Between the Bells

This week’s market saw the fluctuation of commodity prices, the release of anticipated economic data, and a notable surge in uranium reaching unprecedented highs. The ASX200 declined 2% (Mon – Thurs), with all 11 industry sectors in the red. Materials and real estate posted the largest losses, while Boss Energy (ASX:BOE) was the best performing stock.

In this week’s wrap, Sophia covers:

• (0:20): why the energy sector retreated this week
• (1:46): the fall in natural gas and iron ore prices
• (2:29): what’s behind the uranium rally
• (3:04): the latest unemployment rate data
• (3:51): the best performing stocks on the ASX200
• (4:30): the most traded stocks & ETFs by Bell Direct clients
• (5:04): economic data to watch next week.

Wall St closed higher overnight as a surge in the tech stocks, powered major averages into positive territory. The Dow Jones finished off the trading day strong gaining 0.54%, the S&P 500 finished 0.88% in the green and the tech-heavy Nasdaq rallied 1.35%. 

In terms of US shares, Apple added 3.4% following Bank of America upgrading the stock to a buy with a ‘20% upside over the next 12 months’. The Technology Select Sector SPDR Fund also reached an all time high, jumping 1.9%.

The 10-year treasury yield held around the 4.15% level on Thursday following fresh jobs data showing ongoing tightness in the US labour market.

Over in Europe, markets closed higher as investors further consume news and comments from the World Economic Forum in Switzerland. The STOXX600 closed 0.57% higher, rebounding following three previous, negative sessions with travel stocks gaining 5%. Germany’s DAX ended the trading day 0.83% in the green, the French CAC gained 1.13% and over in the UK the FTSE 100 rallied 0.17%.

Locally yesterday, the Australian market fell 0.63% with the real estate sector losing over 2% and the industrial and materials sectors losing over 1%. This was slightly offset by the consumer discretionary sector which gained 0.3% yesterday.

What to watch today:

• The Australian share market is set to open higher, with the SPI future suggesting a rise of 0.90% at the open this morning.
• On the commodity front this morning,
  • Oil is up 2.22% to US$74.17 a barrel, following the continued geopolitical risk in the Middle East and output problems in the US helping drive up the price. 
  • Gold is up 0.81% to US$2021.73 an ounce and iron ore is down 1.53% to US$128.50 a tonne following the uncertain demand for construction materials in China.

Trading Ideas:

• Trading Central has identified a bullish signal on SG Fleet Group (ASX:SGF), indicating that the stock price may rise from the close of $2.30 to the range of $2.76-$2.86 on a pattern formed over 73 days, according to the standard principles of technical analysis.
• And Trading Central has identified a bearish signal on Diversified United Investment (ASX:DUI), indicating that the stock price may fall from the close of $4.92 to the range of $4.80-$4.82 on a pattern formed over 22 days, according to the standard principles of technical analysis.

Rising Treasury Yields and uncertainty around the Fed’s rate cut outlook dampened investor sentiment on Wednesday, extending the red run across the key indices for the week. The Dow Jones fell 0.2%, while the S&P500 and Nasdaq declined 0.5% and 0.6% respectively on Wednesday.

Treasury yields have been rising over the last few sessions following key Federal Reserve member speeches that warned the easing of monetary policy may come slower than investors first expected. This prompted investors to flee equities in favour of bonds as a safer return on investment in the current market environment.

Stronger than expected retail sales out of the US boosted some retail stocks on Wednesday indicating consumers are still spending despite the high interest rate and tough cost-of-living environment in the US. Retail sales in the world’s largest economy rose 0.6% in December, a rise from 0.3% in November and above consensus expectations of a flat reading month-on-month.

European markets closed the midweek session lower, extending on the global red run this week, as key inflation readings and World Economic Forum updates heightened investor concerns over the rate outlook in the region. The STOXX600 fell 1.1% as all sectors ended the day in the red led by mining stocks tumbling over 2.1%. Germany’s DAX closed 0.84% lower, the French CAC lost 1.07% and, in the UK, the FTSE100 fell 1.5% on Wednesday after inflation in the UK rose unexpectedly to 4% year-on-year in December’s reading.

