Market Highlights: ASX to continue its rally as market fear eases; and 5 small caps to watch

ASX set to to rise sharply again on Monday, with ASX200 futures up 0.8pc
Wall Street gained on Friday as market fear eased
Media stocks struggled, Taiwan Semiconductor rose 1.5pc, Expedia jumped nearly 10pc

Aussie stocks are set to rise sharply again when the market opens on Monday, mirroring the mini rally in New York. At 8am AEST, the ASX200 futures contract was pointing up by 0.8%.

On Friday, the S&P 500 closed higher by 0.5% but showed little change for the week, recovering nearly all its losses from Monday’s sharp drop.

The tech heavy Nasdaq also climbed by 0.5% while the blue chips Dow Jones lifted by 0.13%.

Calm has returned to the market as the CBOE Volatility Index (VIX), which measures market fear, dropped by 14% after rising sharply earlier in the week.

This came as Federal Reserve officials said on Thursday that they were confident inflation is easing and hinted at possible rate cuts.

John Stoltzfus at Oppenheimer & Co. reckons the bulls have more room to run from here.

“We’re still bullish on stocks, he told Reuters. “US economic fundamentals remain on solid footing despite the drag of tight monetary policy, which we believe will soon be reduced.”

To stock news, it was a tough week for media stocks as Warner Bros. Discovery (WBD) and Paramount Global both announced major write-downs of their cable business valuations.

On Wednesday, WBD disclosed a huge US$9.1 billion impairment charge after losing a major NBA media rights deal.

Taiwan Semiconductor (TSM) rose by 1.5% after the company reported a 45% year-over-year sales boost in July, driven by strong demand for AI chips.

Meanwhile, travel stock Expedia was one of the best performers on Friday, jumping almost 10% after reporting better-than-expected Q2 results.

However, CEO Ariane Gorin noted that travel demand has weakened, leading the company to lower its forecasts for the rest of the year.

Closer to home, the ASX is gearing up for a busy week of earnings reports.

What happened last week?

Last week was the most volatile week of 2024 so far.

The Dow dropped 1,000 points on Monday, and the S&P 500 fell 3% for its worst day since 2022.

This drop was mainly due to disappointing US job data and concerns that the Fed Reserve was slow to cut interest rates, along with hedge funds unwinding a popular currency trade.

However, the market rebounded later in the week. On Thursday, positive jobless claims data eased some worries about the US economy.

The VIX Index, which measures market fear, spiked to levels not seen since the early days of the pandemic and the Great Financial Crisis (GFC).

But investors bought into the dip, believing another crisis was unlikely, and attributed earlier losses more to hedge fund adjustments rather than serious economic threats.

The 10-year Treasury yield also saw swings, dropping below 3.70% at one point but then rising above 4% before ending around 3.94%.

This volatility is typical for late summer when trading slows down, and doesn’t necessarily signal a worsening economy, experts believe.

Last week also saw traders starting to unwind their yen “carry trades,” where money is borrowed in low-interest currencies like the Japanese yen and invested in higher-yield assets.

In China, July’s consumer price index rose 0.5%, beating expectations, while the producer price index fell 0.8%, slightly better than forecast.

Damien Klassen at Nucleus Wealth said this reporting season for global companies had been among the best ones in the past few years.

“The fundamentals for company earnings are looking a lot better than they have for some time,” Klassen said, noting that valuations were expensive.

In other markets …

Gold price rose by 0.25% to US$2,430.60 an ounce.

Oil prices lifted by 0.7%, with Brent crude now trading at US$79.60 a barrel.

The benchmark 10-year US Treasury yield retreated by 5 basis points (bond prices higher) to 3.95%.

The Aussie dollar dropped by 0.3% to US65.75 cents.

The iron ore price rose by 1.5% to US$100.90 a tonne.

Bitcoin, meanwhile, retreated by 4% in the last 24 hours to US$58,675, while Ethereum also eased by 2% to US$2,559.

5 ASX small caps to watch today

Iondrive (ASX:ION)
Iondrive has partnered with PEM and PEM Motion from RWTH Aachen University in Germany to advance battery recycling technology in Europe. This agreement marks a significant step, as it formalises their collaboration and highlights the unique benefits of Iondrive’s eco-friendly recycling process.

PEM is working on creating a group of partners and securing funding to meet new European battery recycling regulations starting in 2025, which focus on improving recycling efficiency and material recovery. The goal is to assemble a consortium including key players from the battery recycling industry to test the performance of recycled battery cells. Over the next three months, Iondrive and PEM will develop a detailed plan for a pilot plant that uses Iondrive’s technology.

Thor Energy (ASX:THR)
Thor announced that it has received all necessary approvals to start drilling at its Wedding Bell and Radium Mountain projects in southwest Colorado. This means it can now begin follow-up drilling at these sites, including at the Rim Rock and Groundhog prospects. The drilling will test areas where it already knows there are minerals, with hopes of including these findings in future resource estimates.

Predictive Discovery (ASX:PDI)
PDI announced positive new drilling results from its Bankan Gold Project in Guinea. Drilling at the Gbengbeden area revealed strong gold grades that could increase reserves, with notable results including 1.51 grams per ton over 25 meters. The BC and 800W areas also showed promising results, and impressive gold grades were found at the SB target. Plans are underway to drill more at SB and continue evaluating these findings later this year.

Everest Metals (ASX:EMC)
EMC has reported news from its Revere Gold and Base Metal Project in WA. Recent bulk sampling has confirmed the presence of a high-grade gold reef system that extends from the surface. This system is similar to the renowned Bendigo Gold Province in Victoria, known for its high-quality gold deposits.

The company has started crushing the ore and plans to set up a gold processing plant by September. EMC also plans to begin 5,500 meters of exploration drilling in late August. The initial sampling has revealed just a small portion of the system’s potential, and further exploration and resource assessment are underway.

Battery Age Minerals (ASX:BM8)
BM8 has had a strong start to its 2024 drilling program at the Falcon Lake Lithium Project in Ontario. Recent drilling revealed large sections of spodumene-bearing pegmatite, a key lithium source, with notable results including over 50 meters of mineralisation in several holes.

The Falcon Little Lake target and Falcon East Extension both showed significant finds, and geophysical surveys suggest more potential to the south. The company is speeding up assay results, expected by late August and early September, and plans further drilling based on these results.

At Stockhead we tell it like it is. While Everest Metals is a Stockhead advertiser, it did not sponsor this article.