Between the Bells

The ASX200 declined in October due to a slump in utilities and consumer staples. Key themes this month included volatile oil prices, strong gold prices, and mixed US tech earnings. While Australian headline inflation eased, core inflation remained elevated, impacting the RBA’s rate-setting decisions. 

In this week’s wrap, Grady covers: 

• (0:11): how the ASX200 performed in October 
• (1:29): quarterly earnings results released this month
• (2:42): why the Nasdaq reported a fresh record high 
• (4:30): the best performers on the ASX200 this week
• (5:16): the most traded stocks by Bell Direct clients 
• (5:48): economic news items to watch out for. 

Wall Street slipped on Wednesday as investors digested the first release of mega cap earnings results for Q3. The Nasdaq fell 0.56% a session after the tech heavy index posted a fresh record high, while the S&P500 and Dow jones lost 0.33% and 0.22% respectively. 

Alphabet, Google’s parent company, kicked off the mega cap earnings results with a beat of analysts’ expectations driven by strong demand for the company’s cloud business. Meta and Microsoft will post results after the closing bell US time. Key US GDP data for Q3 was also released overnight indicating the U.S. economy grew at a slower pace than expected for the quarter. In Q3 the U.S. economy grew 2.8% on an annual basis while economists were expecting growth of 3.1%. Key payrolls data also out on Wednesday in the U.S. Though pointed to strength in the labour market with private job creations jumping to the highest level in a year.

Over in Europe on Wednesday, markets in the region closed lower following the release of key corporate earnings results and eurozone flash GDP data indicating that the eurozone economy grew 0.4% in Q3 which topped economists’ expectations of 0.2% expansion. The STOXX 600 fell 1.2%, Germany’s DAX fell 1.13%, the French CAC dropped 1.1%, and, in the UK, the FTSE100 ended the day down 0.73%.Across the Asia region on Wednesday, markets mostly fell led by Hong Kong’s Hang Seng sliding 1.65%, while China’s CSI index lost 0.9%, and Japan’s Nikkei ended the day down 0.96%.

Locally on Wednesday the ASX fell 0.83% despite inflation tumbling to an annual headline rate of 2.8% for the three months to September, down from the 3.8% reported in the June quarter. While this reding is positive for the rate outlook, the RBA is still unlikely to reduce the nation’s cash rate until at least 2025 as the drop in inflation is expected to be short lived with key drivers remaining sticky. Core inflation, which is the RBA’s preferred inflation reading, rose 0.8% in the September quarter which topped forecasts of 0.7%.

A key driver of the drop in inflation over the period was a decline in the petrol prices due to the 18% fall in the benchmark price of oil over the past year amid weakened demand outlook from China.

Rental prices have failed to ease up though which is another key driver of inflation remaining sticky, with a rise of 6.7% in the 12-months to September.

A tough warning from our supermarket giants saw shares in Coles and Woolworths decline 2.4% and 6.1% respectively yesterday. Woolworths warned it would post a lower profit in the first half after it was forced to implement more promotions to entice shoppers back into stores, which has been a theme felt across most retailers in FY25 so far.

What to watch today:

• Ahead of Thursday’s trading session the SPI futures are anticipating the ASX to open the day down 0.17% tracking Wall Street’s sell-off overnight.
• On the commodities front this morning oil is trading 2.77% higher at US$69.07/barrel, gold is up 0.44% at US$2787/ounce, and iron ore is down just 0.06% at US$104.09/tonne.
• The Aussie dollar is buying US$0.65, 100.79 Japanese Yen, 50.69 British Pence and NZ$1.10.

Trading Ideas:

• Bell Potter has maintained a buy rating on Gold Road Resources (ASX:GOR) and have raised the 12-month price target on the gold producer from $2.10 to $2.40 following the release of the company’s Q3 FY24 results which were weaker than expected but positions the company well for Q4 especially given the return to peak high-grade ore throughput in the strong gold price environment.
• And Trading Central has identified a bearish signal on Commonwealth Bank of Australia (ASX:CBA) following the formation of a pattern over a period of 36-days which is roughly the same amount of time the share price may fall from the close of $142.93 to the range of $129 - $132 according to standard principles of technical analysis.

