Between the Bells

The Aussie futures are eyeing a 1.2% charge at the open, but local end of financial year selling and the U.S. Fed’s big announcement will keep gains in check, with the U.S. futures already suggesting a hesitant open on Friday.

The U.S. Fed made a huge announcement that big banks will have to suspend share buybacks and cap dividend payments at their current level for the quarter. Dividends will only be allowed to be paid based on a formula of the bank’s recent earnings, as the Fed forecasts loan losses of $700 billion with unemployment hitting 19.5%, significantly pressuring banks.

Today investors will be watching the big banks as they are expected to see pressure following the Fed's announcement of rising debt levels. However, keep in mind many of our banks like CBA (ASX:CBA) have steady underlying income and balance sheets in good shape. 

Local trading ideas:

• Following Dr Martens, Vans, Athlete’s foot and shoe business, Accent Group (ASX:AX1) reporting FY20 earnings up 10% compared to the same time last year following tight costs, focus on online sales and government support, Bell Potter increased its price target to $1.80.
• Citi increased its Newcrest Mining (ASX:NCM) valuation as production at the WA Havieron mine has been maintained. Newcrest has remained a Citi buy.
• Macquarie (ASX:MQG) was declared Bell Potter’s top pick for FY21, giving it has strong underlying earnings, keeping in mind if COVID-19 didn’t occur, it’s profit would have been gained 4%, instead of fallen 8%. Bell Potter targets that Macquarie will grow to $135.

The Aussie share market is eyeing a 1.6% fall at the open.

It’s the final countdown, just four trading days remains until the end of the financial year, so tax loss selling of those underperforming stocks is expected to continue.

What to watch today:

• CSL (ASX:CSL) announced it will buy an exclusive global license rights to commercialise an adeno-associated virus (AAV) gene therapy program. 
• Qantas (ASX:QAN) entered into a trading halt pending capital-raising announcement. 
• Oxygen companies and companies that will be needed with the second COVID-19 wave like Medical Developments International (ASX:MVP), small company ResApp (ASX:RAP)  and ResMed (ASX:RMD).

Local Trading ideas:

• Select Harvest (ASX:SHV) is touted to possibly buy RFF’s Mooral almond orchard.  Select Harvest was reiterated as Bell Potter buy.
• Sonic Healthcare (ASX:SHL) had it's EPS upgraded by 35% by Citi, with a fall expected next year. Bell Potter upgraded the stock to a buy, it’s also a buy for Citi. 
• Qube (ASX:QUB) signed two leases with Woolies (ASX:WOW) in Moorebank. Qube’s balance sheet is very strong with cash of over $1 billion, Citi subsequently downgraded Qube from a buy to a hold.

The Aussie share market is eyeing a 3rd day of gains with the futures suggesting a 0.2% lift at the open after global equities charged and ratings agency Moody’s affirmed Australia’s AAA rating.

What to watch today:

• CSR (ASX:CSR) holds its AGM.
• Following the gold rush, keep an eye on gold companies like Gold Road Resources (ASX:GOR), Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST), Evolution Mining (ASX:EVN), IGO Ltd (ASX:IGO) & St Barbara (ASX:SBM).

Local trading ideas:

• AMP (ASX:AMP) was reiterated as a buy by Bell Potter, increasing its target to $2.50 as AMP is set to receive $1.1 billion following the sales of its life insurance business on 30 June. 
• Woolworths (ASX:WOW) was reiterated as a buy by UBS following the supermarket's stronger sales numbers announced yesterday, but weaker than expected profit.
• Perenti Global (ASX:PRN) mining services company was reiterated as a buy by UBS but it dropped its price target to $2.00. 
• Citi reiterated Harvey Norman (ASX:HVN) as a buy with a price target of $4.60.

The Aussie share market is eyeing a 0.6% gain at the open after new records were made overnight with the oil price jumping over US$40 for the first time since March. 

Investors will be watching:

• Energy companies like Santos (ASX:STO) which has lower debt than most of its peers, as well as Woodside (ASX:WPL) which has a lot of head room for an acquisition down the track.
• With copper moving higher, keep an eye on BHP (ASX:BHP) and Oz Minerals (ASX:OZL).
• On the economic front, manufacturing and services data is out for June, with the market expecting manufacturing activity will grow to a reading of 49.3.

