Between the Bells

It was the worst week for the Australian market since the beginning of the pandemic in 2020. Week-to-date the ASX200 is down 6.6%, led by losses on Wall Street on concerns around aggressive policy tightening.

On Friday, the ASX200 closed 1.8% lower, with materials, tech, financials and energy down the most.

Taking a closer look at the leaderboard, the worst performing stock was G.U.D Holdings (ASX:GUD). The company is a designer, manufacturer and distributor of automatic products and its share price crashed 20% on Friday, following a guidance update, where the company downgraded its guidance due to supply chain disruptions. And some big tech names were finally in the green, including EML Payments (ASX:EML) and Zip Co (ASX:ZIP), regaining some of those prior losses.

The most traded stocks by Bell Direct clients on Friday were CSL (ASX:CSL), Macquarie Group (ASX:MQG), Lake Resources (ASX:LKE), Westpac (ASX:WBC) and BHP Group (ASX:BHP).

On Wall Street, the major benchmarks closed mixed. The Dow Jones slipped 38 points or 0.13%. The S&P500 rose slightly higher, up 0.2%, however still had its worst week since 2020, down 5.8% for the week, with all 11 sectors finishing more than 15% below their recent highs. Meanwhile, the tech-heavy Nasdaq gained 1.4%.

What to watch today: 

• The Australian market is set to drop 0.3% at the open this morning, going by the SPI futures.
• What may add to the decline in global markets is the collapse of cryptocurrencies. Bitcoin tumbled 15% over the weekend, its lowest level in 18 months.
• In commodities, the price of oil has crashed 6.8%, pressured by the recent wave of aggressive rate hikes. Gold is also trading lower amid a rebound in the US dollar and Treasury yields. And iron ore has dropped to an over three-week low as COVID-19 outbreaks in China provoked fears of lockdowns. China is the world’s top steel producer.
• Premier Investments Limited (ASX:PMV) is set to go ex-dividend.

Trading Ideas:

• Bell Potter have a Speculative Buy rating on Lumos Diagnostics (ASX:LDX) and have reduced their valuation to $0.28 from $0.75. At its current share price of $0.14, this implies 95.5% share price growth in a year.
• Trading Central have identified a bullish signal in Capricorn Metals (ASX:CMM), indicating that the stock price may rise from the close of $3.80 to the range of $5 to $5.30 over 43 days, according to the standard principles of technical analysis.

The Aussie share market took a dive this week, falling 4.9% (Mon-Thu). This followed the latest inflation reading out in the US, which saw the US Federal Reserve respond by lifting interest rates by 0.75%.

 In this week’s wrap, Sophia covers:

• (1:55) Bell Potter's top picks in the uranium sector
• (2:20) The US Federal Reserve's rate hike
• (3:40) The tech and major mining stocks that suffered heavy losses
• (4:14) Lake Resources' (ASX:LKE) impressive yearly gain
• (4:36) The most traded stocks & ETFs by Bell Direct clients
• (5:15) Two economic news items to watch out for

Yesterday our local market extended its losses, falling 1.3% or 85 points to close at 6,601. This comes as investors digested rising interest rate forecasts and an increase to the minimum wage. We also got an update on consumer confidence for June, which fell 4.5% month-over-month, back to levels seen at the beginning of the pandemic. Now confidence was weighed down by surging prices and expectations of further interest rate hikes.

Losses were seen across the board, with all 11 industry sectors in the red. The tech sector was down the most, as it’s quite sensitive to interest rates, due to their high price to earnings ratios and low dividend payments.

The best performer yesterday was medical device company PolyNovo (ASX:PNV) despite no announcements out from the company. However, insider buying action amongst its senior managers has likely propped up its share price and overall sentiment. Other top performers included Lynas Rare Earths (ASX:LYC), Suncorp (ASX:SUN) and Computershare (ASX:CPU). Meanwhile, the worst performers included tech companies like NOVONIX (ASX:NVX), Megaport (ASX:MP1) and Block (ASX:SQ2). 

And the most traded stocks by Bell Direct clients were ANZ (ASX:ANZ), Insignia Financial (ASX:IFL) and Lake Resources (ASX:LKE).