Wall Street closed mixed on Tuesday with the Nasdaq extending its record run to end the day at a fresh record high as investors prepare for the release of key corporate earnings results out of some big tech names. The Nasdaq rose 0.78% to close at a record 18,712.75 points, while the S&P500 rose 0.16%, but the Dow Jones ended the day down 0.36%.

Earnings season has driven investor sentiment these last few weeks and we are awaiting key earnings out of the magnificent seven to provide key outlook on the broader market conditions based on earnings growth and forecasts out of the most valuable companies listed on the NYSE. Alphabet, Snap, Reddit and Chipotle are set to release results after the closing bell on Tuesday while Meta and Microsoft will release results on Wednesday US time.

Across the European markets overnight, markets closed lower as investors digested key corporate earnings results. The STOXX 600 fell 0.6%, Germany’s DAX lost 0.27%, the French CAC dropped 0.61% and, in the UK, the FTSE 100 ended the day down 0.8%. German airline Lufthansa fell 4.7% on Tuesday after reporting a 9% YoY fall in Q3 profit, while HSBC rose 3.3% after the bank released Q3 earnings that beat analysts’ estimates and announced it will repurchase up to $3bn in shares.

Asia markets closed mostly higher on Tuesday tracking gains on Wall St overnight with Japan’s Nikkei rising 0.77% on the back of the Japanese jobless rate falling to 2.4%. Hong Kong’s Hang Seng rose 0.35% on Tuesday and South Korea’s Kospi index ended the day up 0.21%.

The ASX started the week slightly higher on Monday and extended gains into Tuesday’s session with a rise of 0.34% at the closing bell as consumer discretionary and mining stocks boosted the local index to a second positive finish for the week. Tech stocks also did much of the heavy lifting for the local market yesterday on the back of Wall Street’s tech rally overnight.

On the retail front, Myer shares came under pressure on Tuesday after the department store giant agreed to acquire Premier Investments’ apparel brands including Just Jeans, Dotti and Jay Jays in a deal worth $950m. Premier Investments shares soared 11% on the news.
 Luxury online fashion retail platform Cettire on the other hand tanked over 14% yesterday after providing the market with a first quarter trading update outlining a 17% margin for the quarter which is down from the 20% recorded in the PCP, and the company’s adjusted EBITDA fell 77% to $2m.

What to watch today:

• Ahead of the midweek trading session here in Australia the SPI futures are expecting the ASX to open the day down 0.08%.
• On the commodities front this morning, oil has steadied following a 6% plunge earlier in the week amid over-supply fears as demand remains resilient and geopolitical tensions and actions were not as impactful as first thought. This morning oil is trading 0.19% lower at US$67.26/barrel, gold is up 0.91% at US$2769.26/ounce and iron ore is down just 0.08% at US$104.15/tonne.
• The Aussie dollar has further weakened overnight to buy US$0.65, 100.54 Japanese Yen, 50.75 British Pence and NZ$1.10.

Trading Ideas:

• Bell Potter has downgraded Cettire (ASX:CTT) from a buy to a hold and have maintained the 12-month price target on the luxury online fashion retailer at $2/share following the release of the company’s 1Q25 update including net revenue rising 22% on the PCP which beat BPe, but lower margins and slowing sales growth leading to a decrease in the rating as headwinds and upcoming promotional periods weigh on earnings growth potential.
• And Trading Central has identified a bearish signal on Seven Group (ASX:SVW) following the formation of a pattern over a period of 33-days which is roughly the same amount of time the share price may fall from the close of $41.35 to the range of $39.10 to $39.50 according to standard principles of technical analysis.

