Between the Bells

The Aussie share market fell slightly this week, down 0.1% (Mon-Thu), with utilities, tech and financials coming under pressure.

In this week’s wrap, Sophia covers:

• (0:10) Lithium stocks falling deep in the red
• (2:02) Why a2 Milk Company (ASX:A2M) gained 9%
• (2:55) Catapult Group (ASX:CAT) declining after disappointing results
• (3:20) The most traded stocks & ETFs by Bell Direct clients
• (3:50) Two economic news item to watch out for

Yesterday, the Aussie share market started the month of June with a gain of 0.3% or 22 points, despite a huge lithium sell-off.

The market was mixed. The communication services sector advanced the most, while the utilities sector fell a massive 5.3%.  

Looking at the ASX200 stock leaderboard, lithium miners, like Pilbara Minerals (ASX:PLS), Liontown Resources (ASX:LTR) and Allkem (ASX:AKE) were amongst the worst performers, all falling over 15%. This is due to three key factors: Firstly, Goldman Sachs have warned of a “sharp correction” in lithium prices in the next two years, secondly, customs in Argentina have set a reference price to stop ‘irregularities” and thirdly, Chinese EV giant BYD signalled plans to buy six African lithium mines. Meanwhile, the best performers yesterday included Fortescue Metals (ASX:FMG), Telstra (ASX:TLS) and TPG Telecom (ASX:TPG).

Looking at the US, Wall Street started the month of June lower, amid worries about the health of the economy. All three benchmarks were in the red, with the Dow dropping nearly 200 points, the S&P500 falling 0.75%, and the tech-heavy Nasdaq down 0.72%. 

What to watch today:

• Following the negative session in the US, our local market is set to fall this morning if you go by the SPI futures. The futures are suggesting a drop of 0.76% at the open.
• Economic news wise, today we’ll get the latest data on Australia’s trade surplus for April, and the market is forecasting $9 billion trade surplus for the month. 
• Keep watch of Pilbara Minerals (ASX:PLS), who have announced its new CEO. According to its release, the business will be promoting its chief operating officer, Dale Henderson to the CEO role. 
• Moving to commodities: 
  • The oil price rose as the European Union leaders agreed to a phased ban on Russian oil, and as China ended its COVID-19 lockdowns in Shanghai. 
  • The gold price also lifted from its two-week low, as investors looked towards the safe-haven asset amid worries over an increase in inflation. However, a stronger dollar and higher US yields kept gains in check. 
  • The seaborne iron ore price is trading 2.6% higher at US$137 a tonne. 
• TechnologyOne (ASX:TNE) is set to go ex-dividend today. 

Trading Ideas:

• Bell Potter have maintained its Buy rating on building company, Johns Lyng Group (ASX:JLG), with a reduced price target, from $8.70 to $7.50. Bell Potter’s favourable view on JLG is supported by the business being the category leader in Australia, its scalable business model, strong cash flow, as well as its opportunities in the US. Now, at its current share price of $5.92, this implies 26% share price growth in a year.
• Trading Central has a bearish signal on Mineral Resources (ASX:MIN) indicating that the stock price may fall from the close of $58.70 to the range of $47 - $50 in the next 16 days according to standard principals of technical analysis.  

The local market fell into the red yesterday as the financials and technology sectors weighed down on the market, after hawkish comments from the US Fed, that moved US yields higher. Also weighing down on the market was the European Union’s decision to pursue the ban on Russian oil. This has been in discussion for a while now and yesterday the EU agreed to a partial oil embargo on Russia over the invasion of Ukraine. This aims to cut 90% of Russia’s crude imports by the end of the year and aims to reduce Russia’s income to finance the war it launched on Ukraine three months ago. 

