Morning Bell 4 September

09/03/23 • 4 min

Favourable jobs data out in the US boosted investor sentiment on Friday to close out a winning week on Wall Street. The Dow Jones added 0.3% on Friday while the S&P500 rose 0.18% and the Nasdaq fell 0.02%. For the week though the Dow and Nasdaq each added 1.4% and 3.3% respectively while the S&P500 rose 2.5%.

Non-farm payrolls data out in the US on Friday showed the unemployment rate ticked higher to 3.8% in August, well above economists’ expectations of a hold at 3.5%. The rise in unemployment provides further signal that the Fed’s aggressive interest rate hikes are proving effective in cooling the tight labour market.

Following recent favourable data being released, the market has factored in a 93% chance the fed will hold interest rates at the next meeting, according to CNBC.

Dell Technologies soared 21% on Friday after reporting stronger-than-expected earnings in the latest quarterly results update.

Over in Europe, it was a mixed session on Friday as key US data and a lag in automaker stocks weighed on investor sentiment in the region. Auto stocks fell 2.6% on Friday after a survey out of Germany showed a deterioration in sentiment among automakers with almost half saying lack of orders is impeding production. The STOXX600 closed flat, Germany’s DAX fell 0.7%, the French CAC lost 0.27%, and in the UK, the FTSE100 rose 0.34%.

Locally, the ASX200 fell 0.37% on Friday, weighed down by the healthcare sector falling 1.42% while utilities stocks lost just shy of 1%. Qantas shares have been heavily sold off in recent sessions as the national carrier is facing a record corporate penalty of $600m from the consumer watchdog for allegations that Qantas was selling tickets for around 8000 allegedly already cancelled flights in May and June 2022. This comes alongside the airline facing scrutiny for making it difficult for customers to access and use flight credits, of $570m in total value, for flights cancelled during the COVID-19 period.

What to watch today:

Ahead of the local trading session here in Australia, the SPI futures are expecting the local market to open 0.43% higher ahead of a big week on the economic front this week including the RBA interest rate decision tomorrow, GDP Growth Rate data out tomorrow and trade balance out later in the week.
On the commodities front this morning, oil is trading 0.57% higher at US$86.04/barrel, gold is flat at US$1939/ounce and iron ore is down 0.43% at US$117/tonne.
AU$1.00 is buying 65 cents, 94.28 Japanese Yen, 51.24 British Pence and NZ$1.09.

Trading Ideas:

Bell Potter has downgraded Resimac Group (ASX:RMC) from a Buy to a Hold and slightly decreased the price target from $1.12 to $1.09 on the back of the company releasing mixed FY23 results including home loan book shrinking 14% to $13.1bn while net interest income decreased to $222.5m from $238.1m and Bell Potter’s analyst expects the home loan book to decline 4% in FY24 before returning to growth in FY25.
And Bell Potter has decreased the price target on XTEK (ASX:XTE) from 80cps to 70cps and maintain a buy rating on the defence manufacturer following the release of the company’s FY23 results that beat both guidance and Bell Potter estimates. The downgrade in price target was due to Bell Potter having lack of visibility over future revenue which is weighing on the share price, however this is not uncommon in the defence industry. Bell Potter is awaiting updates on the referenced multiple large ballistic orders and multi-year new SUAS Support Contract shortly.

Following recent favourable data being released, the market has factored in a 93% chance the fed will hold interest rates at the next meeting, according to CNBC.

Dell Technologies soared 21% on Friday after reporting stronger-than-expected earnings in the latest quarterly results update.

What to watch today:

Ahead of the local trading session here in Australia, the SPI futures are expecting the local market to open 0.43% higher ahead of a big week on the economic front this week including the RBA interest rate decision tomorrow, GDP Growth Rate data out tomorrow and trade balance out later in the week.
On the commodities front this morning, oil is trading 0.57% higher at US$86.04/barrel, gold is flat at US$1939/ounce and iron ore is down 0.43% at US$117/tonne.
AU$1.00 is buying 65 cents, 94.28 Japanese Yen, 51.24 British Pence and NZ$1.09.

Trading Ideas:

Bell Potter has downgraded Resimac Group (ASX:RMC) from a Buy to a Hold and slightly decreased the price target from $1.12 to $1.09 on the back of the company releasing mixed FY23 results including home loan book shrinking 14% to $13.1bn while net interest income decreased to $222.5m from $238.1m and Bell Potter’s analyst expects the home loan book to decline 4% in FY24 before returning to growth in FY25.
And Bell Potter has decreased the price target on XTEK (ASX:XTE) from 80cps to 70cps and maintain a buy rating on the defence manufacturer following the release of the company’s FY23 results that beat both guidance and Bell Potter estimates. The downgrade in price target was due to Bell Potter having lack of visibility over future revenue which is weighing on the share price, however this is not uncommon in the defence industry. Bell Potter is awaiting updates on the referenced multiple large ballistic orders and multi-year new SUAS Support Contract shortly.

