If politics can pack a lot in a day, give markets a week and they’ll take a mile.

It’s been hard work from Monday on. We’ve had three central bank rate rises. One record climb and a mighty fall in response.

The benchmark ASX200 is going to fall the most it has in a single week in well over a few years and the Emerging Companies XEC has shed some 6.6% for the week.

Ach. It’s not a great time to be all in tech. Our sector has shed about 4% today. One fears where the Nasdaq will head to from here.

Perhaps time to bring a few professionals in to the picture for a bit of a race around the grounds.

Mad chartist, philosopher and thinker, Lessep IM’s James White reckons bond yields are peaking.

He says the US-10yr is slowly losing upward momentum.

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“Some of is the Fed, but it’s mainly activity,” White says. “UBS reckon April was the peak for inflation. They expect core and headline inflation to be below 2% by year end. The decline in transport reflects lower used-car prices.”

 

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High inflation is not a synonym of non-transitory inflation

Indeed, White says, these tippy-toppy rises are likely to lead to lower prices, down the track, on the back of weaker demand.

“No Christian, the debate over transitory inflation or not has not been decided.”

Via Hedgeye/Twitter

Really?

“No. For instance, in Europe, one-year forward electricity prices are up 4x on the start of 2021. Lower demand is coming. Factories don’t make money on these prices.

Commentary in the US Services ISM Survey said as much with wholesalers highlighting cost pressures are hurting demand, retailers blaming supply chains and public administration impacted by staff shortages.”

 

A week in commodities

James says a common theme running through the fatalistic end of the market is “a complete breakdown in commodity markets. ”

“The Credit Suisse strategist Zoltan Pozsar sums it up best: “central banks can’t print oil”.

“The argument goes that there is no policy solution to an absence of physical commodities created by fundamental disruptions, such as the war in Ukraine,” he adds.

White’s current focus is New York diesel, where current inventories are at 30-year lows.

“It’s unclear what happens if they run to zero,” he says, without much irony.

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Meanwhile over in lithium spodumene spot land, “prices seem to have eased slightly but remain high relative to history.

“This chart from Hartleys shows a gap between Allkem’s contract price and the spot price,” White observes.

 

 

Taking us back home is CBA’s Gareth Aird, who points out the central banks surely has radically upgraded their forecast profile for underlying inflation.

Aird reckons the RBA’s central scenario puts the trimmed mean at 4.6%/yr at end-2022 (where it’s forecast to peak). The bank now expects the unemployment rate to be 3.8% by mid-2022 and to further decline to 3.6% over 2023.

“We expect the RBA to deliver 25 basis point rate hikes in June, July, August and November 2022 that would see the cash rate target end the year at 1.35%.

“We then expect a further 25 basis point rate hike in February 2023 that would see the cash rate target at 1.60%, Aird says.

“From there we have the key policy rate on hold over 2023.”

Via CBA

So, are we screwed Gareth?

“Looking ahead, the RBA acknowledged (in its SoMP) that there is significant uncertainty for the global economy.

“It is uncertain how consumer demand will respond to withdrawing stimulus in the context of very high inflation and tight labour markets. Due to the above factors and significant uncertainty, the RBA’s view is that the risk to global growth is skewed to the downside.

“We very much agree,” Aird says.

So. Not quite yet, is the answer.

 

How did this week’s IPO’s perform

Solstice Minerals (ASX:SLS) is down 16% for the week. Sadly, the wholly-owned subsidiary of OreCorp (ASX:ORR), gold and nickel focused Solstice jumped to 30% above its listing price to $0.26 per share before settling around $0.225 or 12.49% up on Monday.

The IPO of $12m at $0.20, focuses on four WA assets; Yarri, Kalgoorlie, Yundamindra and Ponton.

“We believe that the demerger and separate listing of Solstice Minerals presents an exceptional opportunity to realise the inherent long-term value of the WA Assets through the creation of a WA focussed corporate vehicle,” executive director Alastair Morrison said.

“With a cash balance of $17 million (before costs, including the Company’s cash balance at demerger) and an experienced Board and senior management team, we look forward to progressing exploration and development activities on the WA Assets and building long-term value for shareholders and other stakeholders.”

Sarama Resources (ASX:SRR) is down 5% for the week after it listed at 20 cents a pop following an IPO of $8m.

The West African gold explorer, already listed on the TSX, and jumped  10% in early trade on Monday.

The company has sights set on growing its flagship Sanutura project in Burkina Faso, which is already pretty big with mineral resource of 2.9Moz. Funds from the ASX IPO will be used for first major drill program in 5 years, with 50,000m of mostly extensional drilling planned in the next 12 months.

The company also has two other assets in the region – the Koumandara project and Karankasso JV with Endeavour Mining (TSE:EDV) Soil geochemical surveys and auger and scout drilling at Koumandara have all delivered high-grade results to date – including 4m at 13.55 g/t gold.

The CSIRO-backed mining-tech firm Chrysos Corp (ASX:C79) ‘coming out party really makes one want to go back in – it’s been a shite ASX debut and not your fault – but giving up a third of your market value probably doesn’t make it any easier to swallow.

The company backed by the hilt by 22% shareholder the science-y peeps at the CSIRO, does analysis for the gold sector. A fine niche, one would think.

They use X-rays that bombard rock samples and consequently activate gold atoms and the like.

Chrysos raised circa $185 million at $6.50 a pop, in what many reckoned would be one of the fatter float of ’22.

 

ASX SMALL CAP WINNERS

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ASX SMALL CAP LOSERS

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