Between the Bells

The Australian market is down 1% week-to-date and closed 0.7% lower on Friday, weighed down by the materials sector. Materials dropped more than 3% on Friday and just over 6% in the week. This was mostly driven by a pullback in iron ore prices, with concerns about weak demand from China, with recurring COVID-19 outbreaks, as well as low profitability at Chinese steel mills. On top of this, there are also concerns over the Chinese property market and banking sectors, so these reports pushed iron ore prices into a bear market, and overshadowed reports of large stimulus packages in China. Rio Tinto (ASX:RIO)’s share price dropped on Friday with the fall in iron ore and the release of its quarterly update. The miner provided a bearish outlook, describing some difficulties facing China’s recovery from the pandemic lockdowns, as well as the impacts of the Fed’s rate hikes on demand. Goldman Sachs retain their Buy rating on RIO, so keep watch of its share price today. The broker says its share price could be great value and have slightly trimmed their price target to $124.10. 

Materials stocks fell across the board on Friday, however the worst performer was investment manager Pendal (ASX:PDL) after the group reported worse-than-expected outflows in the June quarter from its managed funds. 

The most traded stocks by Bell Direct clients on Friday were Whitehaven Coal (ASX:WHC), Rio, Mineral Resources (ASX:MIN) and BHP. 

China’s GDP growth missed expectations in the second quarter, sending Chinese markets lower. Despite this, European markets gained, with the Stoxx-600 up 1.8% by the close. And in New York, US equities rallied, following a round of major banks reporting their earnings results. The Dow Jones gained more than 600 points or 2.2%, the S&P500 up 1.9% and the Nasdaq gained 1.8%. 

What to watch today: 

• The Australian share market is set to open higher, with the SPI futures suggesting a rise of 0.88% at the open this morning. 
• Keep watch of ANZ’s share price movements today, with reports that ANZ will acquire accounting software MYOB, as well as interest in acquiring Suncorp Group (ASX:SUN). A capital raising to fund the deal is expected to be announced this morning. 
• In commodities, oil is trading 2% higher, so look out for energy producers such as Woodside Energy (ASX:WDS). Gold has fallen slightly, while iron ore is currently trading 4% lower. So also watch the major mining stocks today. 

Trading Ideas: 

• Citi have released their latest research report on the major banks: They rate ANZ Bank as a Buy with a price target of $30.75, while Commonwealth Bank (ASX:CBA) they rate as a Sell, with a price target of $90.75. Citi rate NAB as Neutral with a price target of $32.25, and they rate Westpac (ASX:WBC) as a Buy with a $29 price target. 
• Trading Central have identified a bullish signal in Steadfast (ASX:SDF) indicating that the stock price may rise from the close of $5.10 to the range of $5.55 to $5.65 over 14 days, according to the standard principles of technical analysis. 

The Aussie share market declined 0.4% this week (Mon-Thu). Australia's unemployment rate for June dropped to 3.5%, which was well below the 3.8% expected, as the economy continues to recover from the pandemic.

 In this week’s wrap, Sophia covers:

• (0:14) The market's reaction to the latest US inflation reading
• (2:57) Coal stocks outperforming this week
• (3:35) Why BNPL stock Sezzle (ASX:SZL) fell 57%
• (3:57) The most traded stocks & ETFs by Bell Direct clients
• (4:30) Two economic news items to watch out for

Our local market ended yesterday’s session higher, rising 0.2% despite mining and energy stocks coming under pressure off the back of subdued commodity and metal prices. 

Sectors wise, the majority of the market posted gains, with the consumer discretionary, tech and communication services sectors advancing the most. While the energy sector declined 1.8%.

As for the best and worst ASX200 performers, Megaport (ASX:MP1) was up the most, following a rebound in the tech sector, as well as a bullish broker note out of Goldman Sachs. The broker reiterated its buy rating with a $9 price target. MP1’s last closing price was $6.60, so this implies about 36% share price growth in a year. Qantas’ (ASX:QAN) shares also took off yesterday, lifting 4.3%. This comes as the airline announced it is removing vaccine mandates for international travellers commencing next week and following the drop in oil prices recently which has potentially eased the pressure on jet fuel costs. Now, on the flip side, major oil producer, Woodside Energy (ASX:WDS) saw a drop in its share price, off the back of the fall in oil prices, and other decliners yesterday included Viva Energy Group (ASX:VEA) and Alumina (ASX:AWC).

The most traded stocks by Bell Direct clients yesterday included Whitehaven Coal (ASX:WHC), Rio Tinto (ASX:RIO) and BHP Group (ASX:BHP).