In the US, as was widely expected, the US Federal Reserve lifted rates by 75 basis points, the biggest increase made in almost 30 years. Stocks rallied, as Federal Reserve Chairman Jerome Powell noted that a 50 or 75 basis point increase “seems most likely” at its next meeting in July, highlighting the central bank’s commitment to fighting inflation. So, we saw all three benchmarks push higher, with the Nasdaq up the most, rising 2.5%.

What to watch today:

• Following the US market’s positive session, our local market is set for a positive day, with the SPI futures suggesting a lift of 0.4% at the open.
• Economic news wise, the latest jobs figures will be released today, with the May unemployment rate expected to remain steady on forecasts of a small gain in jobs across the economy. 
• Keep an eye on Coronado Global (ASX:CRN) – its share price might see a lift today after news that the coal miner has been added to the ASX200 index, replacing Crown Resorts (ASX:CWN), which has been delisted following Blackstone’s takeover.
• In commodities:
  • Oil prices tumbled over 2% amid concerns that rising interest rates would impact demand. The WTI crude oil pride now trades at around US$116 a barrel.
  • Gold prices retreated from their highs of the day after the rate hike. Now remember, although gold is considered a hedge against inflation, rate hikes increase the opportunity cost of holding non-yielding bullion.
  • The spot iron ore price is trading 0.7% lower at US$136 a tonne.
• If you hold medical device company ResMed (ASX:RMD) you will receive your dividend payment today.

Trading Ideas:

• Bell Potter have maintained its Buy rating on hardware company, Coventry Group (ASX:CYG) with a reduced price target from $2.00 to $1.70. Bell Potter sees Coventry as a business that is fast approaching an inflexion point in recovery, with market share in Australia being recouped at pace and, importantly, little cost to gross margin. Now, at its current share price of $1.20, this implies about 42% share price growth in a year.
• Trading Central has a bearish signal on Duxton Farms (ASX:DBF) indicating that the stock price may fall from the close of $1.68 to the range of $1.40 - $1.46 in the next 111 days according to standard principals of technical analysis.  

Yesterday was the worst trading session since May 2020, as we saw heavy losses that haven’t been since around the beginning of the pandemic. Billions were wiped from the market yesterday, with the ASX200 falling 5.3% in the first 20 minutes of the session, then very slightly recovering some of those losses. The market still closed 3.6% lower at 6,686 points. The reason behind this was the heavy selling we’ve seen in US markets over its last two trading sessions. And this was the first time the Australian market was able to respond, since our local market was closed on Monday for the Queen’s Birthday public holiday. The reason US markets have tumbled is because its inflation reading came in higher than expected. Now, on Thursday the Fed will announce its interest rate decision and these inflation numbers have increased the chances of the Fed raising rates more aggressively.

As the Australian market caught up to the US yesterday, all 11 sectors saw heavy losses. The sectors that declined the most were energy, tech, materials and financials. The major banks also continued to fall. Yesterday CBA was down 2.8%, Westpac down 3.7%, NAB down 4.4% and ANZ is down 4.6%.

The worst performing stocks were tech giants Block (ASX:SQ2) and Zip (ASX:ZIP), which we know are sensitive to interest rates. And some of the major mining stocks were also being sold, including Chalice Mining (ASX:CHC), Paladin (ASX:PDN), Champion Iron (ASX:CIA) , Nickel Industries (ASX:NIC) and Fortescue Metals (ASX:FMG). There were only a handful of stocks that managed to gain yesterday. The best performer was PolyNovo (ASX:PNV), followed by Domino’s Pizza (ASX:DMP).

The most traded stocks by Bell Direct clients yesterday were Lake Resources (ASX:LKE), ANZ, Westpac (ASX:WBC) and CSL.

Overnight, US equities saw little change, as investors await the Federal Reserve’s meeting on Thursday. The Dow is down 0.5%, the S&P500 is down 0.4% while the Nasdaq ended slightly higher, up 0.2%.