The ASX200 closed 1% lower yesterday will all sectors in the red. Zip (ASX:ASX:ZIP), EML Payments (ASX:EML), Megaport (ASX:MP1), Tyro Payments (ASX:TYR) and Suncorp Group (ASX:SUN) declined the most yesterday. Suncorp was also downgraded yesterday by Morgan Stanley, who now rate SUN as Underweight.

 As for the best performers, Beach Energy (ASX:BPT), De Grey Mining (ASX:DEG) and Whitehaven Coal (ASX:WHC) fought against the market sell-off.   

 The most traded stocks by Bell Direct clients yesterday were Lake Resources (ASX:LKE), Scentre Group (ASX:SCG) and the BetaShares Geared Australian Equity Hedge Fund (ASX:GEAR). 

Over in the US, all three major benchmarks closed lower. The Dow Jones down 0.7%, the S&P500 down 0.6% and the Nasdaq down 0.4%. 

What to watch today:

• The decline is set to continue today. Locally, the SPI futures are suggesting the Australian market will fall 0.36% at the open this morning. 
• In commodities, the oil price is trading lower. OPEC is considering suspending Russia’s participation in the cartel, and this could make room for other producers. And as mentioned earlier, the EU has agreed to ban 90% of Russian crude by the end of this year. This embargo will cover Russian oil brought in by sea, while keeping a temporary exemption for pipeline crude, to meet the demand of Hungary, Slovakia and the Czech Republic. 
• The gold price is also trading lower, weighed down by a rebound in the US dollar and firmer US Treasury yields. And iron ore is higher with better demand prospects in the market. 
• In economic data, at 11:30am AEST the GDP Growth Rate for Q1 will be announced. 
• Keep watch of Western Areas (ASX:WSA), as today there’ll vote on the company’s nickel-lithium merger with IGO. 
• Sezzle (ASX:SZL) will hold its AGM today. 
• United Malt Group (ASX:UMG) goes ex-dividend today. 
• Also watch Nordic Nickel Limited (ASX:NNL), which lists on the ASX today. 

Trading Ideas:

• Bell Potter maintain a Speculative Buy rating on De Grey Mining (ASX:DEG), after the company released an updated Mineral Resource for its 100%-owned Mallina Gold Project in Western Australia. They have increased their valuation on DEG by 5% to $1.80. And at its current share price of $1.13, this implies 59% share price growth in a year. 
• Trading Central have identified a bullish signal in Strandline Resources (ASX:STA), indicating that the stock price may rise from the close of $0.37 to the range of $0.44 – to $0.46 over 22 days, according to the standard principles of technical analysis. 

Yesterday, the Aussie share market started the new trading week with an impressive gain of 1.5%. The tech sector led the rally, up 4.6% after US inflation rose just 0.2% in April, which is the smallest increase we’ve seen in about a year and a half. So investors took the inflation data to mean that the central banks may deliver less aggressive rate hikes to control inflation. 

The majority of the top 10 best performing stocks on the ASX200 yesterday were tech shares, like Zip (ASX:ZIP), NOVONIX (ASX:NVX), Block (ASX:SQ2), Tyro Payments (ASX:TYR) and Megaport (ASX:MP1). While Appen (ASX:APX) continues its downward trend, losing 3.7%, after Tellus International walked away from takeover talks. 

The most traded stocks by Bell Direct clients yesterday, they included Lake Resources (ASX:LKE), Bowen Coking Coal (ASX:BCB) and BHP Group (ASX:BHP). 

Wall Street was closed on Monday for the Memorial Day federal holiday, however European stocks closed higher as China relaxed some of its COVID-19 restrictions. The German Dax lifted 0.8%, the FTSE index jumped 0.2% and the French CAC rose 0.7%.

