Between the Bells

As we enter into the 3rd week of Reporting Season, many companies have released results that have defied odds despite strong headwinds and inflationary pressures.

In this weeks video, Grady covers:

• BlueScope Steel (ASX:BSL): Shares rallied 13% despite a 57% drop in H1 EBIT, with H2 earnings guidance suggesting at least 16.5% growth.
• A2 Milk (ASX:A2M): Soared 19%, with a strong 10.1% revenue increase and an inaugural 8.5 NZ cps dividend.
• LendLease (ASX:LLC): Posted a strong 122% rise in operating profit, though net debt grew to $3.8bn.
• BHP (ASX:BHP): Revenue down 8%, but copper boosted results. The 30% cut in interim dividend disappointed.

Wall St closed higher overnight as the S&P 500 sets a new record high, climbing 0.24%. The Dow Jones rose just 0.02% and the tech-heavy Nasdaq had a slight rise of 0.07%. The energy sector was the best performing, gaining 1.9% with Halliburton and Valero Energy leading gains.

Over in Europe, markets closed higher as the STOXX600 jumped 0.32% by market close on Tuesday. Germany’s DAX had a gain of 0.2%, the French CAC rallied 0.21% and over in the UK the FTSE100 had a slight fall of 0.01% by the closing bell.

Locally yesterday the ASX had a pullback to start the week, closing Tuesday’s session down 0.66% despite the RBA announcing the nation’s first cash rate cut since November 2020 after 13-hikes to 4.35%. The nations cash rate now drops 25-basis points to 4.1% as the RBA’s journey to tame inflation is working at the same time the elevated rate environment to date has caused a cost-of-living crisis in Australia.

What to watch today:

• The Australian share market is set to open slightly lower, with the SPI futures suggesting a fall of 0.02% at market open this morning.
• On the commodities front this morning,
  • Oil is trading 0.55% higher at 71 US dollars and 77 cents a barrel after crude exports from Kazakhstan were disrupted after a drone strike hit a Russian pumping station, potentially cutting pipeline flows by 30%.
  • Gold is trading 1.2% higher at 2934 US dollars an ounce and iron ore is trading 0.06% higher at 106 US dollars and 83 cents a tonne.

Trading Ideas:

• Bell Potter maintains a buy rating on HUB24 (ASX:HUB) and has increased its 12-month price target to $93. With a current share price of $84.39, this indicates a share price growth of 10.2% over the next 12-months, hence the buy rating is maintained.
• Trading Central has identified a bearish signal on Appen Ltd (ASX:APX), indicating that the stock price may fall from the close of $2.90 to the range of $1.90-$2.10, on a pattern formed over 30 days, according to the standard principles of technical analysis.

Welcome to another episode of our Macro Insights series! Today, the RBA made a highly anticipated move, cutting the cash rate by 25bps, bringing it to 4.10% from 4.35%. This marks the first rate cut in over four years after a series of 13 hikes aimed at curbing inflation.

While inflation drivers remain sticky, this rate cut should ease cost-of-living pressures for Aussies, though the full effects will take time to trickle through the economy.

Here’s a quick snapshot of the latest data that influenced today’s decision:

• Inflation: Annual inflation dropped to 2.4% (Q4 2024), but services inflation remains high at 4.3%.
• Labour Market: Unemployment rose to 4%, but 256k jobs were added, reflecting a strong labour market.
• Retail Sales: Consumer spending fell 0.1% in December, signalling easing inflationary pressures.
• GDP: Q3 2024 GDP expanded 0.3%, below expectations.

The sectors most likely to benefit from this cut? Tech, Healthcare, and Real Estate – all poised for relief in a lower-rate environment.

Wall street was closed on Monday for the President’s Day holiday.

Over in Europe on Monday markets closed higher as several defence stocks soared amid renewed spend in the defence space in the region. The STOXX 600 rose 0.54% to a fresh record high, while Germany’s DAX added 1.26%, the French CAC climbed 0.13%, and, in the UK, the FTSE 100 ended the day up 0.41%.