What to watch today:

• Selling is set to continue today, with the SPI futures suggesting a 0.6% fall at the open this morning.
• In economic data, Westpac’s consumer confidence data for June will be out today at 10:30am AEST. This data is important because it will provide insights into how consumers have responded to the RBA’s rate hike last week.
• In commodities, oil is lower after signals that the US government may be considering legislation to ease the price pressures. Gold remains under pressure from a rallying US dollar and Treasury yields, as investors anticipate aggressive monetary policy tightening. And iron ore has fallen to an over two-week low.
• Keep watch of ANZ, as the bank may be planning on acquiring accounting software MYOB, from private equity group KKR.

Trading Ideas:

• Bell Potter maintain their BUY rating on Cobram Estate Olives (ASX:CBO) and have lowered their price target from $2.35 to $2.20. At its current share price of $1.56, this implies 40.6% share price growth in a year.
• Trading Central have identified a bearish signal in Inghams Group (ASX:ING), indicating that the stock price may fall from the close of $2.67 to the range of $2.45 to $2.53 over 25 days, according to the standard principles of technical analysis.

The market was closed yesterday for the Queen’s Birthday public holiday, so before we jump into today’s trading session, let’s have a quick look at what happened last Friday.

Our local market experienced its worst week since 2020, dipping below 7,000 points, as markets digested the RBA’s second rate hike, which worried investors over the impact on the big banks' bottom lines. All sectors were in the red, with the real estate, consumer discretionary and energy sectors down the most. 

Looking at the ASX200 leaderboard, the top performer was accounting software business, Xero (ASX:XRO), after Citi reiterated its Buy rating and $108 price target. Meanwhile the worst performers included Pointsbet (ASX:PBH), Sims (ASX:SGM) and Lynas Rare Earths (ASX:LYC).

The most traded stocks by Bell Direct clients last Friday included all four of the big banks, CSL (ASX:CSL) as well as Lake Resources (ASX:LKE).

Moving to the US, on Friday, the highly anticipated inflation report showed a faster-than-expected rise in prices, which took a toll on the share market. CPI came in at its highest level since 1981, rising 8.6% year-over-year. And on Monday’s session, the US market continued to come under pressure, as recession fears intensified ahead of this week’s key Federal Reserve meeting. This saw the S&P500 fall 3.9% to 3,749 points, its lowest level since March 2021, bringing its losses down more than 20% from its January record, therefore entering into bear market territory. 

What to watch today:

• Following two consecutive negative sessions in the US, our local market is set to fall 2.7% this morning if you go by the SPI futures. 
• Economic news wise, today we’ll get an update on business confidence for May. In April, the index dropped to 10, from a 5-month high of 16 in March, and today’s reading is expected to come in at 12 points. 
• In commodities, the oil price rose as tight supplies outweighed demand worries. The gold price slumped over 2%, as the US dollar strengthened ahead of steep interest rate hikes expected by the US Federal Reserve, and the spot iron ore price is trading 2.4% lower at US$141 a tonne. 
• Kingsland Minerals will begin trading on the ASX today, under the ticker code KNG. Kingsland is a mineral exploration and development company focusing on high-grade uranium, copper, and gold projects across Australia. 
• Stocks going ex-dividend today include Cimic Group (ASX:CIM) and KMD Brands (ASX:KMD), which was formerly Kathmandu Holdings.
• If you hold Amcor (ASX:ABC) or investment company, Whitefield (ASX:WHF), you will receive your dividend payment today. 

Trading Ideas:

• Citi have maintained its Buy rating on Domino’s Pizza (ASX:DMP), however have reduced its price target from $108.42 to $100.95. Citi’s analysis of high frequency data suggests that Domino’s website traffic in key markets (Europe and Japan) is under increasing pressure, likely further intensified by inflationary pressures and labour shortages. Citi does however see upside from potential merger and acquisition activity and expect sales momentum to rebound later in calendar year 2022. At its current share price of $62.41, this implies about 62% share price growth in a year.
• Trading Central has a bearish signal on Charter Hall Retail REIT (ASX:CQR) indicating that the stock price may fall from the close of $3.95 to the range of $3.25 - $3.40 in the next 141 days according to standard principals of technical analysis.  