Moving to the US, stocks fell after US inflation came in hotter than expected. The consumer price index increased 9.1% from a year ago during the month of June. This was above the 8.8% expected. So, this inflation reading could push the Federal Reserve into an even more aggressive position at its next meeting later this month. So as for the major benchmarks, the Dow shed 200 points, the S&P500 fell 0.5%, and the Nasdaq was down 0.2%. 

What to watch today:

• The SPI futures are suggesting our market will open slightly lower, down 0.06%. 
• The unemployment rate for June will be released today at 11:30am AEST. It is estimated that 35,000 jobs were added to the local economy last month, which is potentially enough to see the unemployment rate ease to a low of 3.8%. This depends however on the workforce participation rate, which is expected to drop to 66.5%.  
• In commodities, oil prices edged slightly higher after their recent sell-off. The gold price rebounded as the US dollar retreated. And the spot iron ore price trades 4% lower at US107 a tonne.
• Watch Auckland International Airport (ASX:AIA) and Netwealth Group (ASX:NWL) today. AIA will be giving an update on its monthly traffic, while NWL will be providing a June quarter update.
• Botala Energy will be debuting on the ASX today. It’s an Australian energy company focused on exploration and development opportunities for natural gas and renewables in Botswana, and it will be trading under the ticker code BTE.

Trading Ideas:

• Bell Potter have maintained its Hold rating on Bega Cheese (ASX:BGA) with a reduced price target from $4.20 to $3.80. At its current share price of $3.55 this implies 7% share price growth in a year. 

Trading Central has a bearish signal on Origin Energy (ASX:ORG), indicating that the stock price may fall from the close of $5.45 to the range of $3.50 - $3.90 in the next 146 days according to standard principals of technical analysis. 

The Australian market edged higher yesterday, quickly brushing off the weak lead from Wall Street. Materials shares declined the most, as commodity prices fell, while coincidentally the US dollar index rose to the highest level in 20 years, and the US dollar index is a measure against six currency counterparts. The fall in commodities also dragged the Australian dollar down to a two-year low. 

Buy-now-pay-later company Zip (ASX:ZIP) has mutually agreed to cancel its proposed merger with Sezzle, another BNPL stock. This announcement saw Zip gain 6% and was the best performing stock on the ASX200, while Sezzle (ASX:SZL) crashed 39% in yesterday’s session, and was the worst performing stock on the All Ords. Zip will be paying Sezzle $US11 million (AUD$16.4 million) for compensation costs.

The most traded stocks by Bell Direct clients yesterday were Westpac (ASX:WBC), Whitehaven Coal (ASX:WHC) and BHP Group (ASX:BHP). 

European stocks were boosted by luxury and travel stocks. The STOXX 600 closed 0.5% higher, after having opened lower. US equities were lower however, ahead of June’s inflation report. The Dow Jones closed 0.6% lower, the S&P500 down 0.9% and the Nasdaq down 1%. The latest US Consumer Price Index data is scheduled to be released at 10:30pm AEST (Wednesday morning in the US). It’s expected to rise by 8.8% in June on a year-over-year basis. The last reading in May was 8.6%, and that was the largest increase the US had seen in CPI since 1981. Also, in the US reporting season for the second quarter has begun. The major banks are set to report this week: JP Moran and Morgan Stanley will post results on Thursday before the bell. And the yield on the US 10-year note fell 2 basis points in New York. 

What to watch today: 

• The Australian market is set to open flat this morning, as uncertainty continues across global markets. 
• While investors are waiting on US CPI out later tonight, the Reserve Bank of New Zealand is also expected to list its key rate later today.  
• Mining company, South32 (ASX:S32) has announced the sale of four non-core base metals royalties to a company called Anglo Pacific Group. These are royalties from third party interest in copper and nickel projects. 
• In commodities, 
  • Oil has heavily dropped, trading over 8% lower around US$95 per barrel and nearing three-month lows. There is little confidence in oil markets currently, amid a continuously poorer demand outlook. There have also been renewed COVID-19 restrictions in China, which of course is a top importer, and this news has also added to expectations of lower demand for energy as central banks look to accelerate monetary tightening. 
  • The gold price is hovering near its lowest level in nine months, while iron ore has been dragged down to its lowest levels since January. 
  • So, watch the share prices of miners and energy producers today, as they’re likely to start the session lower.  
• Link Administration (ASX:LNK) holds its AGM today. 

Trading Ideas:

• Bell Potter maintain their Buy rating on Envirosuite (ASX:EVS), which is a global provider of environmental management software. They have lowered their price target from $0.25 to $0.23, and at its current share price of $0.16, this implies 43.8% share price growth in a year. 