Wall St closed higher overnight as softening oil prices lift stocks. The Dow Jones rose by 0.65%, the S&P500 gained 0.27% and the tech heavy Nasdaq ended Monday’s trading session 0.26% higher.

Over in Europe, markets closed higher with the STOXX600 ending Monday’s trading session 0.47% in the green. Gains were led by construction and media stocks which added 2% and 1.6% respectively, while oil and gas stocks fell 1.4%. Germany’s DAX rose 0.35%, the French CAC gained 0.79% and over in the UK the FTSE100 ended the trading session 0.45% higher.

Locally yesterday, the ASX200 closed 0.12% higher with the majority of sectors closing in the green. Gains were led by the information technology and consumer discretionary sectors which rose 1.97% and 0.97% respectively. This was offset by the utilities sector which fell 0.59% by market close.

What to watch today:

• The Australian share market is set to open higher, with the SPI futures suggesting a rise of 0.42% at market open this morning.
• On the commodities front this morning,
   
  • Oil is trading 5.27% lower at 67 US dollars and 98 cents a barrel after Israel’s strikes on Iran over the weekend missed the country’s crude facilities and nuclear infrastructure. 
  • Gold is trading 0.17% lower at 2742 US dollars an ounce and iron ore is trading 0.16% lower at 104 US dollars and 23 cents a tonne.

Trading Ideas:

• Bell Potter has upgraded its hold rating to a buy rating for Droneshield (ASX:DRO) and has a 12-month price target of $1.20. Bell Potter has changed its recommendation to a buy despite DRO’s revenue year to date being disappointing. Droneshield remains a high quality technology company, operating in a rapidly growing market and is well capitalised to maintain its market leading position, hence the buy rating is maintained.
• Trading Central has identified a bearish signal on National Australian Bank (ASX:NAB), indicating that the stock price may fall from the close of $38.67 to the range of $35.10-$35.80, on a pattern formed over 24 days according to the standard principles of technical analysis.

The Nasdaq rose to a fresh record high on Friday while the other major averages ended the day lower as investors piled into the high growth sector ahead of key earnings results being released. The Nasdaq rose 0.56% to a fresh record 18,518.61 points, the S&P 500 inched 0.03% lower and the Dow Jones ended the day down 0.61%.Fast food giant McDonalds shares posted the biggest weekly loss since 2020 on Friday as a deadly E. Coli outbreak linked to the burger giant weighed on the fast-food chain’s stock price. Shares fell 7.6% over the trading week. Spirit Airlines soared over 18% on Friday after the budget airline announced it will sell 23 planes for $519m and cut jobs. This rally follows Spirit rocketing 46% on Wednesday on reports the carrier has reignited merger talks with fellow budget airline, Frontier Airlines.

Over in Europe on Friday, markets closed mostly lower as investors responded to key Q3 earnings updates. The STOXX 600 fell 0.04% on Friday but 1% over the trading week, while Germany’s DAX gained 0.11%, the French CAC lost 0.08% and, in the UK, the FTSE100 ended the day down 0.25%. Mercedes shares fell 1% on Friday after the luxury German automaker reported a 64% dive in operating profit, while French spirits maker Remy Cointreau fell 0.7% after slashing its sales outlook for the full year amid demand weakness in the US and APAC regions.

Across the Asia region on Friday, it was a mixed end to the final trading session of last week as investor awaited Japan’s general election over the weekend and responded to Japan’s October inflation numbers with core inflation falling to 1.8% for the month which was in-line with economists’ expectations. Japan’s Nikkei fell 0.6% on Friday, China’s CSI index rose 0.7%, Hong Kong’s Hang Seng rose 0.52% and South Korea’s Kospi index ended the day flat.

Locally on Friday the ASX200 rose just 0.06% to close higher as a 3.34% rally for the tech sector offset weakness among consumer staples, discretionary, and industrials stocks. A rebound in logistics software giant WiseTech Global did a lot of the market’s heavy lifting on Friday with a 12.7% gain after days of being sold off amid negative news surrounding those at the helm of the company.