The Aussie share market declined 3% this week (Mon-Thu), as interest rate sensitive sectors such as real estate, tech and financials fell following the RBA’s interest rate rise on Tuesday.

In this week’s wrap, Sophia covers:

• (0:09) Why bank stocks have entered correction territory
• (1:39) Why Atlas Arteria (ASX:ALX) jumped 13%
• (2:00) Woodside Energy (ASX:WDS) booming as oil and gas prices rise
• (2:31) Zip (ASX:ZIP) tumbling 20% after Apple launches BNPL platform
• (3:37) The most traded stocks & ETFs by Bell Direct clients
• (3:56) Four economic news items to watch out for

The local market managed to gain 0.4% yesterday, regaining some ground after Tuesday’s interest rate rise slump.

The market was up nearly 1% at one point, supported by tech, mining and oil stocks, however, ran out of stream by the session close, as all of the big banks raised their mortgage interest rates in line with the RBA, so the financials sector was the only sector to post a loss, down 2.9%.

Looking at the ASX200 leaderboard, private toll road developer and operator, Atlas Arteria (ASX:ALX) jumped 16% as news came in that IFM had snapped up a 15% holding in the company, and that the infrastructure fund might put forward a takeover bid in the future. This comes amid hot competition for long-term infrastructure assets. Also performing well was Boral (ASX:BLD), up 15% after the building products company announced it had appointed its new CEO. Meanwhile, banking stocks tumbled. Bendigo & Adelaide Bank (ASX:BEN), Westpac (ASX:WBC) and Commonwealth Bank (ASX:CBA) fell the most, all down over 4%, likely driven by concerns that an aggressive tightening cycle by the RBA could create challenges for the banking sector. 

We saw both Commonwealth Bank (ASX:CBA) and Westpac (ASX:ABC) at the top of the most traded stocks by Bell Direct clients yesterday. Also highly traded was the BetaShares Geared Australian Equity Hedge Fund ETF (ASX:GEAR), Woodside Energy Group (ASX:WDS) and Pacific Smiles Group (ASX:PSQ). 

Over in the US, all three benchmarks were in the red. The Dow Jones down 0.8%, the S&P500 down 1.1% and the Nasdaq down 0.7%. This comes as investors monitor signs of a potential economic slowdown. Also, action in the bond market may have hurt investor sentiment, as the 10-year Treasury yield jumped back above 3%. 

What to watch today:

• Our local market is set to fall 0.76% this morning if you go by the SPI futures. 
• Keep an eye on BHP Group (ASX:BHP) and Rio Tinto (ASX:RIO), as both of its US-listed shares tumbled overnight. So, today could be a tough day for the mining sector.
• In commodities: 
  • Oil jumped to a 13-week high on rising US gasoline demand. The WTI crude oil price is up 2.5% to US$122 a barrel and the Brent crude oil price is up 2.7% to US$124 a barrel. 
  • The gold price strengthened as worries over economic growth boosted the safe-haven’s appeal, ahead of the US inflation data due out on Friday.
  • The spot iron ore price is trading 1% higher at US$146 a tonne. 

Trading Ideas:

• Bell Potter have maintained its Hold rating on Platinum Asset Management (ASX:PTM) with a price target of $1.70. While May’s funds under management or FUM figures were not bad, Bell Potter find that there is still little to be positive about. FUM has fallen 16.6% year to date, and at this stage Bell Potter expects average FUM for the year ending June 2022 to be $21.5b, which is 7.4% lower than 2021. At its current share price of $1.74, this implies -2% share price growth in a year.
• Trading Central has a bullish signal on TPG Telecom (ASX:TPG) indicating that the stock price may rise from the close of $6.07 to the range of $6.80 - $7.00 in the next 94 days according to standard principals of technical analysis.  

The Australian share market tumbled yesterday, closing the trading session 1.5% in the red, after the RBA raised the cash rate yesterday, increasing the velocity of higher borrowing costs. In its June meeting yesterday, the RBA raised the cash rate by 50 basis points to 0.85%, which is the largest lift in 22 years – the last time it was raised this much was in February 2000. It is also the first time since 2010 that the cash rate has been raised for the second month in a row. So, the market negatively reacted to the rate hike, and had its worst day in almost 3 weeks. All industry sectors declined, with tech and real estate falling the most, both sectors are sensitive to interest rates. 