Across the Asia region on Monday, markets closed mostly higher as investors digested Japan’s latest GDP reading which came in at a Q4 expansion of 2.8%, exceeding market estimates of 1% growth. Japan’s Nikkei added 0.06% on Monday, Hong Kong’s Hang Seng fell 0.02%, China’s CSI index rose 0.21% and South Korea’s Kospi index ended the day up 0.75%.

The local market was sold off yesterday, ending the day down 0.2% as the banks weighed on market gains after Westpac posted a 9% drop in net profit for Q1, while investors remain cautious ahead of the RBA’s first meeting for 2025 starting today. The market is factoring in a 90% chance of a rate cut today, however, economic data shows inflation and key drivers of inflation remain sticky so the announcement out of the RBA will be highly anticipated this afternoon, in addition to the outlook for the rate journey.

Gold miners saw significant sell-offs after the precious metal experienced its largest single-day drop on Friday. Northern Star Resources dropped 3.5%, Bellevue Gold lost 3.16% and Evolution Mining ended the day down 2.05%.
 On the other hand, payment provider Findi saw a strong rally, up 7.3%. This surge came after the company narrowed its earnings forecast for fiscal 2025, now expecting earnings before tax to fall between $30 million and $32 million, compared to the earlier range of $30 million to $35 million.

Better-than-expected earnings boosted a2 Milk by 19.7% on Monday with the company reporting a 10.1% rise in revenue, NPAT up 7.6% to NZ$91.7m and A2M also declared an inaugural dividend of 8.5 NZ cps.
 A sharp rise in US steel prices since President Trump commenced his term in office, boosted BlueScope Steel’s outlook in results out yesterday. Shares in Australia’s largest steelmaker rose almost 13% on Monday despite the company reporting a 57% slide in underlying EBIT and NPAT down 59%.

What to watch today:

• Ahead of Tuesday’s trading session the SPI futures are anticipating the ASX will open the day up 0.25%.
• On the commodities front this morning, oil is trading 0.91% higher at US$71.38/barrel, gold is up 0.78% at US$2903/ounce and iron ore is up 0.06% at US$106.83/tonne.
• The Aussie dollar has further strengthened overnight to buy US$0.63, 96.30 Japanese Yen, 50.52 British Pence and NZ$1.11.

Trading Ideas:

• Bell Potter has increased the 12-month price target on Chalice Mining (ASX:CHN) from $5.15 to $5.75 and maintain a speculative buy rating on the platinum, nickel, copper and cobalt miner following metallurgical test work breakthrough at the company’s 100%-owned Gonneville Project demonstrating two saleable, smelter grade flotation concentrated can be produced across the entire Gonneville Sulphide resource.
• And Trading Central has identified a bullish signal on Dalrymple Bay Infrastructure (ASX:DBI) following the formation of a pattern over a period of 25-days which is roughly the same amount of time the share price may rise from the close of $3.65 to the range of $3.96 to $4.04 according to standard principles of technical analysis.

The local market closed 0.2% higher on Friday, buoyed by a strong rally for the consumer staples sector amid strong results out of TWE and investors buying up the supermarket giants on Friday. For the week, the ASX posted a gain of 0.52% as industrials and the consumers stocks rallied, while healthcare stocks took a 3.75% hit over the 5-trading days.
Reporting season ramped up on Friday with Avita Medical soaring 11% after the company announced a guidance range of $158m to $167m for commercial revenues in 2025, while GQG rose 5.9% after doubling net inflows to the half year to December.

Hearing device specialist Cochlear on the other hand fell 13% on Friday after downgrading profit guidance for FY25 due to weaker services contribution and increased cloud-related investment, despite the company posting a 5% rise in sales in H1 to $1.17bn.