ResMed rnoallied 5.9% on Friday after the sleep apnoea medical device producer reported revenue rose 3% to US$1.225bn and the company reiterated FY25 guidance of 59-60% despite higher freight costs expected as a result of the Middle East tensions.

What to watch today:

• Ahead of Monday’s trading session here in Australia, the SPI futures are anticipating the ASX to open the day flat.
• On the commodities front this morning oil has risen 2.27% to US$71.78/barrel, gold is up 0.5% at US$2747.60/ounce and iron ore is down 0.16% at US$104.23/tonne.
• The Aussie dollar has slightly weakened against the greenback to buy US$0.66, 101.29 Japanese Yen, 51.10 British Pence and NZ$1.10.

Trading Ideas:

• Bell Potter has downgraded Fortescue (ASX:FMG) to a sell from a hold and have reduced the 12-month price target on the mining giant from $17.58 to $17.04 following the release of the company’s September quarterly update including iron ore shipments falling short of Bell Potter’s expectations while cash costs per wet metric tonne were higher than Bell Potter had anticipated. Production was also down 12% QoQ and are tracking to the bottom of the FY25 guidance range.
• And Trading Central has identified a bullish signal on Grange Resources (ASX:GRR) following the formation of a pattern over a period of 24-days which is roughly the same amount of time the share price may rise from the close of $0.28 to the range of $0.34 to $0.36 according to standard principles of technical analysis.

This week, we delve into Bell Potter's forecast for interest rate reductions, along with their top domestic consumer stock selections, given the recent decline in inflation and rental growth.

In this week’s wrap, Sophia covers:

• (0:28): what the latest CPI reading means for markets
• (0:59): factors contributing to rental inflation
• (1:54): Bell Potter’s consumer stock picks
• (3:05): how the ASX200 performed this week so far
• (4:04): the most traded stocks by Bell Direct clients
• (4:38): economic news items to watch out for.

Wall St closed lower overnight as higher treasury yields weighed on market sentiment. The Dow Jones had its worst day since September falling nearly 1%, the S&P 500 dropped 0.92% and the tech-heavy Nasdaq lost 1.6%.

Over in Europe, markets followed the US and ended Wednesday’s trading session in the red. The STOXX600 closed 0.3% lower with the majority of sectors ending in negative territory. Germany’s DAX fell 0.23%, the French CAC lost half a percent and over in the UK, the FTSE100 closed 0.58% lower.

Locally yesterday, the ASX200 ended Wednesdays session 0.13% higher, with most major sectors ending in the green. Gains were led by the consumer staples and consumer discretionary sectors which rose 1.33% and 0.44% respectively. This was offset by the information technology sector which fell nearly 1%.

What to watch today:

• The Australian share market is set to open lower, with the SPI futures suggesting a fall of 0.19% at market open this morning.
• On the commodity front this morning,
   
  • Oil is trading 0.96% lower at 71 US dollars a barrel, gold is trading 1.14% lower at 2715 US dollars an ounce and iron ore is trading 0.28% lower at 104 US dollars and 94 cents a tonne.

Trading Idea:

• Bell Potter maintains a buy rating on Boss Energy (ASX:BOE) and has a current share price of $3.60. The 12-month price target of $5.70 indicates a 58% share price growth in a year, hence the buy rating is maintained.

Over in the US on Tuesday, rising bond yields are pressured equities for a second session this week. The US 10-Year Treasury note yield briefly topped 4.2% for the first time in months before pulling back. The Dow Jones fell 0.02%, the S&P 500 lost 0.05% lower but the tech heavy Nasdaq ended the day up 0.18%.

In Europe overnight, markets closed lower as investors assessed key corporate earnings results. The STOXX 600 fell 0.2%, Germany’s DAX also lost 0.2%, the French CAC fell 0.01% and, in the UK, the FTSE100 ended the day down 0.14%.