Local Trading ideas:

• UBS upgraded James Hardie Industries (ASX:JHX) price target to $34, saying the building company is a key standout following earnings upgrades and better than expected U.S. sales in the first six weeks of Q1. For UBS, James Hardie Industries is a buy, meanwhile Citi also maintained its buy on the stock.
• Ramelius Resources Limited (ASX:RMS) was rated as a buy by Shaw and Partners. Whereas UBS' preferred gold buy is Independence Group (ASX:IGO) expecting its shares will grow to $6.00 with the price of gold tipped to reach US$2,000 in the not too distant future.
• Citi put out a note on Stockland (ASX:SGP) following the CEO’s retirement and after it estimated a 2H20 dividend of 10.6 which was 25% of its guidance levels. Citi expects further downside for Stockland and prefers Mirvac (ASX:MGR) for residential exposure for Goodman Group (ASX:GMG) on the commercial industrial side.

State and Federal Governments are divided over reopening the Australian economy with the World Health Organisation warning the pandemic is accelerating. This explains why the Aussie share market futures are suggesting a 1.3% fall at the open.

Today, investors will be watching:

• BHP (ASX:BHP) & Whitehaven Coal (ASX:WHC) following the coal price gain of 1.6%; and New Century Resources (ASX:NCZ) following the 1.5% uptick in zinc.
• The Federal Government is set to ramp up its spending on cyber security following an attempted hack into Australian networks. You could think about companies that could benefit or the ETF (ASX:HACK) which has already gained 14% this year.
• Metcash (ASX:MTS) full year results were announced. Food, liquor & hardware sales up in FY21 first seven weeks.
• Transurban Group (ASX:TCL) Q42020 sales are out. Transurban announced a reduced distribution of $0.16 per share for the next six months through June.
• Harvey Norman (ASX:HVN) goes ex-dividend today.
• The RBA Governor Phillip Low will be giving a speech at 10am.

Local trading ideas:

• UBS upgraded Adairs' (ASX:ADH) earnings per share following Adairs' sales guidance levels beating their forecasts. UBS gives Adairs a price target of $2.55.
• UBS upgraded Sigma Healthcare (ASX:SIG) price target by 15% to $0.61.
• Bell Potter upgraded AMA’s (ASX:AMA) price target to $0.85 after AMA performed better in terms of profitability and cash generation than management and market expectations.

The ASX200 rose 1.5% this week (Mon-Thur), continuing the COVID-19 claw back. With massive infrastructure investment planned in both Australia and the U.S., and global oil prices recovering from their virus induced hangover, investing and trading ideas continue to emerge from the woodwork.

In this week’s wrap, Jessica covers:

• Compare the pair: the U.S. vs the Australian outlook (0:11)
• High sentiment charges the Tech sector up 5.9% (1:13)
• Healthcare stocks lead the way however with Clinuvel Pharmaceuticals (ASX:CUV) & Healius (ASX:HLS) up over 20% each (1:22)
• Key themes: the infrastructure $1bn fast track package; oil price; and global equities poised to rise (1:41)
• Trading ideas: Boral (ASX:BLD), BHP (ASX:BHP) and NRW (NWH) are picks for thematic infrastructure trading (3:11)
• Trading the oil trend - stock ideas from the major investment banks (3:51)
• The case for U.S. corporate bonds, outperforming the ASX200 (5:13)

The Aussie share market is set for a hesitant start with the futures eyeing a dip of 0.1% at the open. 

Investors will be watching: 

• Splitit (ASX:SPT) rose over 100% after inking a deal with Mastercard. Pre-market trade suggests it could rally 8% at the open. 
• Afterpay (ASX:APT) became the 22nd biggest company on the ASX, following the RBA announcement that cash payments continued to fall on the back of structural trends and COVID-19. 
• Evolution Mining (ASX:EVN) cut its gold output guidance and flagged an impairment of up to $100 million. 
• UK Retail sales data is out later with stores reopening this week, but online retail is expected to have pushed sales up 5% in May. 

