ASX Small Cap Lunch Wrap: Struggling to get a semi? Don’t worry, it’s probably temporary

Worries over global inflation continue to temper overall market gains.

Iron ore, copper and lumber prices are hitting ludicrous levels.

Then there’s the semiconductor supply shortage, which is pushing up prices for things like cars, touchscreen computers and TVs.

The US consumer price index (CPI) – which measures the average amount punters pay for a ‘basket’ of goods and services – just recorded its sharpest monthly jump since 1981.

Is rapid inflation bad for stock prices? It can be.

Inflationary forces can increase the cost of borrowing money, increase costs for materials and labour, and reduce a company’s earnings expectations.

But experts still believe, tentatively, that this inflationary explosion is temporary, mostly due to the post-COVID ‘Great Reopening’.

Tentatively.

“It’s impossible at this point to say with confidence whether stronger near-term inflation pressures are predominantly due to volatility and temporary factors — such as greater frontloading of price rises — or are a sign that the pandemic has triggered long-term shifts in the inflation generation process,” Oxford Economics says.

“For now, we continue to think that the dominant force is the former, but we remain vigilant for any strong evidence that a more structural shift is playing a role.”

Wall Street ended lower on Monday, weighed down by tech shares as these signs of growing inflation worried investors about the potential for tighter monetary policy (aka increased interest rates).

‘What is causing the decline, no surprise to anybody, is the worry about inflation and interest rates,’ said Sam Stovall, chief investment strategist at CFRA Research in New York.

“As a result, that’s causing the growth group, in particular technology and consumer discretionary stocks, to experience weakness, while some of the more value-oriented groups are holding up a bit better.”

The ASX was green in morning trade, with the benchmark ASX 200 index gaining 37,9 points to 7,061.7 points by midday eastern time.

WINNERS

Here are the best performing ASX small cap stocks at 12pm Tuesday May 18:

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Explorer Great Western Exploration (ASX:GTE) defined a large scale copper-gold target called ‘Thunder’ near the DeGrussa deposit in WA.

Miner and explorers have been hunting for the next DeGrussa – a discovery that put former struggler Sandfire Resources (ASX:SFR) on the map – for over a decade.

Helix Resources (ASX:HLX) harnessed recent popularity to raise $4m for “aggressive copper drilling”.

Latitude (ASX:LCD) today announced it had grown resources at its Murchison gold project in WA by 44%, taking it to more than 1.1 million ounces. 

LOSERS

Here are the worst performing ASX small cap stocks at 12pm Tuesday May 18:

Swipe or scroll to reveal the full table. Click headings to sort.