Between the Bells

It will be a day of red for the Aussie share market bracing for a fall of 1.95% at the open.

Just a day after the benchmark S&P500 and tech-heavy Nasdaq hit brand-new record highs, U.S. equities tumbled overnight, seeing their biggest drop in months as investors locked in profits. Despite the better than expected economic news with jobless claims falling more than expected, investors took the opportunity to cash in on the stocks that have been driving the market higher over the last five months.

What to watch today:

• Keep an eye on U.S. futures that have calmed down a bit, earlier they were indicating heavy selling would continue in the U.S. this evening.
• This evening in the U.S., monthly payroll data is out for August.

Local trading ideas:

• Life360 (ASX:360) was reiterated as a top Bell Potter buy overnight, increasing its target to $7, implying 64% share price growth from yesterday’s close.
• Toll road operator Transurban (ASX:TCL) was upgraded by UBS from a hold to a buy with a $15.50 target.
• ReadyTech (ASX:RDY) is showing a "Bullish flag" chart pattern according to Trading Central’s data, which tells us the stock may rally from yesterday close of $1.93 to $2.19 to $2.25, over 5 days according to standard principles of technical analysis.

The Aussie share market should see a lift of 0.7% at the open, making a nice addition to yesterday 1.8% gain.

Wall Street had another smashing night with the benchmark S&P500 and tech-heavy NASDAQ hitting brand new record highs.

The AUD fell to 73.35 U.S. cents, dragged by weaker than expected Aussie GDP data yesterday.

What to watch today:

• After learning the Aussie economy shrank 7% from April to June, more than the 6% forecast, the Tourism Minister is now pressuring states and territory to open their boarders, saying the government will lose $55 billion this year if borders remain shut.
• On an economic front, import and export data is out for July, known as the balance of trade. The market is expecting a $5.4 billion surplus, meaning we’re expected to see more goods exported.
• Companies to keep an eye on: Fortescue Metals (ASX:FMG), BHP (ASX:BHP), Rio Tinto (ASX:RIO) and CSL (ASX:CSL).
• This evening in the U.S., import and export figures for July will be released.

Local trading ideas:

• Afterpay (ASX:APT) had its buy rating upgraded by Bell Potter, giving it a price target of $99.10, implying 20% share price growth from yesterday’s close of $82.50.
• Midway (ASX:MWY), Australia’s biggest Woodfibre processor and exporter, was given a sharp upgrade from a hold to a buy by Bell Potter with a $1.25 price target, implying 36% share price growth. Midway was upgraded following its improvement in cashflows, reduction in debt, and that pulp prices reached the bottom of their cycle.
• Boral (ASX:BLD), Australia’s largest supplier of building and construction materials was reiterated  as a UBS buy with a $4.30 price target.

Records were smashed in the U.S. overnight for two key reasons: (1) U.S. factory activity in August saw its biggest expansion since November 2018 and (2) video conferencing company, Zoom, reported a 360% jump in revenue, pushing its shares up 41%. The S&P500 ended 0.7% higher, closing at brand new record, while the Nasdaq soared 1.4% also breaking its prior record. 

Commodities: 

• Gold lifted by US$2 compared to yesterday, hitting US$1,979
• Oil trades steady at US$42.76 after encouraging manufacturing numbers came through, however U.S. oil supply fell for the sixth week

What to watch today: 

1. Aussie share market should see a lift today, futures are suggesting at 0.4% gain
2. China suspends barley imports from CBH, claiming there were pests in a shipment.
3. Economic front: GDP data is out today, showing how much the economy shrank from April to June. Estimates suggest that GDP shrank 6% in the second quarter, which means we will officially enter a recession for the first time in 30 years. 
4. The Australian dollar took a breather but holds two-year high territory, 73.74 US cents as the U.S. dollar came back in favour. 
5. BHP listed in New York gained 3.1% overnight,  so you’d think the ASX listed BHP could follow. 