Trading Central have identified a bearish signal in Harvey Norman (ASX:HVN), indicating that the stock price may fall from the close of $3.85 to the range of $3.36 to $3.46, over 17 days according to the standard principles of technical analysis. 

Our local market started the new trading week with a loss of 1.1%, with the majority of the industry sectors in the red. The materials and tech sector felt the most pressure, as investors braced for a US inflation reading, as well as domestic jobs update later this week. 

Looking at the ASX200 leaderboard, EML Payments (ASX:EML) fell a massive 25% after its chief executive Tom Cregan exiting the fintech group with no explanation. NOVONIX (ASX:NVX), Costa Group Holdings (ASX:CGC) and Domino’s Pizza (ASX:DMP), were all hit with bearish broker notes, while lithium company Lake Resources (ASX:LKE) plunged 6.3%, following revelations that the stock is now being heavily shorted off the back of its CEO’s resignation last month and pessimistic projections for lithium demand. On the flip side, the best performers yesterday included New Hope Corporation (ASX:NHC), Imugene (ASX:IMU) and Suncorp Group (ASX:SUN).

The most traded stocks by Bell Direct clients yesterday, there were multiple financial stocks like three of the big four banks, as well as Bank of Queensland (ASX:BOQ), and mining stocks like BHP Group (ASX:BHP) and Allkem (ASX:AKE).

In the US, equities fell on Monday as investors prepare for big company earnings reports and US economic data, including consumer prices, retail sales and factory output due out later in the week, which will give an indication of the extent to which inflation has peaked, as well as how inflation is impacting businesses. The Dow Jones shed 165 points, the S&P500 fell 1%, while the Nasdaq broke its five-day winning streak, down 2.3%

What to watch today:

• Despite Wall Street losing some ground overnight, the SPI futures are suggesting our market is set to open 0.28% higher.
• Economic news wise, we’ll get an update on business confidence for June, which slowed to 6 points in May, down from 10 previously. If the confidence indicators underperform today, we could see the Aussie dollar respond with losses.
• Moving to commodities, oil prices pulled back overnight, following concerns about rising COVID cases in China. The gold price also came under pressure, off the back of a stronger US dollar. And the spot iron ore price trades at US115 a tonne.
• Stocks going ex-dividend today include Metcash (ASX:MTS) and Sunland Group (ASX:SDG), which will likely cause these stocks to trade lower today as investors take their profits.

Trading Ideas:

• Bell Potter have transferred analyst coverage on EROAD (ASX:ERD). The rating on the stock has been maintained as a Buy however with a reduced price target, from $3.40 to $2.75. Bell Potter remain positive on the company and its outlook. At its current share price of $2.00, this implies 37.5% share price growth in a year.
• Trading Central has a bearish signal on AGL Energy (ASX:AGL), indicating that the stock price may fall from the close of $8.26 to the range of $7.60 - $7.75 in the next 16 days according to standard principals of technical analysis.  

Our local market rebounded last week, gaining 2% week-to-date. Most sectors gained WTD, apart from industrials and materials. And taking a quick look at Friday’s session, a rebound in commodities boosted Australian shares and the market closed 0.5% higher, with energy and materials in the lead. Australian shares were largely unaffected by the declines in share markets across Asia on Friday afternoon, following reports that the former Japanese Prime Minister was shot during an election speech. 

Instead, energy producers and gold miners gained, as well as the tech sector which followed a strong lead by the Nasdaq. The ASX200 was once again led by family app Life360 (ASX:360). 

The most traded stocks by Bell Direct clients on Friday were Worley (ASX:WOR), BHP Group (ASX:BHP), Wesfarmers (ASX:WES) and Mineral Resources (ASX:MIN). 

European stocks closed with solid gains, ending the week in positive territory. The STOXX 600 closed the day 0.5% higher, with most sectors in the green. Investor focus was on the US employment report for June, which displayed a stronger than expected month of hiring. It was a key piece of data, as the Federal Reserve is closely watching the labour market and inflation figures as it continues to plan its course for monetary policy. 

US equities closed mixed. The Dow Jones closed slightly lower, down 0.2%, while the S&P500 closed flat. Meanwhile, the tech-heavy Nasdaq slightly rose 0.1%, its fifth straight day of gains. 

What to watch today:

• The Australian market is set to open higher, with the SPI futures suggesting a 0.3% rise at the open this morning. 
• Keep watch of Woolworths (ASX:WOW) after Goldman Sachs this morning added the stock to its conviction list, which is a list of stocks they expect to outperform. The broker also reiterated its Buy rating with a price target of $40.50. 
• In commodities, oil prices are trading lower, while gold and iron ore are in the green.  