Local trading ideas: 

• Seek (ASX:SEK) was upgraded to a buy by UBS with a target of $23, following yesterday’s weaker than expected rise in unemployment. 
• Temple & Webster (ASX:TPW) was reiterated as a Bell Potter buy given its valuable offering online retail. Bell Potter targets 17% share price growth to $6.10. 
• Following Westpac selling its Pendal (ASX:PDL) stake, the fund managers Pendal was reiterated as a Bell Potter buy given Pendals performance fees have grown more than expected.

The Aussie share market futures are suggesting a 0.6% fall at the open. This means we are likely to trim off the week-to-date gain of 2.53%.

COVID-19 cases continued to rise overnight in U.S. states like Arizona and Texas, some of the first to re-open. China has shut down all schools in Beijing and cancelled several domestic flights to slow down the spread of the second wave.

Investors will be watching the unemployment rate which is out at 11:30am. The market is expecting the unemployment rate to rise to 7%, with 125,000 expected to have lost their jobs last month. If these numbers are worse than expected or unemployment is near the 10% mark, like the RBA expects, the market will react negatively. If unemployment is better than expected showing our recovery is ahead of the curve, the market is likely to rally with cyclical stocks like banks, retailers and other consumer spending stocks to do well.

Local trading ideas:

• Imdex (ASX:IMD) was reiterated as buy by UBS with a price target of $1.30.
• Ansell (ASX:ANN) was downgraded to a hold by Citi and UBS, given its trading just under its all-time high. While Bell Potter has Ansell as a buy, given its strong balance sheet and room for acquisitions.
• Brambles (ASX:BXB) has a buy rating from Citi as timber prices have settled and transportation costs have continued to fall along with fuel costs. 
• Carsales (ASX:CAR) is eyeing a earnings recovery this year with Morningstar saying it is undervalued but is maintained as a hold by UBS. 

The Aussie futures are suggesting a 0.5% gain at the open following yesterday’s gain of 3.9%, the best daily gain in 10 weeks. 

U.S. Retail sales skyrocketed 17.5%, 10% more than expected in May. Plus, U.S. President Trump is tipped to be drafting up a $1 trillion infrastructure plan for roads, rail and 5G, which will create jobs for the economy as well. 

In Europe, a drug called dexamethasone has been discovered that drastically reduces the death rate of gravely ill COVID-19 patients.

Investors will be watching New Home Sales data for May, BHP (ASX:BHP) and CSL (ASX:CSL).

Local trading ideas:

• Macquarie (ASX:MQG) has been reiterated as a buy by Bell Potter with a price target of $135, implying a 19% share price growth.
• AMA (ASX:AMA) was reiterated as a UBS buy given increased traffic on the roads.
• UBS has reiterated Viva Energy (ASX:VEA) as a buy, increasing its price target to $2.30 following its gain yesterday of 16%.

The Aussie share market futures are suggesting a gain of 2.5% at the open, which will rub out yesterday’s fall of 2.2% and take the ASX200 out of bear market territory which it re-entered yesterday.

The Government says we will have to wait two years before the economy is back at preCOVID-19 levels. In that time, the Prime Minister says he’s targeting 3.75% annual economic growth until 2025. Despite the Government bolstering jobs and infrastructure, the OECD forecasts the Aussie economy will shrink 5% this year. 

Investors will be watching Viva Energy (ASX:VEA) and Orora (ASX:ORA).

Local trading ideas:

• Bell Potter upgraded Propel Funeral Partners' (ASX:PFP) price target to $3.65 as the funeral business’ earnings guidance came in 7% ahead of expectations. 
• Citi and Bell Potter reiterated Healius (ASX:HLS) as a buy following the $500 million sale of its medical centres.
• Centuria Capital (ASX:CNI) was reiterated as a UBS buy given: 1 - Continued strong demand for yield income in a low interest rate environment, which should growing CNI’s AUM. 2 - Its takeover of Augusta Capital which will grow its assets under management again. 3 - Centuria’s other listed entity Centuria Industrial REIT (ASX:CIP) has made it’s way into the ASX200. Yesterday Centuria Capital closed at $1.79 and UBS targets it to grow to $2.34.