Locally on Wednesday, the Aussie market extended its red run into the midweek session, partly weighed on by global markets overnight on Tuesday, weak economic data out of China also weighed on the local market, and energy and materials stocks dragged the ASX lower on Wednesday. The energy sector sell-off was driven by the sliding price of oil yesterday amid escalating tensions in the Red Sea, however, we have seen a recovery in the price of oil this morning as a strong USD counteracts the Red Sea threat on the commodity.

What to watch today:

• Ahead of Thursday’s trading session here in Australia the SPI futures are expecting the ASX to open 0.27% lower, extended on the negative global run this week. The pullback in global equities this year so far wasn’t unexpected as we saw markets both at home and overseas hover near all-time highs to end 2023. The pullback is primarily due to central banks around the world pushing back rate cut timeframes which is prompting investors to reposition in safer returns and diversified exposure through bonds and equities that perform better in the higher interest rate environment.
• On the commodities front this morning, oil is trading 0.6% higher at US$72.84/barrel, gold is down 1.06% at US$2006.10/ounce and iron ore is down 0.38% at US$130.50/tonne.
• AU$1.00 is buying US$0.65, 97.02 Japanese Yen, 52.14 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has maintained a buy rating on Integrated Research (ASX:IRI) and have slightly upgraded the price target on the leading global provider of experience management solutions from $0.60 to $0.66 following the company releasing a first half trading update including the company’s statutory revenue and EBITDA expectations coming in above Bell Potter expectations and the maintenance of no debt and a strong cash balance by the company throughout the first half.
• And Trading Central has identified a bullish signal on Eagers Automotive (ASX:APE) following the formation of a pattern over a period of 88-days which is roughly the same amount time the share price may rise from the close of $14.37 to the range of $16.60 to $17.10 according to standard principles of technical analysis.

Wall Street closed the first trading session of the holiday shortened trading week lower as investors assessed the latest batch of fourth quarter earnings results alongside rising bond yields. The Dow Jones fell 0.62% lower while the Nasdaq dipped 0.2% and the S&P500 ended the day down 0.37%. The benchmark 10-year Treasury note jumped nearly 12-basis points to 4.068% following Federal Reserve Governor Christopher Waller indicating the central bank may ease monetary policy slower than Wall Street had first anticipated, which prompted investors to sell equities in favour of government bonds.

In Europe, markets closed lower again as investors digested comments made at the World Economic Forum in Switzerland. The STOXX600 fell 0.3%, Germany’s DAX lost 0.3%, the French CAC fell 0.2% and, in the UK, the FTSE100 declined 0.5%.

We also have the European Central Bank indicating rate cuts may come later than first expected which is hurting GDP and economic growth in the region especially for the likes of Germany which are on the edge of technical recessions.

The local market has started the week in the red, with the ASX200 ending Tuesday’s session down 1.09% as utilities and energy stocks weighed on the market, and every sector closed the day in negative territory.

The supermarket giants weighed on the market yesterday, with Coles falling 2% and Woolworths sliding 1.5% after Australia’s competition watchdog said it would not hesitate to take legal action against a big supermarket chain for breaching consumer law, which comes just a week after Labor announced a review of industry codes, telling supermarkets to pass on lower wholesale costs to consumers and not ‘price gauge’ at the checkouts.

Australia’s consumer confidence data slipped in January as Aussies remain concerned about financial pressures following 13 interest rate hikes out of the RBA since May 2022.