Trading Ideas:

• Bell Potter maintain a Speculative Buy rating on Chalice Mining (ASX:CHN) with a valuation of $11.10. At its current share price of $4.01, this implies 177% share price growth in a year. Meanwhile, Macquarie have an Outperform rating on the gold miner and have retained their $7.30 price target. 
• Trading Central have identified a bullish signal in Allkem (ASX:AKE) indicating that the stock price may rise from the close of $10.46 to the range of $12.70 to $13.20 over 25 days according to the standard principles of technical analysis. 

The Aussie share market has advanced 1.7% so far this new financial year (Mon-Thu), accelerating after the cash rate was raised to 1.35%.
 
 In this week’s wrap, Sophia covers: 

• (0:59) Why commodity prices have tumbled
• (1:47) Attractive tech stocks in the current market environment
• (2:22) Bell Potter's FY23 stock picks across five sectors
• (4:39) The most traded stocks & ETFs by Bell Direct clients
• (5:19) Three economic news items to watch out for 

Yesterday our local market closed in the red for the first time this week, declining 0.5%, off the back of renewed worries about a global recession. This led to a sharp fall in the Aussie dollar, commodity prices and global markets.

Mining and energy stocks suffered heavy losses, with both sectors sinking more than 5%, offsetting the gains seen across most other sectors, like real estate and tech.

Looking at the ASX200 leaderboard, many of the winners were tech stocks, following the strong lead from the US Nasdaq. Stocks like Megaport (ASX:MP1), Life360 (ASX:360), Zip (ASX:ZIP) and EML Payments (ASX:EML), were all up more than 10%. On the flip side, the ten biggest decliners were all from the materials sector, led by gold miner St Barbara (ASX:SBM), which was down 9.5%, along with stocks like Rio Tinto (ASX:RIO) and Woodside Energy (ASX:WDS).

The most traded stocks by Bell Direct clients yesterday were BHP Group (ASX:BHP), the BetaShares Geared Australian Equity Hedge Fund (ASX:GEAR) and Woodside Energy (ASX:WDS). 

In the US, stocks pushed slightly higher following the latest minutes from the US Federal Reserve, which reiterated the central bank’s commitment to bringing down inflation. Energy stocks were some of the worst performers on the day, as oil prices continued their recent slide. 

What to watch today:

• Following the positive session in the US, our local market is set to open 0.5% higher if you go by the SPI futures.
• Economic news wise, balance of trade data for May will be released at 11:30am AEST. That’s the difference between what we export vs. what we import, and consensus expects May’s reading to come in higher at $10.725b.
• Keep watch of payments company, Block (ASX:SQ2) after its US listed shares dropped into the red overnight.
• In commodities, oil prices have continued to slide, falling below US$100 a barrel. Gold is trading lower, down 1.5% to US$1,739 an ounce. And the spot iron ore price trades at US114 a tonne.

Trading Ideas:

• Citi have retained its Buy rating on Lovisa Holdings (ASX:LOV), with a price target of $20.40. At its current share price of $15.46, this implies 32% share price growth in a year.
• Trading Central has a bearish signal on engineering services company, Worley (ASX:WOR) indicating that the stock price may fall from the close of $13.62 to the range of $11.10 - $11.60 in the next 19 days according to standard principals of technical analysis.

Yesterday the RBA’s rate hike was in line with expectations, which saw the share market slightly accelerate. The cash rate was raised by 0.5% or 50 basis points to 1.35%. It was the third consecutive increase, with the central bank taking an aggressive approach to taming inflation. Remember, higher interest rates make it more expensive to borrow money, and this takes some of the pressure off rising prices by discouraging spending. And while there are a few global factors contributing, there are also domestic factors contributing to inflation, such as the recent floods, the increasing number of job vacancies and strong spending.

The local market still managed to close in the green yesterday. The tech sector performed well, and this is an industry usually quite sensitive to interest rates. Real estate was the worst performing sector, which has been the case the last few rate hikes.

As for the major banks, Commonwealth Bank (ASX:CBA), National Australia Bank (ASX:NAB) and Australia & New Zealand Banking Group (ASX:ANZ) all closed slightly lower, while Westpac (ASX:WBC) closed flat. And energy outperformed as oil prices increased, before falling overnight.