What to watch today:

• The Aussie share market looks to have run out of steam, as the SPI futures are suggesting that our local market is set to open 0.1% lower this morning.
• Keep watch of Crown Resorts (ASX:CWN) today as the business has been hit with a $80m fine from the Victorian Gambling and Casino Control Commission, over its illegal practice of accepting Chinese bank cards at its Melbourne casino to fund gambling and disguising the transactions as hotel expenses.
• In commodities, the oil price jumped to US$117 a barrel, a two-month high as investors wait to see if the European Union will reach an agreement on banning Russian oil. The gold price also lifted, as the US dollar dipped. While, the copper price declined 6.6% to $4.02 per pound, following ongoing demand concerns from China. 
• If you hold Janus Henderson (ASX:JHG), Autosports Group (ASX:ASG), Plato Income Maximiser (ASX:PL8), Red Hill Iron (ASX:RHI) or Kelly Partners Group (ASX:KPG), you will receive your dividend payment today. 
• Orica (ASX:ORI) is set to go ex-dividend today. 

Trading Ideas:

• Bell Potter have maintained its Hold rating on Appen (ASX:APX) but have reduced its price target from $6.75 to $6.50. Bell Potter have also downgraded its earnings per share forecast by 5% in both 2022 and 2023 and 4% in 2024. Now at its current share price of $6.30, this implies 3% share price growth in a year.
• Trading Central has a bullish signal on the a2 Milk Company (ASX:A2M) indicating that the stock price may rise from the close of $4.77 to the range of $5.15 - $5.30 in the next 36 days according to standard principals of technical analysis.  

Week-to-date the ASX200 has advanced 0.52%, boosted by the rebound in Friday’s session, when the market closed just over 1% higher, lifting the ASX200 index to its second consecutive weekly advance. 10 of the 11 industry sectors posted gains. The best performing sectors were energy, which lifted as oil prices neared two-month highs, and the consumer discretionary sector, which followed optimistic forecasts from retailers in the New York. The major banks also all advanced, supporting the broader market.  

The best performing stocks were Pointsbet Holdings (ASX:PBH), City Chic Collective (ASX:CCX) and Block (ASX:SQ2). The worst performer on Friday was Appen (ASX:APX), after it was the best performer Monday-Thursday. Appen is an artificial intelligence services provider, which was approached by Canadian tech company Telus for a $1.2 billion takeover offer, offering $9.50 per share. However, Telus then withdrew their offer and Appen’s share price dropped 21% in Friday’s session. And Appen has received a lot of investor criticism, following the news. 

The most traded stock by Bell Direct clients on Friday were Galileo Mining (ASX:GAL). Investors took their profits after the company’s share price jumped 20.6% on Friday, following news that the miner has discovered rhodium mineralisation at its Norseman project in Western Australia. 

It was a strong session on Wall Street, with the Dow Jones and the S&P500 closing their best weeks since November 2020. The Dow gained 575 points, up nearly 1.8%. The S&P500 rallied 2.5% higher. And the tech-heavy Nasdaq outperformed, ending the day 3.3% higher, boosted by strong earnings from software companies, as well as a fall in the 10-year Treasury yield. 

What to watch today:

• The ASX200 is set to open higher. The SPI futures are suggesting a strong lift of 1.15% at the open this morning.
• In commodities, oil is trading around US$115 per barrel, amid persistent concerns of tighter global supplies and increasing demand. So watch producers such as Santos (ASX:STO) and Woodside, which recently changed its ticker code to (ASX:WDS). Gold is also trading higher, benefiting from recent weakness in the US dollar. And iron ore has also rallied to an almost three-week peak. 
• Watch AGL Energy (ASX:AGL)’s share price movements, as there has been some speculation that the company has dropped its demerger plans. We’re expecting an announcement from AGL’s CEO sometime today. 
• Companies that are set to go ex-dividend today are Coronado Global Resources (ASX:CRN) and Elders (ASX:ELD). So, this often sees shares fall, as investors take their profits.
• Link Administration (ASX:LNK) will hold its AGM today. 