Across the Asia region on Tuesday, markets closed mostly lower in the region tracking global market sell-offs early in the week. China’s CSI index bucked the sea of red to rise 0.57% on Tuesday while South Korea’s Kospi Index fell 1.31%, and Japan’s Nikkei lost 1.39%. Hyundai Motor shares debuted on India’s stock exchange on Tuesday with a record IPO but shares ended the day down 7%.

The local market started the week higher before closing 1.66% lower on Tuesday in line with the Wall Street’s pullback on Monday. With markets now factoring the need for a less aggressive rate cut strategy out of the US as inflation eases and the economy remains resilient, investors are now questioning how much steam the local and global market rally has left.

Mineral Resources and WiseTech Global have been under pressure this week amid news and respective investigations into those at the helm of the mining and logistics technology company alike.

Audinate Group fell over 6% on Tuesday after the media software provider released a quarterly update outlining weak performance in a challenging operating environment was the key reason for full-year gross profit missing the target.
Toll roads operator Transurban also fell almost 2% yesterday despite reaffirming FY25 distribution guidance of 65cps and reported growth in traffic across its key markets aside from Melbourne.

One element of positivity in the Aussie market yesterday was Australian consumer confidence jumping to its highest level since January last year last week with a rise to 87.5 points, or a 4.1 point rise as the outlook for inflation eases and consumer sentiment was boosted by strong Australian jobs data also released last week.

Wine exports from Australia also climbed 34% to $2.39bn in the 12-months to the end of September which is a welcomed boost for listed companies like Treasury Wine Estates which has faced tougher operating conditions prior to China lifting its tariffs on Aussie wine exports recently.

What to watch today:

• Ahead of the midweek trading session here in Australia the SPI futures are expecting the ASX to open the day up 0.28% despite the pullback on Wall St on Tuesday.
• On the commodities front this morning oil is trading 2.26% higher at US$71.63/barrel, gold is up 0.92% at US$2746/ounce, and iron ore is down 0.13% at US$105.23/tonne.
• The Aussie dollar has weakened against the greenback overnight to buy US$0.66, 101.03 Japanese Yen, 51.39 British Pence and NZ$1.11.

Trading Ideas:

• Bell Potter has decreased the 12-month price target on Select Harvests (ASX:SHV) from $4.95 to $4.60 and maintain a buy rating on the almond producer following a disappointing FY24 update including a capital raising and the guidance for FY24 underlying EBIT of $17-19m which is lower than Bell Potter was expecting. Bell Potter maintains the buy rating due to recent strengthening in almond prices driving upside potential.
• And Trading Central has identified a bearish signal on The Star Entertainment Group (ASX:SGR) following the formation of a pattern over a period of 17-days which is roughly the same amount of time the share price may fall from the close of 27cps to the range of 15 cps to 17 cps according to standard principles of technical analysis.

Wall St closed mixed overnight as the Dow snapped a three-day winning streak losing 0.8%. The S&P 500 fell 0.18%, whilst the tech-heavy Nasdaq ended Monday’s trading session 0.27% in the green.

Over in Europe, markets closed lower as investors monitor heightened Middle Eastern tensions. The STOXX600 closed 0.7% lower with nearly all major sectors ending the day negatively. Losses were led by insurance stocks which fell 1.1%, whilst oil & gas stocks rose 0.6%.

Germany’s DAX and the French CAC both lost 1%, whilst over in the UK the FTSE 100 dropped nearly half a percent.

Locally yesterday, the ASX200 ended Monday’s trading session 0.74% higher with all but one major sector ending the day in the green. Gains were led by the materials and energy sectors which closed 1.44% and 1.25% higher respectively. This was offset by the information technology sector which fell 2.97%.

What to watch today:

• The Australian share market is set to open lower, with the SPI futures suggesting a fall of 0.81% at market open this morning.
• On the commodities front this morning,
  • Oil is trading 1.67% higher at 70 US dollars and 37 cents a barrel as rising Middle Eastern tensions threaten supply disruptions.
  • Gold is trading 0.08% lower at 2719 US dollars an ounce and iron ore is trading flat at 105 US dollars and 37 cents a tonne.