Family app Life360 (ASX:360) advanced along with the broader tech sector yesterday. Bell Potter continue to maintain their Buy rating on the stock and have a $7.50 price target. 360’s current share price is $3.24. And gold miners also advanced yesterday. Regis Resources (ASX:RRL) gained after reporting record gold production in the June quarter, and other gold stocks followed its advance, including St Barbara (ASX:SBM) and De Grey Mining (ASX:DEG). 

The most traded stocks by Bell Direct clients yesterday were BHP Group (ASX:BHP), CSL Limited (ASX:CSL) and the Vanguard Australian Shares ETF (ASX:VAS).

Overseas, Europeans shares were in the red in the lead up to the European Central Bank’s meeting on Thursday. The STOXX 600 closed 2% lower, with oil and gas stocks falling more than 6%. And the Euro also dropped to its lowest level in two decades on Tuesday. US equities were mixed. The Dow Jones closed slightly lower down 0.4%, the S&P500 gained 0.2%, while the Nasdaq rallied 1.8% higher.

What to watch today:

• The SPI futures are suggesting the Australian market will drop 0.98% at the open this morning.
• In commodities:
  • Oil is trading more than 7% lower, as concerns of a US recession continue. Norwegian offshore workers were striking on Tuesday, and this is expected to cut around 130,000 barrels or 6.5% of the country’s daily oil production. Elsewhere, OPEC is also struggling with capacity limits.
  • Gold is trading lower, with expectations of more aggressive monetary tightening by the Federal Reserve than previously expected.
  • Iron ore prices are in the red with a weak demand outlook as steel mills cut production.
  • Copper has also sunk 5%, so watch BHP Group (ASX:BHP) and Rio Tinto (ASX:RIO).
• Graincorp (ASX:GNC) is set to go ex-dividend today, so the stock is likely to be trading lower as investors take their profits.

Trading Ideas:

• Bell Potter maintain a Speculative Buy rating on EBR Systems (ASX:EBR) and have lowered their price target from $1.28 to $0.90. At its current share price of $0.49, this implies 81.8% share price growth in a year.
• Trading Central have identified a bullish signal in Life360 (ASX:360) indicating that the stock price may rise from the close of $3.24 to the range of $3.75 to $3.95 over 25 days, according to the standard principles of technical analysis.

Yesterday, our local market started the new trading week with an impressive gain of 1.1%, with all eleven industry sectors closing in the green. The energy sector posted the largest gains, up 2.6%, closed followed by the real estate sector and consumer discretionary sectors, which were both up around 2% each. 

Looking at the ASX200 leaderboard, one of the best performers was Imugene (ASX:IMU), which lifted nearly 13% yesterday. Also performing well was coal producer New Hope Corporation (ASX:NHC) and real estate investment trust, Ingenia Communities (ASX:INA). Meanwhile, Magellan Financial Group (ASX:MFG) came under pressure, sinking 10% after its co-founder and former Chief Investment Officer, Hamish Douglass had been offloading a significant quantity of his shares in MMG. 

The most traded stocks by Bell Direct clients yesterday were the BetaShares Geared Australian Equity Hedge Fund (ASX:GEAR), BHP Group (ASX:BHP) and the Vanguard Australian Shares ETF (ASX:VAS). 

Wall Street was closed for the Independence Day holiday but in Europe the DAX fell 0.3% and the FTSE rose 0.9%, and US futures are pointing to declines tonight.

What to watch today:

• The Australian share market is set to open flat, going by the SPI futures.
• Economic news wise, for the third month in a row, the RBA is all but certain to lift interest rates, with the majority of economists believing a 50 basis point increase is locked in, which would take the official cash rate to 1.35%. Stay tuned for this announcement at 2:30pm AEST. 
• Moving to commodities, the WTI crude oil price is trading 2% higher at US$110 a barrel, as supply concerns boosted prices despite fears that a recession is looming. Gold is trading flat at US$1,809 an ounce. And the spot iron ore price trades 3.7% lower at US118 a tonne.
• If you hold National Australia Bank (ASX:NAB), Incitec Pivot (ASX:IPL) or CIMIC Group (ASX:CIM), you will receive your dividend payment today.
• Ardent Leisure Group (ASX:ALG), and Clime Capital (ASX:CAM) are set to go ex-dividend today. 

Trading Ideas:

• Citi have maintained its Buy rating on Australia's global shipbuilder, Austal (ASX:ASB) with an increased price target from $2.35 to $2.91. At its current share price of $2.38, this implies 22%. share price growth in a year

Trading Central has a bullish signal on Immutep (ASX:IMM) indicating that the stock price may rise from the close of $0.32 to the range of $0.44 - $0.46 in the next 21 days according to standard principals of technical analysis.