Trading Ideas:

• Bell Potter maintain their Buy rating on EROAD (ASX:ERD) and have lowered their price target from $5 to $3.40, as well as reduced their underlying EPS estimates, accounting the higher corporate costs and lower FY23 estimated EBIT guidance. ERD last closed at $2.40, implying 41.7% share price growth in a year.
• Trading Central have identified a bullish signal in Qantas (ASX:QAN), indicating that the stock price may rise from the close of $5.46, to the range of $6.10 to $6.30 over 17 days, according to the standard principles of technical analysis. 

The Aussie share market declined 0.6% this week (Mon-Thu), with only the materials and financials sectors managing to post gains.

In this week’s wrap, Sophia covers:

• (0:17) Bell Potter & Citi's ratings on the major banks
• (2:06) Why Appen (ASX:APX) has crashed today
• (2:39) The most traded stocks & ETFs by Bell Direct clients
• (3:13) Four economic news item to watch out for

Yesterday, the ASX200 managed to lift 0.4% or 26 points higher to close at 7,155 points, despite the threat of rising interest rates and inflationary pressures again leading to a heavy tech sell-off. 

Consumer staples stocks led the way, with the sector lifting 1.5%. Financials also performed well with all four of the big banks posting gains of over 1%. While, the worst performing sector was the tech sector, which fell about 3%.

The best performer yesterday was Australia’s largest horticultural company, Costa Group Holdings (ASX:CGC) which closed 8.6% higher. This followed its shareholders receiving a cautiously optimistic outlook for the 2022 financial year in its AGM yesterday. CGC expects its earnings to be $5 million higher this year while its after tax profit is predicted to fall $6.4 million. Other stocks that posted gains included Nufarm (ASX:NUF), Perseus Mining (ASX:PRU) and Orica (ASX:ORI).  Meanwhile, Chalice Mining (ASX:CHC), City Chic Collective (ASX:CCX) and Pro Medicus (ASX:PME), all posted losses of around 6%. 

The most traded stocks by Bell Direct clients yesterday, they included BHP Group (ASX:BHP), Lake Resources (ASX:LKE), Bank of Queensland (ASX:BOQ) and BrainChip (ASX:BRN).

Moving to the US, all three benchmarks closed higher. The Dow closed 0.6% higher, the S&P500 up 1% and the Nasdaq pushed 1.5% higher. The minutes of the Federal Reserve’s May meeting were released, and they showed that the central bank is prepared to raise rates further than the market had anticipated. 

What to watch today:

• Following the positive session in the US, the SPI futures are suggesting that our local market is set to open 0.2% higher this morning.
• Reporting wise, iron ore miner, Champion Iron (ASX:CIA) is set to release its full-year results today. Goldman Sachs is expected CIA to report both revenue and EBITDA increases of 14% and 12.8% respectively over the prior corresponding period. 
• Moving to commodities: 
  • The oil price lifted 1% to US$110 a barrel. Natural gas surged to above $9, its highest level since 2008, as inventories stay low.  
  • The gold price fell as the US dollar strengthened after the minutes of the Federal Reserve’s May meeting.
  • The spot iron ore price is trading 1.5% lower at US$130 a tonne.
• One company debuting on the ASX today is TG Metals. The company is pursuing nickel, lithium and gold exploration and development opportunities in Western Australia. It will be trading under the ticker code TG6.
• A few companies going ex-dividend today include Aristocrat Leisure (ASX:ALL), James Hardie Industries (ASX:JHX) and Nufarm (ASX:NUF).
• If you hold Bank of Queensland (ASX:BOQ), you will receive your dividend payment today. 

Trading Ideas:

• Citi have maintained its Buy rating on Bank of Queensland (ASX:BOQ) but have reduced its price target from $10.25 to $9.25. At its current share price of $7.52, this implies 23% share price growth in a year.
• Trading Central has a bearish signal on BHP Group (ASX:BHP) indicating that the stock price may fall from the close of $43.02 to the range of $33.50 - $35.25 in the next 89 days according to standard principals of technical analysis.  