What to watch today:

• Ahead of the midweek local trading session here in Australia the SPI futures are expecting the ASX to open Wednesday’s session up 0.05% despite the negative session across global markets overnight.
• On the commodities front this morning, oil is trading 0.81% lower at US$72/barrel, gold is down 1.34% at US$2027/ounce and iron ore is down 1.5% at US$131/tonne.
• The Aussie dollar continues to weaken against the greenback with AU$1.00 buying US$0.66, 96.94 Japanese Yen, 52.21 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has maintained a buy rating on Coventry Group (ASX:CYG) and increased the 12-month price target on the industrial supply and services group from $1.45 to $1.80 following the release of a first half trading update which overall was ahead of Bell Potter forecasts, including the anticipation of first half sales growth of 5.4% YoY and pre-leases standard EBITDA to lift 18.1% after the company implemented a range of buy and sell-side margin initiatives through the Trade network early in FY24.
• And Trading Central has identified a bearish signal on Sigma Healthcare (ASX:SIG) following the formation of a pattern over a period of 7-days which is roughly the same amount of time the share price may fall from the close of $0.95 to the range of $0.84-$0.86 according to standard principles of technical analysis.

Over in Europe, markets started the week lower as investors in the European region prepare for the World Economic Forum in Switzerland. The STOXX600 fell 0.5% on Monday, while Germany’s DAX closed down 0.49%, the French CAC lost 0.72% and, in the UK, the FTSE100 ended the day 0.4% lower. Germany’s DAX closed in the red after fresh GDP data indicated the economy contracted 0.3% in 2023 amid rising interest rates, weaker domestic and foreign demand and high inflation in the region. Despite the 0.3% contraction in the region, Germany’s GDP was still 0.7% higher in 2023 than pre-pandemic in 2019.

Locally on Monday, the ASX was little unchanged with the key index closing the day down just 0.03% as a 2.11% surge in energy stocks was offset by losses among materials, healthcare and utilities companies.

Uranium stocks have enjoyed an extended rally into the first trading weeks of 2024 as global sentiment around nuclear energy continues to rise. Locally, Boss Energy and Palandin Energy rose over 9% and over 7% respectively on Monday.

On legal battles front yesterday, Santos and Qantas had very different outcomes that led to mixed reactions from investors. Santos shares rallied almost 4% after the mining giant received the green light to push ahead with laying the pipe at its $5.8bn Timor Sea gas project, after the Federal Court judge rejected cultural and environmental evidence from a group seeking to halt the project.

Qantas shares on the other hand fell 4.44% on Monday on news that the airline is engaged in another legal case with its workforce over alleged underpayment of its aircraft engineers.

What to watch today:

• Ahead of Tuesday’s trading session on the ASX, the local market is set to open the day 0.3% lower, taking no lead from Wall Street overnight as the U.S. was closed for the Martin Luther King Junior holiday.
• On the economic calendar today, we can expect Westpac’s consumer confidence data for January out this morning with the expectation of a slight rise by 0.5% for the first month of the year, that’s down from a 2.7% rise that ended 2023 on a high for consumers.
• Looking at the commodities, oil is trading 0.1% lower at US$72.61/barrel, uranium is up 1.65% at US$92.50/pound, gold is up 0.26% at US$2054/ounce and iron ore is down 2.92% at US$133/tonne amid ongoing weak economic growth fears out of China.
• AU$1.00 is buying US$0.67, 97.07 Japanese Yen, 52.31 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased the price target on Santana Minerals (ASX:SMI) from $1.40 to $1.85 and maintain a speculative buy rating on the gold explorer and developer after the company released an update outlining it is awaiting one last batch of infill drilling results before commencing an updated Rise-and-Shine Mineral Resource Estimate. Bell Potter’s re-rating follows an update on the outlook for gold price forecasts, a modification to Bell’s Notional Development Scenario to confine the initial project development to an open pit mine development on the Rise-and-Shine deposit and an increase in exploration valuation to account for unutilised Mineral Resources.
• And Bell Potter has maintained a buy rating on GrainCorp (ASX:GNC) but has slightly decreased the 12-month price target on the end-to-end grain logistics company following a review of key drivers at the end of harvest season including improved soil moisture and tighter domestic wheat premiums. The reason for the slight decline in price target is due to NPAT expectation being reduced by around 4% in FY24 on lower assumed crush margins.

The Australian share market closed the week 0.12% higher, with technology and consumer discretionary leading the market, while utilities and materials declined the most. 