Taking a closer look at the ASX200, the stocks that managed to make gains yesterday included Sandfire Resources (ASX:SFR), Inghams Group (ASX:ING) and Ampol (ASX:ALD), while the stocks that declined the most were BNPL company Zip (ASX:ZIP) and Clinuvel Pharmaceuticals (ASX:CUV). 

The most traded stocks by Bell Direct clients yesterday were Australia & New Zealand Bank (ASX:ANZ), Lake Resources (ASX:LKE), Westpac (ASX:WBC), National Australia Bank (ASX:NAB) and Commonwealth Bank (ASX:CBA). 

European stocks closed slightly lower amid inflation concerns, however over in the US it was a positive session, with all three major benchmarks closing higher. The Dow up 0.8%, the S&P500 up 0.95% and the Nasdaq up 0.9%. 

What to watch today: 

• The Australian market is set to regain some of yesterday’s losses and follow Wall Street’s lead. The SPI futures are suggesting the ASX200 will rise 0.63% at the open this morning. 
• In commodities: 
  • Oil is trading higher and crude futures are nearing 14-year highs, after OPEC decided to raise output for July and August. 
  • The gold price is also higher, as gold is often viewed as a safe-haven metal by investors in a risk-adverse environment, and concerns continue around slowing global growth and inflation. 
  • Iron ore has also rallied, with seaborne iron ore trading around US$145 a tonne. 
• As for economic data to watch out for today, at 11:30am AEST, NAB’s business confidence data for May will be released, which will give us an indication of sentiment across all industry sectors. And confidence is forecast to rise from last month. 
• Also today, watch Southern Palladium Limited (ASX:SPD) which lists on the ASX today. 

Trading Ideas:

• Bell Potter have upgraded their rating on PWR Holdings (ASX:PWH) from a Hold to a Buy and have lowered their price target from $10 to $9.25. At its current share price of $7.21, this implies 28.3% share price growth in a year.  
• And Trading Central have identified a bearish signal in Harvey Norman (ASX:HVN), indicating that the stock price may fall from the close of $4.26 to the range of $3.93 to $3.99 over 13 days, according to the standard principles of technical analysis. 

Yesterday, the Aussie share market started the new trading week in the red, dipping 0.5% lower to 7,206 points.

The majority of the industry sectors posted losses, with the tech sector the biggest drag, falling 1.6%. While the energy sector posted a decent gain after Saudi Arabia raised oil prices substantially. 

Looking at the best and worst performers, gambling company, Tabcorp (ASX:TAH) advanced the most, after the state of Queensland announced tax reforms that are expected to boost revenues. Graincorp (ASX:GNC) also performed well, following the release of a positive broker note out of Macquarie. Its analysts retained their outperform rating and $11.10 price target. Meanwhile, the worst performer yesterday was Magellan Financial Group (ASX:MFG). MFG’s share price tumbled nearly 14% after its funds under management fell 5.2% to $65 billion in May. 

The most traded stocks by Bell Direct clients yesterday were Lake Resources (ASX:LKE), Whitehaven Coal (ASX:WHC) and Fortescue Metals (ASX:FMG). 

Moving to the US, all three benchmarks managed to close higher, with the Nasdaq advancing the most, up 0.4%. It was a choppy day of trade, with the market navigating a jump in Treasury yields.

What to watch today:

• Our local market is set to fall slightly this morning if you go by the SPI futures. The futures are suggesting a small drop of 0.07% at the open.
• In economic news, the RBA, Australia’s central bank is all but certain to lift interest rates for the second month in the row. The cash rate currently sits at 35 basis points, with economists expecting a hike of 40 to 50 basis points. While Governor Phillip Lowe has previously voiced support for more conventional 25 basis point increases. So, keep watch today at 2:30pm AEST. 
• Moving to commodities, the oil price topped US$120 a barrel as Saudi Arabia raised its July crude prices. The gold price dipped on a stronger dollar and Treasury yields. The seaborne iron ore price is trading 0.6% higher at US$145 a tonne. 
• Lastly, if you hold Perpetual Credit Income Trust (ASX:PCI), you will receive your dividend today.  