The local market fell 0.3% or 20 points lower yesterday to close at 7,128 points.

The tech sector came under quite a bit of pressure, falling 3% after US tech stock Snapchat, plunged in after-hours trading. We’ll touch on Snapchat in just a bit. The rest of the sectors closed in the red, except for the real estate and financial sectors, both closing around 0.3% higher, with all four of the big banks closing higher. 

Some of the best performers yesterday included Allkem (ASX:AKE), Pilbara Minerals (ASX:PLS) and Liontown Resources (ASX:LTR), all benefitting amid optimism that lithium demand will continue to outstrip supply for some time to come. While the worst performers included Nufarm (ASX:NUF), Imugene (ASX:IMU) and City Chic Collective (ASX:CCX). 

The most traded stocks by Bell Direct clients yesterday, they included Grange Resources (ASX:GRR), which rose 5.6% yesterday, following the strength in the iron ore price. Also highly traded was Lake Resources (ASX:LKE), BHP Group (ASX:BHP) and Commonwealth Bank (ASX:CBA).

Moving to the US, the market was mixed. The Dow Jones managed to claw back its early losses and rally into the close, boosted by UnitedHealth Group, as well as McDonald’s, Verizon, and IBM. While the S&P500 fell 0.8% and the Nasdaq dropped over 2% after Snapchat plummeted 43%. The social media company’s shares fell as it warned that it was bracing to miss its earnings and revenue targets in the current quarter. So this led to other tech companies, like Meta, Alphabet, Amazon, and Apple leading the day’s losses as investors feared a slowdown in digital advertising. 

What to watch today:

• Following the mixed session in the US, the SPI futures are suggesting that our local market is set to open 0.1% higher this morning.
• Reporting wise, ALS (ASX:ALQ) and Fisher & Paykel Healthcare (ASX:FPH) will be releasing their full-year results and dividend today. 
• Moving to commodities, the oil price traded flat as tight supply worries offset concerns over a possible recession and China’s COVID-19 curbs. The gold price gained as the US dollar fell, therefore boosting the safe-haven asset’s appeal. And the spot iron ore price trading 4.8% higher to US$132 a tonne.
• One company debuting on the ASX today is Bellavista Resources. Bellavista is a mineral exploration company, targeting large, high-grade base metal and battery mineral deposits in WA. It will be trading under the ticker code BVR. 
• Alumina (ASX:AWC) and Costa Group Holdings (ASX:CGC) are holding their AGMs today. 

Trading Ideas:

• Bell Potter have maintained its Buy rating on software company, TechnologyOne (ASX:TNE) with an increased price target from $12.50 to $12.75. TNE provided financial year 2022 guidance of 10-15% profit after tax growth, as expected. The company also said it expects SaaS or Software as a Service annual recurring revenue growth for the full year to be more than 40%, with initial licence fees to be down from financial year 2021. At its current share price of $10.24 this implies about 25% share price growth in a year. 
• Trading Central has a bullish signal on lithium business, Liontown Resources (ASX:LTR) indicating that the stock price may rise from the close of $1.33 to the range of $1.54 - $1.60 in the next 22 days according to standard principals of technical analysis.  

The local market closed with little change yesterday, amid reviving fears about China’s economic growth now that there are rising COVID-19 cases in Beijing. Locally, materials and technology shares advanced the most, while utilities, financials and consumer staples declined. 

On the ASX200 leaderboard, Codan (ASX:CDA) was the best performer after releasing its FY22 guidance. The company expects to match its first-half profit in the second half. If this is achieved, Codan will hit a record full-year profit of $100 million, which would be an 56% increase year-on-year. Meanwhile Polynovo (ASX:PNV), NOVONIX (ASX:NVX) and Incitec Pivot (ASX:IPL) dropped the most. 

