China hype wanes
The defining event at the end of this week has been, perhaps, unsurprising – after just over a week, the thrill China’s latest stimulus announcements put into world markets has started to subside.
Stocks in Hong Kong crashed 30% on Thursday as excitement wore off, and we’ve also seen a pullback in ASX mining stocks on Friday – though, not in commodity markets, where most goods that benefitted last week remain higher MoM.
I pondered on whether or not this would happen in last week’s wrap (in a way that suggested I thought it would) – and now, it’s come true. Don’t tell me I don’t do anything for you.
Stimulus thesis didn’t make sense
Most curious about the last reaction to Chinese stimulus is that it was actually based more around artificially propping up the country’s stock market.
The PBOC is giving money to Chinese brokers to buy Chinese stocks, which if you think about it, wouldn’t actually do anything at all for the real Chinese economy. So there’s that.
When it comes to the real Chinese economy, the PBOC just told banks to loosen barriers to entry for mortgages, and, cut interest rates slightly. But they’ve already done that, like, five times this year. Who cares? It was obviously the stocks thing that got people excited, but share markets aren’t economies.
It seems markets are realising they might have gotten a bit overexcited. But that’s enough thinly veiled gloating. Let’s talk about HotCopper.
What HotCopper had its eyes on
One of the most watched stocks this week has been a company with no news out – stem cell player Mesoblast (ASX:MSB). Mesoblast jumped 11% on Friday with no news announced; over the last week, it’s up 37%. While there was a webinar on Friday, its strong performance precedes that one event.
A long-running thread on HotCopper has long been devoted to Mesoblast – don’t forget stem cells were once a force of hype unparalleled by anything else in biotech – and for true believers who haven’t lost sight of the prize, Mesoblast has long been a healthy point of discussion.
Its six month returns are perhaps most impressive: shares are up +77% over that timeframe. At market close on Friday 4th October, shares are worth $1.50.
What else was HotCopper watching this week? White Cliff Minerals’ (ASX:WCN) Friday announcement it had found potentially the highest grade copper rock chips ever found was enough to spur healthy interest; earlier in the week, it was Rincon Resources’ (ASX:RCR) 212m copper hit (grading at 0.23%) practically from the surface, as well as some brief REE intersections.
(Most investment bank analysts in the world broadly are bullish on copper right now; so is BHP, which this week said it expects copper demand to rise by 1Mtn per year into 2030.)
Middle East rears its head…again
No wrap of this week would be complete without talking about that great market catalyst: war.
Israel has begun bombing Lebanon more thoroughly, except this time, it’s Beirut. We’ve seen a lot of action in the last week: top Hezbollah commanders killed, Hamas commanders killed (also in Lebanon,) a mass shooting in Tel Aviv, and Iran fired 200 missiles into Israel.
(In an unfortunate turn of events, it appears the only casualty of the Iranian strike was a Palestinian in the West Bank who was killed by a fallen missile fuselage.)
As of Friday, it now appears Israel may be seeking to strike Iranian oil infrastructure. In turn, oil prices jumped 5% on Friday above US$77/bbl, which represents an 8.3% gain for Brent Crude this week as at 4.30pm Sydney time October 4th 2024.
That could be a bad thing for Australia’s disinflation trajectory. On Friday, petrol prices in Sydney hit new all-time-high records.
It feels a bit like COVID all over again. I’ll be keeping a very close eye on things over the weekend. Speaking of weekends – have a good one.
(And don’t forget to check my list below of headlines that I feel to be important – there’s a lot I haven’t talked about.)
What HotCopper was watching
- Rincon hits mammoth copper drill hit at 212m in width from surface
- White Cliff believes it’s uncovered the highest graded copper rock-chips ever found
- Stem cell darling Mesoblast up nearly 80% over last 6 months; 40% gains in Week 40
Australian Economy
- Australia delivers second straight budget surplus, first time in 15 years
- Retail sales jump in August on warmer weather; Citi says not conducive for RBA cut
- Property watchers mixed in reaction to negative gearing change rumours
- 92% of businesses in construction are reporting overdue invoices in last year
Australian Equities
- ASX200 has best September quarter in a year; Monday clocks 8,270pts
- Sigma rallies as it addresses regulator concerns on Chemist Warehouse deal
International Equities
- Hong Kong stocks fall on Thursday as stimulus rally loses steam
- Apple falls -3% as iPhone 16 value proposition falters
International Economies
- Saudi Arabia cuts GDP growth forecast to 0.8%
- HSBC call -50bps rate cut from NZ central bank in Week 41
- Eurozone inflation falls below 2% for first time in 3 years
Commodities
- Iron Ore upside persists in second week post-China stimmy announcement…
- But Goldman Sachs’ China analysts remain wary of iron ore boost longevity
- Goldman Sachs see US$2.9K/oz gold price in early 2025
- A week after Shell, Australia’s Origin also ditches hydrogen plans…
- But China is leading record hydrogen project investment
Geopolitics
- Oil, gold rise as Israel and Lebanon share missile strikes; MidEast tension rises broadly
- US ship queues grow as American dockworker strike continues
- US and India agree to cooperate on critical battery minerals supply