Hit hardest were high-flying artificial intelligence (AI) stocks such as Palantir and Nvidia which dropped by 8% and 5% respectively after famed short-seller Michel Burry from the book/movie The Big Short placed bets on both falling sharply as the AI bubble deflates.
Collectively, AI stocks are estimated to have lost close to $10 billion in valuation over the past week.
Top investment banks Goldman Sachs and Morgan Stanley are both predicting a 10%-to-20% overall market correction over the next 12-to-24 months.
Gold, Australia’s go-to commodity, eased back below US$4000 an ounce as overall investor confidence took a knock, though most gold producers held their ground thanks to the spectacular profits they are continuing to bank.
Northern Star, the local gold leader, set the pace with an early fall to $23.04 followed by a recovery to $23.37 to be a few cents ahead over the week, perhaps aided by the currency effect flowing from the Australian dollar weakening against its U.S. cousin.
The net result of the currency moves was that the Australian gold price held on to a level above A$6000/oz even as the U.S. gold price slipped.
Gold news of importance included a planned US$20 billion merger in North America of Coeur Mining and New Gold. The all-share transaction will create a business producing 20 million ounces of silver, 900,000oz of gold and 100 million pounds of copper from next year.
More importantly for Australian investors. the deal could be the start of a fresh round of sector consolidation as local miners jockey for the attention of global investors who value size in the stocks.
Most share price moves in the gold sector this week were modest, either way, with Perseus one of the best performers, down 10c to $4.75 while fellow African focused miner Resolute slipped 11c lower to 85c thanks to reports of fresh Islamic terrorist activity in Mali.
Explorer activity was led by MI6, which continues to expand activity at its Bullabulling project in WA, shrugging off the effect of gold price uncertainty to put on 3c to 31c.
Sunstone was another small stock to make modest headway with a rise of 0.4c to 2.2, aided by an updated buy tip from Shaw and Partners with a price target of 5c.
Lefroy exploration received a psychological boost with the receipt of final approvals to start mining its Lucky Strike project in WA but had 1c pruned off its share price which closed at 16c.
Copper, which has rivalled gold for the attention of investors interested in commodities, fell back through the US$5 a pound mark even as reports of weak South American production caught the attention of banks.
Goldman Sachs said in a midweek research note that copper output was soft in August, declining in all analysed countries thanks to the effect of outages, including loss of production from Chile’s El Teniente mine.
Caravel Minerals was the pick of the local copper sector with a modest rise of 1c to 18c after unveiling an improved plan for the development of its big WA copper project.
Capstone Copper, one of the more heavily promoted copper stocks, ran out of road this week, slipping 83c to $12.61 despite a Morgans buy tip with a price target of $16.10.
Sandfire also weakened, shedding 54c to $15.60, as did 29Metals, which lost 1c to 43c despite reporting a promising round of exploration drilling results at its copper and zinc operations in WA.
Iron ore stocks were marked down after a fresh outbreak of Simandou jitters. Fortescue paid the highest price with a fall of $88c to $20.43. Fenix was 6c weaker at 46c.
The iron ore price, which has held up strongly all year, showed signs of rolling over as Simandou’s first shipment date edged closer, easing back by US$2 a tonne on the Singapore exchange to US$103/t.
Champion Iron benefited from proximity of its Canadian operations to the strengthening U.S. economy, rising by 63c to $5.50.
Lithium stocks got a boost early in the week when high-profile investment bank JPMorgan told clients that a recovery was coming thanks to strong and growing demand in the battery energy storage sector.
Other banks disagreed and by the end of the week it seemed that JPMorgan might have been suffering a case of premature optimism.
Liontown rose initially before sliding back to $1.08, possibly heading down to the 80c mark tipped by UBS, or even the 50c from Citi.
Pilbara Minerals performed a similar trick. Up early to $3.37 and then down sharply to $2.98, perhaps on its way to the $2.40 price target of UBS or the $2.65 of Bell Potter.
Rare earth stocks were also sold down as investors reacted to a warning from UBS that the sector had risen too far, too fast, and was exposed to a steep correction.
UBS strategist Richard Schellbach said today’s rare earth market was similar to that of 2010 when China first weaponised its control of the industry with a ban on exports to Japan, an event which led to the birth of the Australian rare earth industry.
“What’s playing out right now in rare earths, we’ve seen before,” Schellbach said.
On cue, top local rare earth stocks fell sharply. Lynas lost $2.08 to $13.36. Iluka fell by 57c to $6.27 and Arafura slipped 6c lower to 25c.
The rare earth correction was felt as far away as the U.S. where its leader, MP Materials, fell by 16% over the past week to US$54.90.
Other moves of interest this week included:
- Image Resources and Sheffield Resources rising modestly on the strength of a media report that both we beneficiaries of a rising zirconium price. Image added 0.3c to 6.5c. Sheffield put on 1.3c to 11c, and
- Locksley Resources slipped 3c to 34c despite reporting receipt of a U.S. Government funding offer for its North American antimony project.
