Between the Bells

The Federal Reserve’s decision to lower interest rates was welcomed by Australian investors this week. Learn why the US rate cut boosted the local market and explore why the recent dip in oil prices is likely to be short-lived. 

In this week’s wrap, Grady covers: 

• (0:10): how Wall St reacted to the Fed’s rate cut 
• (1:20): the recent data signalling economic stability in the US 
• (2:08): why the US rate cut is a positive for our local market 
• (5:01): the most traded stocks & ETFs  by Bell Direct clients
• (5:29): economic news items to watch out for.

The US market closed lower on Wednesday despite the Fed announcing a 50-basis point rate cut in the first rate cut of the interest rate cycle as inflation continues to ease in the world’s largest economy. The Dow Jones fell 0.25% on Wednesday while the S&P500 lost 0.35 and the tech-heavy Nasdaq ended the day down 0.31%. Investors likely responded to the 50-basis point rate cut with concerns over the Fed potentially cutting aggressively in fear of further weakening to the US economy in the months to come.

Over in Europe on Wednesday, markets closed lower as investors assessed key economic data released in the region. The STOXX 600 fell 0.5%, Germany’s DAX lost 0.08%, the French CAC fell 0.57% and, in the UK, the FTSE100 ended the day down 0.68%. UK inflation data for August was released yesterday with a flat reading on July of 2.2%, which comes ahead of the Bank of England’s rate decision on Thursday UK time where it is expected the BoE will maintain the current cash rate of 5% for another period.

The Asia region closed mostly higher on Wednesday as investors in the region digested key economic data including Japan’s exports and imports rising 5.6% and 2.3% respectively in August and the country’s trade deficit easing over the month. Japan’s Nikkei rose 0.5% on Wednesday while China’s CSI index rose 0.37% and South Korea and Hong Kong’s markets were closed for a holiday.

Locally on Wednesday, the ASX 200 ended the midweek session flat after setting a fresh record close on Tuesday as a decline in the price of iron ore hit the big miners.

Underwhelming economic data out of China over the weekend placed further pressure on the iron ore price as the world’s second largest economy continues its struggle to regain economic expansion and stability post pandemic.

Rio Tinto and BHP each fell just shy of 1%, while FMG ended the day down 0.3%.

Harvey Norman shares closed flat on Wednesday despite the homewares retailer being hit with a class action accusing the retailer of allegedly selling hundreds of millions of dollars of unnecessary and worthless extended warranties. Harvey Norman said it complied with all relevant laws.

Biotech company Imugene received a long-awaited Orphan Drug Designation from the FDA for its CF33-hNIS vaxinia to treat cholangiocarcinoma (COLAN-GIO-CARCINOMA) which is a rare form of bile tract cancer. Shares in the company rose 6.25% yesterday.

What to watch today:

• All eyes locally today will be on Australia’s latest jobs data which is out this morning with the market expecting the unemployment rate to remain flat at 4.2% while it is forecast that the employment change is expected to drop to an increase of just 28,000 in August from the high jump of 58.2k reported in July.
• Ahead of Thursday’s trading session the SPI futures are anticipating the ASX to open the new trading day down half a percent tracking Wall Street’s loss overnight.
• On the commodities front this morning oil is trading 1.66% lower at US$70/barrel, gold is down 0.6% at US$2558.84/ounce, and iron ore is up 0.04% at US$91.98/tonne.
• The Aussie dollar has strengthened overnight to buy 67.65 US cents, 96.13 Japanese Yen, 51.23 British Pence and 1 New Zealand dollar and 9 cents.

Trading Ideas:

• Bell Potter has initiated coverage of Genesis Minerals (ASX:GMD) with a buy rating and a 12-month price target of $2.55/share. Genesis Minerals is a Western Australian gold production and development company focused on the Leonora District with two gold processing plants and four mining centres under the company’s belt as well as two critical deposits boasting high grade gold. The company’s value is in its 10-year long-term growth plan and the restart of the Laverton plant in December 2024.
• Trading Central has identified a bullish signal on Adairs (ASX:ADH) following the formation of a pattern over a period of 17-days which is roughl

Overnight, Wall St closed flat as investors await for the Federal Reserve interest rate decision in the US on Wednesday. The Dow Jones fell 0.04%, the S&P500 rose 0.03% and the tech heavy Nasdaq jumped 0.2%.

The Federal Reserves interest rate decision will be announced after local market close today following the aggressive hiking campaign that started in March 2022, which could help boost earnings growth for companies following recent high borrowing costs and inflation.