The US saw little change on Friday, with the three major benchmarks closing slightly mixed. The Dow Jones was down 0.3%, while the S&P 500 and the Nasdaq only gained 0.08% and 0.02% respectively. 

This followed disappointing earnings results which offset news of cooler-than-expected producer prices. The big focus was US bank earnings: Bank of American and JP Morgan shares declined, while Citigroup gained, after posting a $1.8 billion quarterly loss and announcing that they’re cutting 10% of its workforce. 

And US markets will be closed Monday for the Martin Luther King public holiday. 

What to watch today:

• The Australian share market is set to open higher this morning, with the SPI futures suggesting a 0.07% rise at the open. 
• And economic data that the market will be looking out for this week includes Westpac’s consumer confidence data out tomorrow and December’s unemployment rate out on Thursday. 
• Looking at commodities, 
  • Crude oil is trading almost 1% higher at US$72.86 per barrel, as concerns following potential supply disruptions escalated, following US and British air and sea strikes in Yemen. 
  • Gold has jumped over 1% to $2,050 an ounce, multiplying its morning gains on Friday, following the cooler-than-expected producer inflation print in the US that fuelled bets on earlier monetary easing by the Federal Reserve. 
  • Iron ore has fallen 3.2% to $136 per tonne, extending the decline from the 20-month high of $145, hit on January 4th, as decreasing margins for Chinese steel mills raised expectations of lower input buying. 

Trading Ideas:

• Trading Central has identified a bearish signal on Transurban Group (ASX:TCL), indicating that the stock price may fall from the close of $13.67 to the range of $13.05 to $13.20 over 7 days, according to the standard principles of technical analysis. 

The ASX200 advanced 2.54% this week (Mon - Thurs), buoyed by the Nasdaq and S&P500 hitting a 52-week high. The Dow Jones hit an all-time high, breaking through the 37,000 points barrier. The rally came after economic data showed inflation easing in the US and the Federal Reserve signalled rate cuts on the horizon in 2024.

The ASX took strong lead from Wall Street with rate-sensitive sectors leading the gains including the REIT sector rising 5.82%, while tech stocks jumped 4.9%.

In this week’s wrap, Grady covers:

• (0:26) key opportunities for investors to reposition their portfolios in 2024
• (0:37) what to consider in the healthcare sector
• (1:32) the outlook for gold heading into the new year
• (2:52) how retailers surprised the market in 2023
• (4:31) the best & worst performing stocks on the ASX200
• (5:11) the most traded stocks by Bell Direct clients this week
• (5:41) economic data to watch out for next week.

Read the transcript here.

Wall Street’s rally experienced a significant boost on Wednesday with the Dow Jones soaring 1.4% to top 37,000 points for the first time ever after the Federal Reserve not only maintained the US cash rate, but also signalled it would cut rates three times next year amid inflation easing in the world’s largest economy. The S&P500 jumped 1.37% and the tech-heavy Nasdaq rallied 1.38% on Wednesday, leading to the three major indices hitting fresh 52-week highs. The Federal Reserve also lowered its inflation forecast for 2024, with the expectation of inflation to ease to 2.4%, down from the previously expected 2.6.

Over in Europe, markets closed flat on Wednesday as investors in the region awaited the release of the Fed’s latest interest rate decision and any commentary on rate outlook from the world’s largest economy in the last month of 2023. The STOXX600 closed just 0.01% lower as gains for chemicals stocks were offset by a decline among telecoms stocks. Germany’s DAX fell 0.15% on Wednesday, the French CAC shed 0.16%, and, in the UK, the FTSE100 closed the day up 0.08%. UK GDP data out overnight indicated the English economy contracted by 0.3% in October, with the country’s services, production and construction services all shrinking according to new data out of the National Statistics on Wednesday. This follows growth of 0.2% in September.

