Each week, corporate advisory firm Barclay Pearce highlights the key trading themes of the week, along with which companies and sectors Stockhead readers should be keeping their eye on.

A quick market snapshot as Q3 draws to a close; oil prices are ripping higher, M&A activity is surging, stocks are still near record highs and is that… inflation?

Local stocks fell yesterday after a panicky session on Wall Street.

That followed a shift in communication from US Fed Chair Jerome Powell, who acknowledged that US inflation gains through the middle of this year had been “larger and longer lasting than anticipated”.

Uncertainty about the pace at which central banks may have to tighten monetary policy has prompted a punch move in bond yields (here’s how that worked out back in February).

But turning to the ASX, there’s still “a lot of money around” in local markets, said Trent Primmer, Head of Trading at advisory firm Barclay Pearce.

That partly stems from a strong reporting season, which resulted in a cash splash from Australia’s mining heavyweights who reaped bumper profits from the iron ore price surge (those days seem like long ago).

Last week, BHP (ASX:BHP) lavished shareholders with around $10bn while the Rio Tinto (ASX:RIO) cash splash was more like $9bn, with Fortescue (ASX:FMG) set to pay out $7.5bn this Thursday, Primmer said.

That’s a lot of divvies.

Australian investment funds “will receive about $40bn in half-year distributions from stocks in September and October”, Primmer said. “So where they put that cash will be interesting.”

And he flagged ongoing interest in the commodities complex tied to the EV thematic.

“Rare earths, copper, nickel and lithium. With iron ore and gold lately, we’ve seen a bit more interest from clients in those small cap names that have exposure to those sorts of commodities,” Primmer said.

While inflation jitters are still creeping around in the broader market, Primmer said the Barclay team aren’t positioning their portfolios for a sharp move either way at the current juncture.

As a practical example, local stocks fell quite sharply at the open this morning but are now fighting their way back.

“I don’t think this market’s going to be going anywhere fast — no considerable drop or a crazy rally. So I think there’s a reasonable chance it will trade sideways for the remainder of the year,” he said.

In that context, “it’s important on our side not to be nervy and throw in the towel on signs of market weakness”.

Commodities picks

Linking back to the commodities space, Primmer flagged three small caps that are getting particular interest from Barclay Pearce clients.

One is oil and gas junior Grand Gulf Energy (ASX:GGE), which has been climbing sharply in September after raising $3.3m at 1c per share to acquire Utah-based helium play Kessel Resources.

A niche commodity, helium gas is used for… balloons that make your voice sound funny. But it also has the lowest boiling point of any element, which gives it a multitude of use cases as a cooling agent.

There’s also a global supply crunch underway, which is expected to last through the middle of this decade.

In his interview with Stockhead earlier this month, GGE was flagged by high-profile resources investor Tolga Kumova in a basket of resources minnows worth keeping on the watchlist.

Primmer has also been a consistent backer of Hot Chili (ASX:HCH), which recently completed its 100% acquisition of the Cortadera copper-gold discovery in Chile.

“We’re still happy to buy and hold there and build positions for clients that want exposure to that Chilean copper thematic,” he said.

Lastly, Primmer picked out junior explorer Mandrake Resources (ASX:MAN), which has started drilling at its Newleyine prospect 30km east of the Julimar territory that Chalice Mining (ASX:CHN) put on the map with its company-making PGE-nickel-copper-cobalt discovery in March 2020.

From June highs of 25c, the stock has sold off quite sharply but that makes it “quite cheap around these levels”, Primmer said.

In mid-June the company raised $12m at 20c a share, which should leave it “relatively well cashed up”, he added.

“I think if the stock stays near these levels they could come in for some acquisition interest. And obviously there’s some upside there if you look at how Chalice went nuts following their discovery in the same area.”

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.