As for Trading ideas:

• Zip (ASX:Z1P) was downgraded to a sell by Citi, giving it a price target of $6.90. Yesterday Z1P fell 13% to $7.99. However its outperformed the market of late, rising over 35% in the last month. The entry of PayPal increases concerns over the medium-term – in particular, Zip’s acquisition of Quadpay could go head to head with PayPal’s pay in four. Hence Citi downgraded Zip to a sell. 
• Aristocrat Leisure (ASX:ALL) was reiterated as a UBS buy, while dropping its target to $29.60. The most upside for Aristocrat comes from online with 35% digital growth expected in the second half of the year. 
• Silver Lake Resources (ASX:SLR) has formed a bullish "continuation wedge" chart pattern according to Trading Central’s technical analysis. This indicates SLR shares could rise from yesterday’s close of $2.23 to $2.70 - $2.85 over the next 18 days according to standard principles of technical analysis. Macquarie has a $2.60 price target for SLR. 

The Australian dollar has continued to soar, hitting a new two-year high overnight, 73.75 US cents. The reason for that is that the U.S. dollar continues to retreat, as inflation is now being encouraged to rise to over 2%, while interest rates are likely to remain at record lows for some time. Overnight, U.S. indices closed mixed, with the top 30 stocks, the Dow Jones falling 0.8%. The Nasdaq meanwhile gained 0.7%, supported by Apple shares rising 3.4%, and Amazon and Intel rising over 1% each.

The month of August marked great significance as both the broader S&P500 and Dow rose 7% - their best gain since the 1980's. This came as the ASX200 closed higher for the 5th month, up 2.24% - the best return since 2009.

Commodities:

• Gold holds steady where it was yesterday at US$1,974
• Oil fell 0.4% to US$42.82.

What to watch today:

• Aussie futures set to lose 0.96%, or 58 points at the open
• The RBA meets today – rates tipped to remain on hold at 0.25%
• BHP listed in New York lost 1.4%, Rio similarly fell by 1.2%

Trading ideas:

• Temple & Webster (ASX:TPW) shares soared 18% yesterday to a record all time high – $9.69 after delivering results that were much stronger than expected. Its sales have risen 161%, and Bell Potter have increased its price target to $11.40.
• PointsBet (ASX:PBH) shares fell about 7% yesterday, but it managed to remain in record high territory at $13.03. Bell Potter have upgraded the stock’s buy rating, and increased the price target to $18.40.
• Sezzle (ASX:SZL) shares fell 9.4% yesterday to $10.27, after reporting its loss sank from $4.8m to $8.2m in the half year to June 30. However, its active merchants and customers increased 220-340%. Ord Minnett increased Sezzle’s price target to $11.80.

The Aussie futures are suggesting a 0.7% fall at the open despite U.S. stocks shining on Friday. This really reflects how differently we have been performing to the U.S. market of late, given their market is mainly tech stocks and ours is heavily made up of banks and miners.

The Australian dollar has scaled to its highest level in two-years to US$0.736, with the U.S. dollar continuing to fall. It has continued to drop since the U.S. Federal Reserve said it would let inflation rise to over 2% and keep interest rates at record levels.

What to watch today:

• The market looks like it will close higher for August, its fifth positive month.
• Economic data will come back into focus this week with the RBA meeting tomorrow and GDP data out on Wednesday, with Australia to officially enter a recession for the first time in almost 30 years.
• Bubs Australia (ASX:BUB) reports results today and Zip Co (ASX:Z1P) holds it AGM.

Local trading ideas:

• Intellectual property business, QANTM Intellectual Property (ASX:QIP) was reiterated as a Bell Potter buy, while the broker decreased QIP’s target price to $1.60, implying 44% share price growth from Friday’s close.
• Buy now pay later group Spilitit (ASX:SPT) is giving off a bullish trend according to Trading Central’s standard technical analysis principals. Keep in mind SPT is not yet covered by a lot of brokers. However according to Trading Central analysis, SPT shares may rise from $1.83 to $2.35 - $2.45 over the next 50 days. 

