came after Frontier announced that it was acquiring additional land for its main Bristol Springs solar project in south-west Western Australia.
The company secured exclusive options to acquire 6.51 km2 of land for the project, in addition to the existing 1.95 km2, where it plans to produce 114MWdc of solar power.
This additional land will allow Frontier to realize its green hydrogen production strategy, which it is closer to achieving after a pre-feasibility study forecast would have a total unit cost of $2.83/kg of hydrogen produced.
Frontier says this would position Bristol Springs as one of the lowest cost producers of green hydrogen in Australia.
Kairos Minerals (ASX: KAI)
gold explorer Kairos Minerals attracted investor interest this week after revealing assays by spodumene pegmatites that he had discovered in his Mt York project.
The pegmatites were discovered during construction of the drilling platform in preparation for a gold drilling program at the Lucky Sump prospect.
Five pegmatite samples that were analyzed yielded maximum results of 1.91% lithium and 103 ppm tantalum; 1.56% lithium and 115 ppm tantalum; and 0.58% lithium and 167 ppm tantalum.
Kairos plans to follow up the discovery with further sampling and mapping, as well as a major drilling campaign.
Lucky Sump is adjacent to Pilbara Minerals’ Pilgangoora lithium operation and about 25 km from Albemarle and Mineral Resources’ Wodgina mine.
It is suspected that the Lucky Sump could be an extension to the south of Pilgangoora.
Incannex Healthcare (ASX: DIH)
After completing its APIRx acquisition on FridayIncannex Healthcare officially has the world’s largest portfolio of proprietary medicinal cannabinoid drug formulations and psychedelic treatments.
The acquisition was announced in March, with APIRx co-founders Dr. George Anastassov and Lekhram Changoer joining Incannex as non-executive director and chief technical officer, respectively.
APIRx has 22 preclinical and clinical research and development projects, with aggregate addressable markets of US$400 billion a year.
The acquisition continues Incanex’s announcement earlier in the week that it would expand manufacturing of IHL-216Awhich is a neuroprotective drug designed to treat concussion and traumatic brain injury.
Incannex contracted with Curia to scale-up fill-finish manufacturing of IHL-216A in compliance with current Good Manufacturing Practices (cGMP) and generate drug quality and stability data to support future regulatory submissions.
European Lithium (ASX: EUR)
BMW AG is the latest major automaker to secure a direct supply of lithium hydroxide after signing a non-binding memorandum of understanding with European Lithium.
European Lithium has agreed to grant BMW the first right to 100% of the lithium hydroxide produced from its identified resources at the Wolfsberg project in Austria.
Should the parties agree to a binding contract, BMW will make an initial payment of $15 million, which will be used to advance Wolfsberg.
A definitive feasibility study on Wolfsberg is scheduled to be completed in the December quarter.
On the local front, consumer and business confidence numbers are available mid-week, along with consumer inflation expectations and new home sales for July.
In the US, July’s inflation numbers will reveal how far behind the Federal Reserve is in what it once called “transient inflation”, which has been quite the opposite.
Analysts forecast that inflation will return to 9.1% for July, the same as for the month of June. This was the highest inflation reading in more than 40 years.
Meanwhile, in China, July inflation and industrial production figures will be released.
Of course, these inflation figures are a hindsight, however, it is clear that the globally synchronized central bank policy of rates held near or below zero percent in most countries for more than a decade and excessive money printing is causing inflation to spiral out of control and the cost of living to rise for people around the world.