Trading Ideas:

• Bell Potter maintains a buy rating on Beach Energy (ASX:BPT) and has a current share price of $1.25. The 12-month price target of $1.50 indicates a share price growth of 20%, hence the buy rating is maintained.
• And Trading Central has identified a bearish signal on Ingenia Communities Group (ASX:INA), indicating that the share price may fall from the close of $4.93 to the range of $4.57-$4.63, on a pattern formed over 10 days, according to the standard principles of technical analysis.

6-straight weeks of gains were sealed across the major averages in New York on Friday with both the Dow and S&P500 setting fresh records at the closing bell.

Over the week, the Dow and S&P500 gained 0.96% respectively, while the Nasdaq added 0.8%, with Q3 earnings results being the driver of gains throughout the last trading week.

Netflix shares rose 11% on Friday after the streaming giant beat Wall St estimates for earnings and revenues for Q3 and reported a 35% jump in ad-tier memberships on the prior quarter. Of the more than 70 companies that have reported from the S&P500 so far, 75% have beaten earnings expectations according to FactSet.

The small cap space once again outshone the major players last week with the Russell 2000 index ending the week 2% higher.
 Over in Europe on Friday markets closed mostly higher marking a second straight week of gains boosted by a rise in luxury brands. The STOXX600 rose 0.21%, Germany’s DAX added 0.38%, the French CAC gained 0.39% and, in the UK, the FTSE100 ended the day down 0.32%.

Gucci owner Kering rose 3.5% on Friday while Burberry rose 0.5% as investors saw Chinese stimulus as a boost for demand outlook for luxury European brands in China.

Across the Asia markets on Friday, markets rebounded to close higher as stronger-than-expected GDP data in China boosted investor optimism. China’s GDP grew 4.6% in Q3 compared to the same period a year earlier which beat economists’ expectations but was a slight fall from the 4.7% expansion reported in Q2.

Retail sales in China also beat expectations for September with a rise to 3.2% YoY while China’s industrial output also grew faster than expected at 5.4%. China’s CSI index rose 3.62% on Friday, Japan’s Nikkei gained 0.2%, South Korea’s Kospi index fell 0.6%, and Hong Kong’s Hang Seng rose 3.61%.

Locally on Friday, the ASX200 fell 0.87% as a sharp sell off in utilities stocks weighed on the market, while every sector closed the day in the red. The Aussie sell-off was on the back of China’s economic data out on Thursday indicating worsening economic slow down out of the world’s second largest economy, despite stronger data out on Friday.

Flight Centre tanked 20% on Friday after the company released a trading update outlining a profit downgrade was imminent.

What to watch today:

• Ahead of Monday’s Trading Session the SPI futures are anticipating the ASX to open the day up 0.53% on the back of global market strength on Friday.
• On the commodities front this morning, oil is trading 2.05% lower at US$69.22/barrel, gold is up 1.02% at US$2721/ounce, and iron ore is flat at US$105.37/tonne.
• The Aussie dollar has slightly weakened against the greenback to buy US$0.67, 100.34 Japanese Yen, 51.41 British Pence and NZ$1.10.

Trading Ideas:

• Bell Potter has downgraded the rating on Lynas Rare Earths (ASX:LYC) from a buy to a hold rating and have reduced the 12-month price target on the company from $8.30 to $8 heading into the release of the company’s quarterly production update. The analyst has estimated production of NdPr to fall 5% QoQ and revenue of $121m down 12% QoQ after management guided to a slow start to FY25 amid the planned shut down towards the end of CY24 and delay in the Mt Weld expansion.
• And Trading Central has identified a bearish signal on Paragon Care (ASX:PGC) following the formation of a pattern over a period of 16-days which is roughly the same amount of time the share price may fall from the close of 47cps to the range of 38-40cps according to standard principles of technical analysis.