The most traded stocks by Bell Direct clients yesterday were Lake Resources (ASX:LKE), APA Group (ASX:APA), BHP Group (ASX:BHP) and CSL Limited (ASX:CSL). 

In New York there was a bank-led rally saw the Dow Jones rebound more than 600 points, closing 1.98% higher, following a week of sharp losses. The S&P500 closed with a gain of 1.86% and the tech-heavy Nasdaq gained 1.59%. 

What to watch today:  

• Following US equities, the Australia share market is set to rise 0.27% at the open this morning. 
• In commodities, the price of oil is trading lower as worries of a recession offset expectations of higher fuel demand over in the US. Gasoline demand in the US has remained at record levels, ahead of Memorial Day weekend, the peak driving season in the US. The price of gold reached its highest in two weeks, lifted by a weaker US dollar. Meanwhile, iron ore prices have risen higher. 
• Today watch Technology One (ASX:TNE), which is set to report its earnings results today. 
• Viva Energy Group (ASX:VEA) will hold its AGM today. 
• Amcor (ASX:AMC) and GQG Partners (ASX:QGQ) are set to go ex-dividend today. 

Trading Ideas:

• Bell Potter have upgraded their recommendation on AFT Pharmaceuticals (ASX:AFP) from a Hold to a Buy, after the company reports its FY23 result yesterday. The price target has remained unchanged at $4.80 and AFP’s currently share price is $3.20, which implies 50% share price growth in a year. 
• Trading Central have identified a bearish signal in PM Capital Opportunities Fund (ASX:PGF), indicating at the stock price may fall from the close of $1.58 to the range of $1.44 to $1.46 over 11 days, according to the standard principles of technical analysis. 

Over the week the ASX200 gained 1%, with the tech sector in the lead, up 5% week-to-date. On Friday the market gained 1.15%, with most sectors in the green. Only energy and real estate stocks finished lower. 

The standout stock on Friday was Chalice Mining (ASX:CHN), jumping 19%.The company received a new set of exploration approvals to expand its existing WA nickel projects. Following this, Bell Potter retained their Speculative Buy rating on CHN with a $12.02 price target. At its current share price of $6.81, this implies 76.5% share price growth in a year. Following CHN on the leaderboard were tech stocks, recovering from prior losses. These included family app Life360 (ASX:360), battery materials and tech company NOVONIX (ASX:NVX) and Afterpay’s parent company Block (ASX:SQ2). Meanwhile Nufarm (ASX:NUF) and Woodside Petroleum (ASX:WPL) declined the most. 

The most traded stocks by Bell Direct clients on Friday were Lake Resources (ASX:LKE), CSL (ASX:CSL), BHP Group (ASX:BHP) and BrainChip Holdings (ASX:BRN). 

In US equities, the Dow fell for the 8th straight week amid a broader market sell-off. The Dow and the S&P500 both closed flat, while the Nasdaq saw its 7th negative week in a row for the first time since March 2001 and also saw its lowest intraday level since November 2020 on Friday. 

 What to watch today:

• The SPI futures are suggesting the Australian market will fall 0.21% at the open this morning. 
• In commodities, the oil price is trading lower, as we wait for news on the potential EU ban on Russian oil. Oil demand however is expected to rebound in China, as authorities in Shanghai lifted some COVID restrictions. Meanwhile gold is trading flat, while seaborne iron ore is in the green. 
• And two companies reporting their earnings results today are Elders (ASX:ELD) and Incitec Pivot (ASX:IPL). So, keep watch of their share price movements today. 

Trading Ideas:

• Bell Potter maintain their Buy rating on Select Harvests (ASX:SHV) and have lowered their price target from $7.40 to $6.95. SHV last closed at $5.99, implying 16% share price growth in a year. 
• Trading Central have identified a bullish signal in The a2 Milk Company, indicating that the stock price may rise from the close of $4.28 to the range of $4.65 to $4.75 over 30 days, according to the standard principles of technical analysis.