Over in Europe, markets closed higher as they rebounded from a negative session to start the week. The STOXX600 ended Tuesday’s trading session 0.42% in the green with banks leading gains up 1%. Germany’s DAX and the French CAC both gained half a percent and over in the UK, the FTSE100 rallied by 0.38% by market close. 

Locally yesterday, the ASX200 rose by 0.24% by market close yesterday with all major sectors closing in the green. Gains were led by the information technology and real estate sectors which gained 1.07% and 0.71% respectively.

What to watch today:

• The Australian share market is set to open lower, with the SPI futures suggesting a fall of 0.48% at market open today.
• On the commodities front this morning,
   
  • Oil is trading 1.33% higher at 71 US dollars and 2 cents a barrel as it is expected that demand for oil will rise once the Federal Reserve cuts rates overnight. 
  • Gold is trading 0.55% lower at 2569 US dollars an ounce and iron ore fell 0.35% at 91 US dollars and 94 cents a tonne.

Trading Ideas:

• Bell Potter maintains a buy rating on Austal Limited (ASX:ASB) and has a 12-month price target of $3.15. The buy rating is maintained by Bell Potter following the announcement of a $670 million contract from General Dynamics Electric Boat to expand its shipyard in Alabama by designing and constructing a new module fabrication and outfitting facility to support the US Navy Submarine Industrial Base. It is believed by Bell Potter that this is a significant update for ASB that will diversify its shipbuilding operations, drive long-term revenue growth, and reinforce its position as a key contributor to the US naval industrial base, hence the buy rating is maintained.
• And Trading Central has identified a bullish signal on Accent Group (ASX:AX1), indicating that the stock price may rise from the close of $2.27 to the range of $2.90-$3.05, on a pattern formed over 194 days, according to the standard principles of technical analysis.

Wall St started the new trading week with a mixed session ahead of the commencement of the Fed’s FOMC meeting where it is expected a rate cut of 0.25% will be announced as the US inflation rate continues to ease to the target 2% while the economy remains robust enough to avoid a recession. The S&P500 reversed morning losses to close Monday’s session up 0.13% while the Dow Jones rose 0.55% to a fresh record 41,622.08 points. The tech-heavy Nasdaq ended Monday’s session down 0.52% though as Apple shares weighed on the tech index.

Over in Europe, markets closed mostly lower on Monday ahead of key interest rate decisions out around the world this week. The STOXX 600 fell 0.2% on Monday, Germany’s DAX lost 0.35%, the French CAC fell 0.21%, and, in the UK, the FTSE100 ended the day up 0.06%. The Bank of England rate decision is announced on Thursday where it is widely expected the BoE will maintain the current cash rate of 5% for another period following the first 25 basis points rate cut announced in August.

Across the Asia region on Monday markets rose as investors assessed key economic data out of China including August factory, retail sales and fixed asset investment all rising by less than economists’ were expecting in data out over the weekend. China and South Korea’s markets were closed on Monday for the mid-Autumn festival, while Hong Kong’s Hang Seng rose 0.13% on Monday.

Locally on Monday, the ASX200 rose 0.27% taking lead from Wall Street’s rally on Friday ahead of the Fed’s next FOMC meeting where it is widely expected the Fed will announce the first interest rate cut of this cycle as inflation eases in the US.

Gold stocks rose on Monday as the price of the precious commodity rose 0.41% to US$2589/ounce. Evolution Mining, Regis Resources and Northern Star Resources each ended Monday’s session in the green.

Qantas shares rallied yesterday after the national carrier announced it is raising the cost of changing airfares booked with the airline by 20% which increases income for the flying kangaroo.

Australian-based global ship maker, Austal jumped over 17% on Monday after announcing it had won a US$450m contract with General Dynamics Electric Boat to expand production capacity at its US shipyard in support of the US Navy Submarine Industrial Base (SIB).

What to watch today:

• Ahead of Tuesday’s trading session the SPI futures are anticipating the ASX to open the day up 0.65%.
• On the commodities front this morning, oil is trading 2.73% higher at US$70.53/barrel, gold is up 0.16% at US$2582/ounce, and iron ore is down 0.86% at US$92.26/tonne.
• The Aussie dollar has strengthened to buy US$0.67, 94.98 Japanese Yen, 51.04 British Pence and NZ$1.09.