Locally yesterday, the ASX200 rose 0.31% driven by healthcare stocks lifting 1.11% buoyed by Sigma Healthcare soaring 40% after returning from a trading halt post Chemist Warehouse merger announcement. Neuren Pharmaceuticals was the best performing stock on the ASX200 on Wednesday while Chalice Mining and IDP Education weighed on the key index.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are expecting the ASX to open Thursday’s trading session up 1.09% on the back of the Wall St rally overnight.
• On the commodities front this morning, oil has rebounded to trade 1.9% higher at US$69.91/barrel, gold is up 2.3% at US$2024/ounce, iron ore is trading 0.73% higher at US$138.50/tonne, and coal is trading 4.26% lower at US$146/tonne.
• The landmark COP28 summit in Dubai has seen nations agree to ‘transition away’ from coal, oil and gas as opposed to a complete ‘phase out of fossil fuels’ as some of the larger nations had pushed for a complete phase-out while others argued against it. The focus for the last two weeks of the summit has been on making progress on tackling climate change after months of record-breaking extreme weather.
• AU$1.00 is buying US$0.67, 95.39 Japanese Yen, 52.32 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has maintained a hold rating on Clean Seas Seafood (ASX:CSS) and has significantly reduced the price target on the integrated Kingfish producer after the company announced a material strategy pivot and associated recapitalisation of the balance sheet. The new strategy includes an approximate 800 tonne reduction in biomass, a consolidation of farming sites and a targeted reduction in fixed and variable costs.
• And Trading Central has identified a bearish signal on Chorus (ASX:CNU) following the formation of a pattern over a period of 30-days which is roughly the same amount of time the share price may fall from the close of $7.13 to the range of $6.15 to $6.35 according to standard principles of technical analysis.

Wall Street’s rally extended into Tuesday’s session with the key indices rising sharply in afternoon trade as the S&P500 added 0.46%, the Dow Jones rose 0.48%, and the tech-heavy Nasdaq had the biggest rise of 0.7%. The latest Consumer Price Index data is driving the rally today with the reading showing inflation in the US rose 3.1% in November YoY and 0.1% MoM which was in-line with economists’ expectations and continuing the deflationary trend, which provides support for the Fed to look toward interest rate cuts in the near future as the inflation rate is falling toward the target 2% inflation rate.

The all-important Fed policy meeting also kicks off today ahead of the interest rate decision out tomorrow with the expectation that the Fed will maintain the current cash rate following the release of recent favourable economic data.

Over in Europe, it was a lacklustre session across markets with majority closing slightly lower on Tuesday as investors responded to the latest CPI reading out of the US and other economic data released in the European region. The STOXX600 fell 0.23%, weighed down by the oil and gas sector sliding 1.28%, while Germany’s DAX closed just 0.02% lower, the French CAC fell 0.11% and, in the UK, the FTSE100 ended the day down just 0.03%.

UK unemployment came in at 4.2%, a flat reading on September and below economists’ expectations in a sign the labour market in the UK remains tight.

The ASX extended its December rally into Tuesday’s session with the ASX ending the day up 0.5%, as every sector closed in the green, led by the technology sector after the Nasdaq had a strong day on Wall Steet on Monday. Materials stocks closed flat as the iron ore price dipped on Tuesday.

Australia’s business and consumer confidence data released yesterday came in at mixed readings with business confidence falling -9 points, well below the expected -1 point while consumer confidence rose 2.7% from a decline of 2.6% in November, in a sign consumers are optimistic over the recovering economic conditions.

The story of the week so far has been the response to Sigma Healthcare accepting a transformative merger with Chemist Warehouse to bring the retail pharmacy to the ASX. Fund managers are bullish on the potential backdoor listing for Chemist Warehouse as the $8.8bn deal is awaiting approval from the competition regulator.

What to watch today:

• On the commodities front this morning, oil has taken a dive overnight, with the spot price now down 3.84% to US$68.59/barrel amid concerns of oversupply despite OPEC+ announcing further output cuts to stabilise the price of the commodity. Gold is trading 0.2% lower at US$1977/ounce and iron ore is flat at US$137.50/tonne.
• AU$1.00 is buying US$0.66, 95.41 Japanese Yen, 52 British Pence and NZ$1.07.
• Ahead of the local trading session here in Australia the SPI futures are expecting the local market to open the midweek session flat despite Wall Street’s rally overnight.