In the US on Friday, markets closed mixed on Friday despite investors gaining certainty around Trump’s tariff plans and fresh economic data signalling the US inflation story is not running hot as was previously feared. The Dow Jones fell 0.4%, the S&P500 fell just 0.01% and the Nasdaq ended the day up 0.41%. For the week, each of the major averages posted a gain. The latest US inflation reading out last week showed core inflation rose more than expected in January by 0.4% MoM, and 3.3% YoY, while the overall inflation rate rose to 3% YoY, while retail sales in the US fell 0.9% in January MoM, which was more of a decline than the markets were expecting.

Across the European region on Friday, markets pulled back from record highs earlier in the week. The STOXX fell 0.24%, Germany’s DAX lost 0.44%, the French CAC rose 0.18%, and, in the UK, the FTSE100 ended the day down 0.37%.

Asia markets closed mixed on Friday as investors assessed President Trump’s reciprocal tariff plans but did not enact levies immediately. China’s CSI index rose 0.87%, Hong Kong’s Hang Seng rose 3.48%, South Korea’s Kospi Index gained 0.31%, and Japan’s Nikkei fell 0.79%.

What to watch today:

• Ahead of Monday’s session on the ASX, the SPI futures are anticipating the local market will open the day down 0.61%.
• On the commodities front this morning, oil is trading 0.77% lower at US$70.74/barrel, gold is down 1.73% at US$2880.76/ounce and iron ore is up 0.06% at US$106.83/tonne.
• The Aussie dollar has strengthened against the greenback to buy US$0.63, 96.63 Japanese Yen, 50.47 British Pence and NZ$1.11.
• On the reporting season calendar today, Aurizon, Bendigo and Adelaide Bank, BlueScope Steel, Lendlease Group and A2 Milk will release results.

Trading Ideas:

• Bell Potter has upgraded Pro Medicus (ASX:PME) from a hold to a buy rating and have increased the 12-month price target on the leading diagnostic imaging healthcare provider following the release of the company’s first half results. Despite PME reporting a small miss on earnings, the outlook remains strong and with 10 contract announcements and strong growth in the cardiology space expected, the analyst sees strong upside potential for the company in H2.
• And Trading Central has identified a bullish signal on Endeavour Group (ASX:EDV) following the formation of a pattern over a period of 52-days which is roughly the same amount of time the share price may rise from the close of $4.42 to the range of $4.68 and $4.74 according to standard principles of technical analysis.

Australian companies are reporting mixed results this earnings season, with some exceeding expectations like CBA and Suncorp, while others, such as AGL, have fallen short. CBA's strong profit and Suncorp's boosted earnings from lower natural hazards led to positive investor reactions, while Evolution Mining saw significant profit growth in the gold sector. Next week promises a busy earnings calendar with major companies like BHP and Rio Tinto reporting.

In this week’s wrap, Grady covers: 

• (0:25): the results that saw CBA rally
• (1:30): why insurance companies posted positive earnings 
• (2:38): Evolution Mining’s strong performance 
• (4:19): why AGL’s financial results took a hit
• (6:16): how the ASX200 performed this week so far 
• (7:02): the most traded stocks & ETFs by Bell Direct clients
• (7:34): economic news items to watch out for.

Wall St closed lower overnight following a hotter-than-expected CPI report. The Dow Jones lost half a percent, the S&P 500 dropped 0.27% and the tech heavy Nasdaq had a slight rise of 0.03%. January’s consumer price index jumped 0.5% for the month, putting the annual inflation rate at 3%, more than the 0.3% rise expected by economists in January.

Over in Europe, markets closed higher as earnings season continues. The STOXX600 ended Wednesday’s trading session 0.11% higher, Germany’s DAX rose half a percent, the French CAC jumped 0.17% and over in the UK the FTSE100 closed 0.34% in the green.

Locally yesterday, the ASX200 gained 0.6% with the majority of sectors closing in the green. Gains were led by the industrial and financial sectors which gained 1.93% and 1.41% respectively. This was offset by the information technology sector which fell 1.05% by the closing bell.