Trading Ideas:

• Bell Potter has initiated coverage of Champion Iron (ASX:CIA) with a buy rating and a 12-month price target of $7.15/share. Bell Potter’s analyst sees the company’s shift into higher grade production will likely support average realised prices and earnings amid an iron ore price environment generally expected to weaken. CIA will benefit from maturing high-grade iron concentrate markets that recognise emission reduction benefits. CIA is a dividend payer and the analyst expects earnings to continue to support dividends.
• And Trading Central has identified a bearish signal on Kelsian Group (ASX:KLS) following the formation of a pattern over a period of 12-days which is roughly the same amount of time the share price may fall from the close of $3.99 to the range of $3.25 to $3.40 according to standard principles of technical analysis.

On Friday, Wall St closed higher to cap off what was the best week of 2024. The Dow Jones rose by 0.72%, the S&P500 jumped over half a percent and the tech heavy Nasdaq gained 0.65%.

In terms of US stocks, Alphabet rose 1.8% and Uber added more than 6%.

Over in Europe, markets closed higher to end the trading week following the European Central Bank’s decision to cut rates. The STOXX600 closed 0.72% higher with nearly all major sectors ending the day in the green. Gains were led by retail and autos stocks which jumped 1.84% and 1.6% respectively. This was offset by food and beverage stocks which fell 0.32%. Germany’s DAX climbed nearly 1%, the French CAC rose by 0.41% and over in the UK, the FTSE100 ended Friday’s trading session 0.39% higher.

Locally on Friday, the ASX200 rose by 0.3% with half of the major sectors ending the day positively. Gains were led by the materials and real estate sectors which rose by 2.25% and 1.02% respectively. This was offset by the financial sector which fell 0.61% by market close.

What to watch today:

• The Australian share market is set to open higher, with the SPI futures suggesting a rise of 0.2% at market open this morning.
• Oil is trading 0.46% lower at 68 US dollars and 65 cents a barrel, gold is trading 0.78% higher at 2578 US dollars an ounce and iron ore is trading 0.86% lower at 92 US dollars and 26 cents a tonne.

Trading Idea:

• Bell Potter maintains a buy rating on Champion Iron (ASX:CIA) and has a 12-month price target of $7.15. Bell Potter’s valuation implies a 24% share price growth of the current share price of $5.76, hence the buy rating is maintained.

The global economic landscape is a dynamic interplay of inflation, interest rates, and geopolitical events. As investors navigate this evolving environment, key economic indicators continue to shape market movements. From China’s struggling inflation to the United States’ resilient economy, this week’s economic data has offered a missed bag of signals. As we delve deeper into the details, it becomes evident that the path toward economic stability and growth is still fraught with uncertainties.

In this week’s wrap, Grady covers:

• (0:11): how economic indicators continue to drive market movements
• (0:46): why China’s economy faces challenges
• (2:58): what the United States’ economic resilience demonstrates
• (5:25): how the ASX200 performed this week so far
• (6:07): the most traded stocks & ETFs by Bell Direct clients
• (6:38): economic news items to look out for.

Wall St closed higher overnight as the S&P 500 records its fourth straight winning day up 0.75%. The Dow Jones rose 0.58% and the tech heavy Nasdaq rose by 1% as investors anticipate a rate cut by the Federal Reserve next week.

Over in Europe, markets closed in the green following a 25 basis point rate cut from the European Central Bank. The STOXX600 ended the trading session 0.78% higher with all major sectors closing positively. Germany’s DAX closed up over 1%, the French CAC jumped over half a percent and over in the UK the FTSE100 rallied 0.57%.

Locally yesterday, the ASX200 closed 1.1% higher by market close will all major sectors ending Thursday’s trading session in the green. Gains were led by the information technology and energy sectors which climbed 2.44% and 2.32% respectively.

What to watch today:

• The Australian share market is set to open higher with the SPI futures suggesting a rise of 0.56% at market open this morning.
• On the commodities front this morning,
  • Oil is trading 2.75% higher at 69 US dollars and 16 cents a barrel following disruptions from storm Francine in the Gulf of Mexico which has led to the shutdown of around 670,000 barrels a day. 
  • Gold is trading 1.87% higher at 2558 US dollars an ounce and iron ore rallied 1.12% to 92 US dollars and 30 cents a tonne.

Trading Ideas:

• Bell Potter maintains a buy rating on Genusplus Group (ASX:GNP) and has an unchanged 12-month price target of $2.70. Bell Potter’s valuation implies a 18.4% share price growth of the current share price of $2.28, hence the buy rating is maintained.
• Trading Central has identified a bullish signal on Lindsay Australia (ASX:LAU), indicating that the stock price may rise from the close of $0.91 to the range of $0.98-$1, on a pattern formed over 23 days, according to the standard principles of technical analysis.