We saw 35 companies report this week, the busiest reporting season week in August. Most results came in line or beat expectations, while a handful of reports dragged the chain. 
 
 In this week’s wrap, Jessica covers:

• (0:6) Reporting Season's final dash
• (0:16) Sectors: Tech shines, while Utilities dampen
• (0:5) Who beat, who met, and who missed expectations?
• (2:49) The reporting season big picture
• (3:18) Results to watch next week: Bubs Australia (ASX:BUB) and Cooper Energy (ASX:COE)
• (3:45) Ex-dividend dates coming up including: Ansell (ASX:ANN), Steadfast Group (ASX:SDF) and Amcor (ASX:AMC) 

The Aussie share market is eyeing a 0.2% fall at the open today.

It was a monumental day in the U.S. on Thursday as the Federal Reserve unveiled a new framework to let inflation run above its 2% goal, while it would keep interest rates lower for longer. This will encourage wage growth and encourage people back into the work force, while also helping businesses keep credit costs low. This news sent treasury yields higher, which lifted financial stocks like JP Morgan and American Express.

Oil lost about US$0.40 to US$43.04 as one of the strongest hurricanes in years made landfall in the heart of the Gulf of Mexico’s oil and gas production.

Companies reporting today:

• Australian Finance Group (ASX:AFG), Boral (ASX:BLD), Costa Group Holdings (ASX:CGC) and Harvey Norman (ASX:HVN).

What to watch today:

• Keep an eye on BHP (ASX:BHP) and Rio Tinto (ASX:RIO), as both of their UK and U.S. listed entities closed lower overnight.

Local trading ideas:

• Accent Group (ASX:AX1) was reiterated as a Bell Potter buy overnight, increasing AX1’s price target to $1.85. That implies 21% share price growth in a year, from yesterday’s close.
• City Chic Collective (ASX:CCX) was reiterated as a Bell Potter buy, increasing CCX’s price target to $3.95. That implies 19% share price growth in a year, from yesterday’s close. Bell Potter sees significant upside in its expansion into the U.S. and thinks it will benefit from the online shift.
• UBS reiterated data centre and cloud business NEXTDC (ASX:NXT) as a buy with a 12-month price target of $14.15. UBS expects returns to increase and has modelled earnings will continue to grow for the next five years, while its debt to equity will decrease.

The Aussie share market is eyeing a 0.3% lift today at the open, which will rub out some of yesterday’s 0.7% fall.

Last night U.S. manufacturing goods orders rose 11.2% in July, recovering from the sharp fall in March and April. Sentiment also got a kick as COVID-19 vaccine hopes were lifted when Moderna posted promising results from a small trial of patients.

What to watch today:

• Afterpay (ASX:APT) just reported full financial year results. Earnings (EBITDA) came in at $44.4 million in the year, stronger than its own expectations of $43 million. APT’s price could jump to about $94 at the open today with brokers expected to upgrade their target prices given its expansion into Europe and the U.S., Morgan Stanley’s the most bullish at $101.

Local trading ideas:

• MTS shares formed a pattern that indicates it may rise from yesterday’s close of $2.99 to $3.26 - $3.32 over the next 9 days, according to standard principles of technical analysis. Metcash’s results showed strong sales momentum and Citi expects this to continue, which is why MTS is a Citi buy with a $3.50 price target.
• Jewellery business Lovisa Holdings (ASX:LOV), was upgraded by Bell Potter with the broker bumping up its price target to $8.35, implying 14% growth from yesterday's close of $7.30. With trading, building and revenue growing despite the pandemic, it looks like the business is gaining momentum as expected.
• Car dealership business A.P. Eagers Automotive (ASX:APE), was downgraded from a buy to a hold by Bell Potter with the broker increasing its price target to $9.50, indicating its share price will only rise 6% from yesterday's close of $8.96.