What to watch today:

• The Australian share market is set to open higher, with the SPI futures suggesting a rise of 0.04% at market open this morning.
• On the commodities front this morning,
   
  • Oil is trading 2.79% lower at 71 US dollars and 27 cents a barrel, gold is trading 0.13% higher at 2902 US dollars an ounce, and iron ore is trading 0.61% lower at 106 US dollars and 32 cents a tonne.

Trading Ideas:

• Bell Potter maintains a buy rating on Perpetual Limited (ASX:PPT) with a 12-month price target of $25.40. With a current share price of $22.50, this indicates a share price growth of 12.9%, hence the buy rating is maintained.
• Trading Central has identified a bearish signal on Kelsian Group (ASX:KLS), indicating that the stock price may fall from the close of $3.53 to the range of $3.23-$3.29, on a pattern formed over 20 days according to the standard principles of technical analysis.

With Reporting Season in full swing, investors continue to digest all the latest reports from the companies reporting their earnings. 

Strong results from companies in the healthcare space such as ResMed (ASX:RMD) and Ansell (ASX:ANN) impressed investors. How did JB Hi-Fi (ASX:JBH) post strong results despite strong headwinds? Why did CSL’s (ASX:CSL) latest report disappoint investors. 

Catch all the latest updates with Bell Direct to help you find your investing edge.

Over in the US so far on Tuesday, Wall Street closed mixed as Fed Chair Jerome Powell signalled concerns over the direction of the US economy amid US tariffs and the possibility of a global trade war. The Dow Jones climbed 0.1% while the S&P500 and Nasdaq dropped 0.2% and 0.6% respectively.

In Europe overnight, markets closed higher as investors digested the latest Trump tariff announcements and The European Union plans to retaliate against the US for new steel and aluminium tariffs. The STOXX 600 rose 0.23%, Germany’s DAX added 0.56%, the French CAC gained 0.28% and, in the UK, the FTSE100 ended the day up 0.11%.

Across the APAC region on Tuesday, markets closed mixed as investors continued digesting the impacts and flow on effects of Trump’s latest tariffs. Hong Kong’s Hang Seng fell 1.06%, and China’s CSI index fell 0.46%, while South Korea’s Kospi Index rose 0.71% and Japan’s markets were closed for a holiday.

The local market started the new trading week lower on Monday before a choppy session that led to a flat close on Tuesday as a sharp sell-off in healthcare stocks weighed on the local index.

Trump tariffs continue to dampen investor sentiment and fuel investor and central bank demand for gold stocks, bullion and exposure in portfolios given the safe-haven nature of the precious commodity at a time where economic and market certainty is unclear.

CSL’s results for the first half out yesterday weighed on the local market and healthcare sector as the healthcare giant fell nearly 5% yesterday despite beating expectations for 2 of the company’s 3 divisions. The company’s Behring business, which manufactures plasma products and provides collection services in the US, Australia, Europe and more, reported a strong first half with revenue up 10% and gross margin of 51.1% which beat expectations by 20bps. Investors likely sold out of the company amid warnings of FX headwinds to come in H2 and after the Seqirus division posted a 9% decline in revenue on the PCP.

Gold miners rocketed again yesterday as the price of the precious commodity jumped over US$2900/ounce for the first time amid increased demand out of central banks and from investors due to the haven nature of the commodity in a time of great uncertainty.

What to watch today:

• Ahead of the midweek trading session here in Australia the SPI futures are anticipating the ASX will open the day up 0.02%.
• The Aussie dollar has further strengthened against the greenback to buy US$0.62, 95.87 Japanese Yen, 50.70 British Pence and 1 NZ$1.11 cents.
• On the commodities front this morning, oil is trading 1.21% higher at US$73.19/barrel, gold is down 0.38% at US$2906/ounce and iron ore is up 0.56% at US$106.97/tonne.