Overnight, Wall St closed higher as investors reacted to the latest US inflation data readings and what it could mean for the Federal Reserve policy. The Dow Jones gained 0.31%, the S&P 500 rose by 1.07% and the tech-heavy Nasdaq ended Wednesday’s trading session 2.17% higher.

In terms of US inflation data, core inflation year on year remained the same as its previous result and in line with the consensus of 3.2%. And the inflation rate year on year came in 0.2% below the forecast of 2.7% at 2.5%. Investors are now pricing in an 85% chance that the US central bank will approve a 25 basis point interest rate reduction in September, according to the CME  Group’s FedWatch measure.

Over in Europe, markets ended Wednesday’s session mixed following the release of US inflation data. The STOXX600 closed 0.02% higher after a volatile day of trading with tech stocks gaining 1.21%, whilst industrials and household good stocks fell 0.4% each. Germany’s DAX gained 0.35%, the French CAC dropped 0.14% and over in the UK the FTSE100 lost 0.15% by market close.

Locally yesterday, the ASX200 fell 0.3% lower yesterday with the majority of stocks closing in the red. Losses were led by the financial and energy sectors which dropped 1.46% and 1.41% respectively. This was offset by the materials sector which rose by 1.67%.

What to watch today:

• The Australian share market is set to open higher, with the SPI futures suggesting a rise of 0.63% at market open this morning.
• On the commodity front this morning,
  • Oil is trading 2.41% higher at 67 US dollars and 33 cents a barrel after hitting a near three-year low in its previous session.
  • Gold is trading 0.29% lower at 2511 US dollars an ounce and iron ore is trading over half a percent lower at 91 US dollars and 28 cents a tonne.

Trading Idea:

• Bell Potter maintains a buy rating on Adrad Holdings (ASX:AHL) and has an unchanged 12-month price target of $1.12. Bell Potter’s valuation implies a 48.3% share price growth of the current share price of $0.75, hence the buy rating is maintained.

Wall Street rallied in the final hours of trade on Tuesday to post a positive finish across the major averages as investors bought into higher growth stocks which boosted the Nasdaq to a 0.84% gain at the closing bell. The S&P500 rose 0.45% on Tuesday and the Dow Jones reversed losses to end the day up 0.23%. Investors in the US are now bracing for key inflation data out in the US on Wednesday with the expectation of further easing of the inflation rate, while the core inflation rate month on month is expected to rise slightly.

In Europe overnight, auto stocks weighed on the key regions leading to a red finish across European markets on Tuesday. The STOXX600 fell 0.66%, Germany’s DAX lost 0.96%, the French CAC fell 0.24% and, in the UK, the FTSE100 ended the day down 0.78%. Car parts supplier Continental fell 10% on Tuesday after the company said It saw provisions in the mid double digit million-euro range due to a warranty case involving one of its brake systems, while BMW shares fell 11% on Tuesday.

Across the Asia region on Tuesday, markets were mixed as investors responded to key economic data out in the region. China’s exports grew 8.7% YoY in August and imports rose 0.5% in trade balance data out yesterday indicating recovery of output in the world’s second largest economy. China’s CSI index closed flat on Tuesday, South Korea’s Kospi index fell 0.5%, Japan’s Nikkei rose 0.16% and Hong Kong’s Hang Seng ended the day up 0.37%.

The ASX had a strong rally on Tuesday with a 0.3% gain at the closing bell to hit 8011.898 points, on the back of the US rally on Monday as investors assessed key Westpac consumer confidence data and NAB business confidence data released yesterday.

Westpac consumer confidence data for September out on Tuesday came in at a fall of 0.5% which was less than economists were expecting (1.2%), but still indicated a slide from August as consumer confidence was hit by the sluggish GDP growth in Q2 for Australia and the overall stability of the Australian economy.

NAB Business confidence data for August also out yesterday indicated business confidence fell 3 points in August to -4 index points, compared to market expectations of a rise to 3 points.

The slide in business confidence was driven by declining employment and cost inputs eating away at margins.

Iron ore miners had a reverse of Monday’s start to the week with a boost yesterday on the back of a rise in the price of the commodity on news that improved seasonal demand for steel in China and hopes of stimulus out of Beijing will drive material demand increase for the coming months.

According to the consultancy Mysteel, September is usually a high-demand period for steel in China. However, last week saw lower demand due to concerns about both the Chinese and US economies.