The Aussie share market opened 0.6% lower in the first 10 mins of trade, as the futures predicted. The market continued to fall in the first hour  - with investors digesting weaker than expected financial year report cards, leaving the market sitting 1% lower at 11am.

On the downside:

• Financial software and advice provider, Bravura (ASX:BVS) is one of the worst performers on the market today – its shares are down 15% dragging BVS almost back to its COVID-19 low. BVS reported a 22% jump in profit but the market is focused on the uncertainty of its new sales.
• Whitehaven Coal (ASX:WHC) is down 8%, on the back of full year results that were largely in line with estimates.

On the upside:

• Waste business, Cleanaway Waste Management (ASX:CWY) is the best performing stock so far this session up 8.5% after reporting its revenue rose 2% to $2.33 billion in the year, while all divisions made a profit, beating market expectations.
• Fintech business, HUB24 (ASX:HUB) is up 6% to $16.26, after hitting a record all-time high earlier today – as Credit Suisse and Citi upgraded the stock overnight, Citi giving HUB a $17.40 target. HUB’s financial results were out yesterday, showing much stronger inflows into the financial platform than expected, something Credit Suisse expects will continue.
• We are also seeing oil stocks like Oil Search (ASX:OSH) and Cooper Energy (ASX:COE) trading higher after the oil price rose to its highest level in five months US$42.45 on the back of storm-driven output cuts.

Trading ideas:

• Ship builder, Austal (ASX:ASB) was upgraded by Citi after it handed down its full financial year results – showing an improvement in profitability. Citi upgraded ASB’s earnings estimates by 10%, has a buy rating on the stock and a target of $4.50.
• Fortescue Metals (ASX:FMG) is now being sold around $18.50, as there’s downside risk to the iron ore price.  FMG has strong free cash flows and is focused on returning surplus cash to shareholders.

Moving to overseas, sentiment is high, for two key reasons, (1) COVID-19 cases are continuing to fall over the month, and (2) the U.S. and Chinese officials reaffirmed the phase one trade deal is on track.

If you look at the U.S. futures  - they’re indicating U.S. equities will mostly open positive, indicating the S&P500 and Nasdaq will rally off Tuesday’s record closes.

The futures are looking at a gain of 0.6% for Aussie equities - a nice addition to yesterdays 0.3% lift, as well as the 35% rise from the COVID-19 low. Overnight in the U.S., the S&P and the Nasdaq reached brand new record closing highs, following the FDA’s approval of the use of plasma as a treatment for COVID-19 patients. Furthermore, positivity was instilled by Trump’s work to fast-track the AstraZeneca/Oxford University COVID-19 vaccine. This positive sentiment helped the S&P500 gain 1%, rising above 3,400 for the first time. 

Over to commodities, gold fell to US$1,937 as global equities surge from the potential COVID-19 vaccines. Oil similarly fell 0.5% due to an impending tropical storm threatening the Gulf Coast.

Companies reporting today

• Ansell (ASX:ANN), which has been front and centre with PPE distribution. Blackmores (ASX:BKL) the vitamin maker, City Chic Collective (ASX:CCX) the online and U.S. women’s clothing company, and Nanosonics (ASX:NAN) – the infection prevention company.
• Additionally, oil companies; Oil Search (ASX:OSH) and Ampol (ASX:ALD) are on today, while port and logistics company QUBE Holdings (ASX:QUB), and Propel Funeral Partners (ASX:PFP) are set to report too.

Trading ideas:

• Virgin Money (ASX:VUK) is showing a bullish ‘hammer signal’ using standard technical analysis from Trading Central.
• CBA (ASX:CBA) may fall from yesterday's close of $68.95 to the range of $60.75 - $62.25 over the next 34 days according to standard technical analysis from Trading Central. This is why Bell Potter has downgraded CBA from a buy to a hold with a $78.00 price target. UBS targets $74.70.
• Afterpay’s (ASX:APT) buy rating was upgraded by Bell Potter yesterday following the announcement that it will buy Spanish based European buy now pay later company Pagantis.