Trading Ideas:

• Bell Potter has maintained a buy rating on CSL (ASX:CSL) but have lowered the 12-month price target from $345 to $335 following the release of the company’s first half results showing revenue rose 5% but fell 1% short of BPe and NPATA rose 3% but was 4% below BPe. The analyst maintains a buy rating as the Behring division continues its strong growth outlook and positive margin recovery despite the Seqirus division facing headwinds of declining vaccine demand in the US.
• And Trading Central has identified a bullish signal on QBE Insurance Group (ASX:QBE) following the formation of a pattern over a period of 7-days which is roughly the same amount of time the share price may rise from the close of $20.43 to the range of $21.90 to $22.20 according to standard principles of technical analysis.

Wall St started the week in positive territory as investors looked past Trump’s latest tariff talks about a blanket tariff on steel and aluminium imports, and bought into growth areas of the market. The Dow Jones rose 0.38%, the S&P500 added 0.67% and the tech-heavy Nasdaq led the gains with a near 1% rise.

Strength in the US jobs market dampened investor hopes of a near-term rate cut as the latest unemployment data showed the jobless rate in the world’s largest economy fell from 4.1% to 4% in January at the same time 143,000 jobs were added. The Fed has already cut the US cash rate once last year to 4.25% - 4.5%, however, with signals of a stronger labour market, a rise in the inflation rate for the last 3-months and strong retail sales growth, the US central bank is unlikely to cut rates again until these inflationary driver’s ease.

In Europe overnight markets in the region started the new trading week higher with the STOXX 600 gaining 0.58%, while Germany’s DAX added 0.57%, the French CAC rose 0.42% and, in the UK, the FTSE100 ended the day up 0.77%.

Across the APAC region on Monday, markets closed mixed as escalating tensions around Trump’s tariff implications weighed on investor sentiment. Japan’s Nikkei closed flat, South Korea’s Kospi index also ended the day little unchanged, Hong Kong’s Hang Seng rose 1.76% and China’s CSI index rose 0.21% after China’s consumer inflation rose to a 5-month high in January amid higher consumer spend in the lead up to the Lunar New Year.

Locally on Monday, the ASX200 started the new trading week in the red with a 0.34% loss at the closing bell as a sharp sell-off in tech stocks weighed on the local key index.
 Reporting season continued on Monday with key names releasing first half results that surprised investors. Trump’s new tariffs on aluminium and steel weighed on the local index early in the session before realising that less than 1% of China’s steel exports went to the US in 2024, and China is Australia’s largest buyer of iron ore which is a key ingredient used to make steel.

JB Hi-Fi faced inflationary pressures and subdued demand in the first half but still posted strong results, with total sales rising 9.8% to $5.67bn, NPAT up 8% to $285.4m, and an interim dividend increase of 7.6% to 170cps. However, investors sold off shares, likely due to a 13.5% rise in inventory and a 9bps drop in inventory turnover. Payables also increased by 16% YoY in H1. CEO Terry Smart’s cautious remarks about retail market uncertainty and heightened competition likely spooked investors yesterday.

Ansell on the other hand had investors buying in on Monday after the global leading protective equipment producer released strong first half results including sales growth of 12.5%, EBIT up 20.9% and a dividend of 22 US cps.

What to watch locally today:

• Ahead of Tuesday’s trading session on the ASX the SPI futures are anticipating the ASX to open the day up 0.37% tracking Wall Street’s positive start overnight.
• On the local reporting season calendar today, we will likely see investors react to results out of global healthcare giant, CSL.
• On the commodities front this morning, oil is trading 2.02% higher at US$72.44/barrel, gold is up 1.68% at US$2907.41/ounce and iron ore is up 0.13% at US$106.37/tonne.
• The AUD has strengthened against the greenback to buy US$0.62, 95.29 Japanese Yen, 50.73 British Pence and NZ$1.11.

Trading Ideas:

• Bell Potter has downgraded the rating on JB Hi-Fi (ASX:JBH) from a buy to a hold and have increased the 12-month price target on the leading tech retail company from $98 to $99/share following the release of the company’s results yesterday. The downgrade to a hold follows the analyst believing JB is currently well valued and limited earnings upgrades in the near-term are priced in at a current PE multiple of around 23x.
• And Trading Central has id