Previous Episode

Weekly Wrap 1 September

As we near the end of Reporting Season, we’ve seen 348 companies report their earnings. 106 have beat expectations, 146 met expectations, while 96 fell short of expectations.

This week, the Australian share market advanced 2.67% this week (Mon – Thurs), in a strong week of trading. All but the energy sector, posted notable gains. The materials sector had the biggest rally, with the sector rising 3.66%, followed by the healthcare sector adding 3.36% and consumer discretionary rising 3.18%.

In this week's wrap, Grady covers:

(0:51) How City Chic (ASX:CCX) fell out of favour with investors
(1:53) The positive run for travel stocks, including Flight Centre (ASX:FLT)
(3:09) What’s causing Brambles’ (ASX:BXB) share price movements
(4:34) The key takeaways from Reporting Season this week
(5:30) Best performing stocks in the ASX200
(6:15) The most traded stocks & ETFs by Bell Direct clients
(6:45) Five economic news items to watch out for

Read the article transcript here.

Next Episode

Morning Bell 5 September

The US market was closed on Monday for the labour day holiday.

Over in Europe, markets closed lower in the region on Monday with the STOXX600 closing flat, while Germany’s DAX fell 0.1%, the French CAC lost 0.24% and in the UK the FTSE100 lost 0.16%. European Central Bank President Christine Lagarde said it will be critical for central banks to pin their inflation targets at a period where fluctuations in the likes of energy prices and geopolitical activity are factored in, according to Reuters.

Germany’s trade data released on Monday showed a 0.9% month-on-month decline in exports in July while imports rose 1.4%, leading to a decline in Germany’s trade surplus to 15.9 billion euros from 18.7bn euros in June and well below the consensus forecast of a slight dip to 18 billion euros.

Locally, the ASX started the week in positive territory with the key index closing the first trading session of the week up 0.56%, continuing the momentum from last week’s 2.29% rise.

Yesterday, the key index rally was fuelled by materials stocks rising almost 2% amid optimism of further stimulus out of China increasing demand outlook for iron ore. Energy stocks also lifted to start the week in the green as the price of oil trades 6.57% higher over the last week amid fears of possible production cuts from Moscow.

The story of the local session yesterday was lithium miner Liontown Resources receiving an upgraded takeover bid from US chemicals giant, Albermarle, valuing Liontown at $6.6bn. The initial takeover offer of $2.50/share was rejected on the grounds of value however the Liontown board is reportedly considering the revised $3/share offer and has granted Albermarle a ‘limited period of exclusive due diligence’. Following the offer news, Liontown shares traded 9.5% higher around $2.87/share.

On the other end of the market, Sky City tumbled 15% yesterday after the casino and entertainment company revealed its operating licence may be suspended in New Zealand for 10 days by New Zealand’s Department of Internal Affairs for failure to comply with the responsible gaming program.

As we near the end of reporting season, 385 companies have reported with 28.8% beating estimates, 43% meeting estimates and 27.8% missing estimates.

What to watch today:

Ahead of the local trading session here in Australia the SPI futures are expecting the local index to open 0.26% lower on Tuesday.
On the commodities front this morning, oil is trading 0.44% higher at US$85.93/barrel, gold is flat at US$1938.56/ounce and iron ore is down 0.43% at US$117/tonne.
Stocks trading ex-dividend today include Pilbara Minerals (ASX:PLS), Yancoal (ASX:YAL), Northern Star Resources (ASX:NST), Codan Limited (ASX:CDA), Corporate Travel Management (ASX:CTD), Clinuvel Pharmaceuticals Limited (ASX:CUV)and Origin Energy (ASX:ORG).

Trading Ideas:

Bell Potter has downgraded Liontown Resources (ASX:LTR) to a hold from a buy and maintain a 12-month price target of $3.85 on the lithium miner following the receipt of an upgraded takeover bid from Albermarle of $3/share. Albermarle has declared this is its best and final offer unless a superior proposal is received. The Liontown board has granted Albermarle a limited period of exclusive due diligence and according to Bell Potter, intends to unanimously recommend the proposal in the absence of a superior offer and subject to an independent expert opinion.
And Trading Central has identified a bullish signal on Coronado Global Resources (ASX:CRN) following the formation of a pattern over a period of 15-days which is roughly the same amount of time the share price may rise from the close of $1.66 to the range of $1.76-$1.78 according to standard principles of technical analysis.