CBA rallied to all time high yesterday as the big banks rallied again, while Life360 pulled back yesterday after the stock traded lower on the Nasdaq overnight, and an early investor and independent non-executive director sold 100,000 shares worth $3.7m.

What to watch today:

• Ahead of the midweek trading session on the ASX, the SPI futures are anticipating the local market to open the day up 0.1% following Wall Street’s rally overnight.
• On the commodities front this morning, oil has tumbled overnight to trade 4% lower at US$65.96/barrel, gold is up 0.4% at US$2515.85/ounce and iron ore is up 0.16% at US$91.76/tonne.
• The Aussie dollar has slightly strengthened against the greenback overnight to buy US$0.66 cents, 94.81 Japanese Yen, 50.88 British Pence and NZ$1.08 

Trading Idea:

• Trading Central has identified a bullish signal on Lycopodium (ASX:LYL) following the formation of a pattern over a period of 16-days which is roughly the same amount of time the share price may rise from the close of $12.22 to the range of $14.60 to $15.10 according to the standa

Over in the US, Wall Street started the new trading week in positive territory as investors bought into the dip following Wall Street’s worst week in a year last week. The Dow Jones rose 1.2% on Monday, the S&P500 climbed 1.16% in recovery after the index posted its worst week since March 2023 last week, and the tech-heavy Nasdaq ended Monday’s session up 1.16%. Investor eyes in the US are now firmly focused on the Fed’s rate decision with the expectation of a cut to be announced later this month.

In Europe overnight, it was a positive start to the week in the region as the STOXX 600 rose 0.76% led by travel and leisure stocks, while Germany’s DAX added 0.77%, the French CAC rose 0.99% and, in the UK, the FTSE100 ended Monday’s trading session up 1.09%.
Across the Asia markets on Monday, key economic data out in the region painted a picture of eased economic stability which weighed on investor sentiment on Monday. Japan’s Q2 GDP came in at 2.9% on an annual basis which fell short of economists’ expectations of a 3.2% rise. Japan’s Nikkei closed Monday’s session down 0.48%, Hong Kong’s Hang Seng lost 1.42%, and China’s CSI index ended the day down 1.2%.

On Monday, China’s consumer price index climbed by 0.6% YoY in August which fell short of economists’ expectations and paints a further concerning picture about the economic recovery of the world’s second largest economy. China’s producer price index also fell 1.8% YoY in August which was also a worse reading than economists’ were expecting led by declines in the prices of oil, coal and other fuel industries due to insufficient domestic demand and a drag from the country’s real estate sector.

What to watch today:

• The local market started the new trading week in negative territory with a fall of 0.32% as investor sentiment was dampened by jobs data out in the US on Friday signalling a weakening labour environment in the world’s largest economy.
• The big banks and energy stocks led the losses on Monday while rate sensitive real estate and tech stocks rallied to offset some of the heavy losses.
• Domino’s Pizza (ASX:DMP) shares fell over 2.5% on Monday after the pizza giant was served with a class action from shareholders on allegations the company misled investors in 2021 about expected performance in Japan. Domino’s has said it will defend against the legal proceedings and denies any liability.
• Looking at commodities, oil is trading 1.5% higher at US$68.68/barrel, gold is up 0.66% at US$2503/ounce and iron ore is up 0.34% at US$91.61/tonne.
• The Aussie dollar has slightly weakened overnight to buy 66.68 US cents, 95.17 Japanese Yen, 50.87 British Pence and 1 New Zealand dollar and 8 cents.
• Ahead of Tuesday’s training session the SPI futures are anticipating the ASX to open the day up just shy of 1% following the rally on Wall St on Monday.
• We will likely see investors react to Westpac’s consumer confidence data for September out this morning with the forecast of a 1.2% decline from a 2.8% rise in August, while NAB business confidence data for August is also out today with the forecast of a rise to 3 points from 1 point in July.

Trading Ideas:

• Bell Potter has increased the 12-month price target on Premier Investments (ASX:PMV) from $35 to $37 and maintain a buy rating on the leading retail investment company following the release an update out of the company including FY24 post-AASB-16 (lease related payments guide) EBIT of $341m. The increase in the price target is due to Bell Potter’s analyst seeing upside to the company’s share price from the potential demerger of PMV’s two-key brands, Smiggle and Peter Alexander which are highly profitable and global roll out worthy.
• Trading Central has identified a bearish signal on Orora (ASX:ORA) following the formation of a pattern over a period of 22-days which is roughly the same amount of time the share price m