Trading Ideas:

• Bell Potter has initiated coverage of Pilbara Minerals (ASX:PLS) with a hold rating and a price target of $3.90. The hold rating follows recent lithium market weakness seeing heavy shorting in the PLS stock, however Bell Potter’s analyst sees this as short-sighted momentum and is confident that Pilbara’s low-cost producing and strong balance sheet sets it up to withstand weaker lithium prices and supports expansion programs. The analyst is also confident that EV-led demand will see strong medium to long-term lithium market fundamentals.
• And Trading Central has identified a bullish signal on GUD Holdings (ASX:GUD) following the formation of a pattern over a period of 36-days which is roughly the same amount of time the share price may rise from the close of $11.66 to the range of $12.60-$12.90 according to standard principles of technical analysis.

Wall St traded mostly flat on Monday before rallying in afternoon trade to close higher across the key indices as investors remain optimistic in the final trading weeks of 2023. Investors are looking ahead this week to the all-important Fed policy meeting and inflation data in the region which could see markets respond accordingly later in the week. The S&P500 closed 0.4% higher, the Nasdaq added 0.2% and the Dow Jones advanced 0.43%. Macy’s shares rallied over 20% on Monday after the retailer received a takeover offer worth US$5.8bn while tech stocks pulled back to close the session lower.

Over in Europe, markets in the region closed mostly higher on Monday as investors look ahead to the upcoming US FOMC meeting this week to determine the rate outlook for the world’s largest economy heading into 2024. Miners in the region weighed on the market while the European Blue-Chip index or the STOXX600 rose 0.4%. Germany’s DAX rose 0.21% on Monday, and the French CAC added 0.33%, but in the UK, the FTSE100 fell 0.13% at the session’s end.

Locally yesterday, the ASX200 rose just 0.06% as strong gains among energy stocks offset losses for materials, utilities and technology stocks. The gold miners took a hit yesterday amid the price of the precious commodity dipping below US$2000 during the trading session, with analysts blaming the strong jobs data out of the US last week as the catalyst for the decline in the price of gold. Iron ore miners on the other hand enjoyed a rally on Monday as the price of the commodity rose, attributed to China’s restocking demand for steel mills in the region.

Sigma Healthcare (ASX:SIG) was the story of the day yesterday after the company agreed to a ‘transformational merger’ with Chemist Warehouse to bring the leading retail pharmacy brand to the ASX through the creation of an $8.8bn retail giant. Shares in Sigma Healthcare remain in a trading halt but last traded at 76.25cps. Concerns over Star Entertainment Group (ASX:SGR) ’s ability to operate its Sydney-based casino sparked a further sell-off in the stock yesterday with shares closing the day down 8.7%, while Costa Group lost almost 4% yesterday after announcing earnings in CY23 would come in below that of 2022.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open Tuesday’s session up 0.18% taking lead from Wall Street’s rally overnight.
• On the economic calendar today, Australia’s consumer and business confidence data will be released for December and November respectively with the expectation of a slight lift in both amid improving outlook for business conditions.
• On the commodities front this morning, oil is trading just 0.08% higher at US$71.29/barrel, gold is down 1.09% at US$1981.46/ounce and iron ore is up 1.1% at US$137.50/tonne.
• 1 Aussie dollar is buying US$.066, 96 Japanese Yen, 52.29 British Pence and NZ$1.07.

Trading Ideas: 

• Bell Potter has maintained a sell rating on Platinum Asset Management (ASX:PTM) and a price target of 84cps following the company’s announcement of appointing Jeff Peters as its new CEO. The appointment of Mr Peters may signal a new dawn for the company, however, there remains challenges with declining funds under management and revenues, in addition to an increasing cost base.
• And Bell Potter has increased the 12-month price target on Alligator Energy (ASX:AGE) from 8cps to 10cps and maintain a speculative buy rating on the uranium miner following the release of an updated Mineral Resource Estimate for the Blackbush Deposit including an increase of 21%.