Trading Ideas:

• Citi have maintained its Buy rating on cloud tech company, Megaport (ASX:MP1), however have reduced its price target from $16.60 to $12.30, to reflect higher cost of capital and earnings downgrades. While the reduction in Megaport Virtual Edge (MVE) pricing could suggest softer demand, Citi sees the new bandwidth options as positive as high IP transit costs were a barrier for MVE adoption in Australia and New Zealand. At its current share price of $6.30, this implies 95% share price growth in a year.
• Trading Central has a bearish signal on Northern Star Resources (ASX:NST) indicating that the stock price may fall from the close of $8.58 to the range of $5.10 - $5.80 in the next 152 days according to standard principals of technical analysis.  

Week-to-date, the ASX200 gained 0.78%, with energy and materials gaining the most, while utilities declined. Last Friday was a positive session, with the ASX200 closing 0.9% higher, led by the materials and tech sectors, which each advanced more than 2%. 

The major miners gained the most on Friday, boosted by demand for iron ore and well as a lithium stocks, which extended their rebound after Wednesday’s sell-off. The best performers were Champion Iron (ASX:CIA), Pilbara Minerals (ASX:PLS), Gold Road Resources (ASX:GOR), Liontown Resources (ASX:LTR) and Nickel Mines (ASX:NIC). And the worst performer was healthcare company Healius (ASX:HLS), following an update that revealed its EBIT came in just under $100 million, compared to first half EBIT of $376 million. 

The most traded stocks by Bell Direct clients on Friday were Lake Resources (ASX:LKE), Fortescue Metals (ASX:FMG), Whitehaven Coal (ASX:WHC), BHP Group (ASX:BHP) and Commonwealth Bank (ASX:CBA). 

Overseas, European and US equities declined, following the release of a stronger-than-expected jobs report and its implication for monetary policy moving forward. The latest jobs report saw that hiring in the US remained elevated in May, however the sell-off was likely a reaction to fears that the Fed will be tightening monetary policy. The benchmark 10-year Treasury yield climbed after the report, above 2.9%. Investor fears around higher rates are around the possibility that it could cause an economic slowdown that could lead to a recession, and higher yields also discount the value of future earnings, making some stocks, like tech, less attractive. The Dow Jones closed 1.05% lower, the S&P500 down 1.6% and the Nasdaq down 2.5%. 

What to watch today:

• Following Wall Street, the Australian share market is set to fall 0.44% at the open this morning, going by the SPI futures.
• Today watch the share price movements of Liontown Resources (ASX:LTR), which is due to release an update to the market on its lithium agreement with Tesla. 
• In economic data, today investors may be trading cautiously, with all focus on the RBA’s policy meeting tomorrow, as well as the European Central Bank meeting on Thursday. 
• In commodities: 
  • The oil price rallied after OPEC delivered a modest increase in output, deciding to increase production by 648,000 barrels per day in July and August, instead of 432,000 barrels per day previously. This was seen as insufficient to compensate for Russia’s lost supply, as the European Union’s ban on Russian oil kicks in. And Russian output has dropped by 1 million barrels per day since the invasion of Ukraine. 
  • On the other hand, the gold price extended losses, following the US jobs report, while seaborne iron ore is rising higher.
• Companies going ex-dividend today include ALS Limited (ASX:ALQ), Champion Iron (ASX:CIA) and Incitec Pivot (ASX:IPL). 

Trading Ideas:

• Bell Potter maintain their Buy rating on Accent Group (ASX:AX1), with a $2.20 price target. The company is a footwear and sports clothing retailer and are investing in its store rollout and customer engagement, particularly for vertical brands. Bell Potter sees these higher margin sales to likely become a major driver of margin improvement and earnings growth. And AX1 last closed at $1.34, implying 64.8% share price growth in a year. 
• Trading Central have identified a bullish signal in AMP (ASX:AMP), indicating that the stock price may rise from the close of $1.12 to the range of $1.24 to $1.26 over 21 days, according to the standard principles of technical analysis.