Between the Bells

Ahead of the RBA’s rate announcement next week, we look at the predicted rate outlook for the remainder of CY23, what this means for companies and most importantly, what the outlook means for your portfolio this festive season.
In this week's wrap, Grady covers:

• (0:12) fears and expectations around the cash rate,
• (0:27) Tuesday’s RBA meeting,
• (1:56) what ‘higher for longer’ means for businesses and individuals,
• (2:29) two companies who excelled in the FY23 reporting season,
• (3:04) interest rate impacts on portfolios and investment decisions,
• (4:46) the best performing stocks in the ASX200,
• (6:12) the most traded stocks & ETFs by Bell Direct clients, and
• (6:27) five economic news items to watch out for.

Wall St finished higher on Thursday, however, is still on track for its worst month of the year. All three major indexes finished in the green with the Dow Jones up 0.35%, the S&P 500 up 0.59% and the tech-heavy-Nasdaq up 0.87%.

The US ten-year treasury hit a 15 year high as data came out on Thursday highlighting the still-resilient labour market with jobless claims coming in lower than expected. In terms of US stocks, the communications services performed strongly with a 2% gain in Meta Platforms, whilst Intel and Cisco Systems rallied 1.6% and 1.3% respectively.

Over in Europe, markets closed higher, snapping a 5-day losing streak following strong performances in mining and banking stocks. The STOXX600 closed 0.36% higher thanks to help from the basic resources sector following a rise in Chinese industrial profits. The German DAX and the French CAC finished Thursday strongly, rallying 0.70% and 0.63%, whilst the UK’s FTSE100 closed marginally higher by 0.11%.

Locally yesterday, the ASX 200 ended Thursday marginally lower by 0.08% with most sectors finishing in the red, including the consumer discretionary sector which lost over 1%. This was offset by the energy sector which saw a 2.96% increase yesterday.

Washington H Soul Pattinson results were released yesterday, leaving investors disappointed despite increasing dividends by over 20%. There could possibly be two contributing factors to this. Investors may have been taking profits from the recent run the share price has been on or it could be from Brickworks releasing results on the same day with underlying profit falling 32% in FY23. Washington H Soul Pattinson is the largest share holder in Brickworks, so the rising costs that impacted Brickworks underlying profits may have caused investor sentiment to slide with both Brickworks and Washington H Soul Pattinson closing Thursday’s session down over 6% each.

What to watch today: 

• The Australian share market is set to open higher, with the SPI futures suggesting a rise of 0.64% at the open this morning.
• In terms of commodities,
  • Oil is down 2.07% to 91 US dollars and 74 cents a barrel with official data showing that US crude inventories fell by 2.2 million barrels last week. 
  • Gold has fallen 0.52% to 1864 US dollars an ounce following a strong US dollar. 
  • And iron ore is up 1.28% to 119 US dollars a tonne following a drop in supply with steel mills limiting production.

Trading Ideas: 

• Bell Potter maintains a buy rating on Nufarm (ASX:NUF), despite lowering the price target from $7 to $6.75 with a current share price of $4.72. The buy rating remains unchanged following predictions of a reasonable rebound in earnings in FY24.
• And Trading Ideas has identified a bearish signal in Hearts and Minds Investments (ASX:HM1), indicating that the stock price may fall from the close $2.30 to the range of $2.17-$2.19 over a pattern formed in 50 days, according to the standard principles of technical analysis.

Inflationary drivers rising sparked a mixed session on Wall Street overnight as the price of oil and bond yields respectively rose which dampened investor sentiment in equities. The Dow Jones fell 0.2%, the S&P500 edged just 0.02% higher and the Nasdaq rallied 0.22% following a turbulent few session for the tech-heavy index. The benchmark on the 10-year treasury yield hit its highest level since 2007, while the 2-year treasury yield also climbed. Energy stocks were naturally the best performers on Wall St overnight amid the price of oil rising 3%. Inflation remains a key concern in the U.S. with volatility in investor sentiment expected to continue over the coming weeks as further economic data is released.

Over in Europe, markets closed at a 6-month low on Wednesday as investor sentiment in the region continues to be dampened by the state of the global economy, rising interest rates and inflationary concerns. The STOXX600 fell 0.2%, Germany’s DAX lost 0.25%, the French CAC shed 0.03%, and in the UK, the FTSE100 fell 0.43%. Oil and gas stocks did most of the heavy lifting in Europe on Wednesday following that uptick in the price of oil which offset some of the losses among other sectors like insurance stocks. 

The RBA’s rate decision headache worsened yesterday after Australia’s CPI monthly indicator data, the key inflation reading for the country, came in at an acceleration to 5.2% for the 12-months to August. While this was in line with economists’ expectations, it is an increase from the 4.9% rise in July and provides further support for the RBA to consider raising rates again or maintaining the cash rate at 4.1% for longer to ensure inflation comes down to the target range of 2-3%. The key drivers of the boosted inflation reading for August were housing, transport, food and non-alcoholic beverages, insurance and financial services. When the RBA meets next week to announce the interest rate decision, the market is currently factoring in just an 11% chance of a rate hike.

The market fell in afternoon trade following the release of CPI data, leading to the ASX200 closing the midweek session down 0.11% weighed down by the tech sector falling nearly 1%. Star Entertainment Group tumbled over 9% after the embattled casino operator raised $565m from institutional investors through offering new shares at 60cps.

At the other end of the market, Tamboran Resources rallied 11.5% after announcing the upgrade of its gas resources to 2 trillion cubic feet at its 100%-owned Beetaloo Basin.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open Thursday’s session down 0.18%.
• On the commodities front this morning, oil is trading just shy of 4% higher at US$93.93/barrel amid data showing crude inventories in the US fell by a much bigger-than-expected amount last week, gold is down 1.26% at US$1876.55/ounce, and iron ore is down 1.26% at US$117.50/tonne.
• AU$1.00 is buying US$0.64, 94.92 Japanese Yen, 52.65 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has initiated coverage of COG Financial Services (ASX:COG) with a buy rating and a price target of $1.73. Bell Potter’s analyst sees COG’s recent acquisitions will add 182 broker firms nationally across the car and lifestyle markets for COG and as a result, Bell Potter expects an uplift of $833m in total funding volumes with improved cross-pollination into higher margins parts of the Group.
• And Trading Central has identified a bullish signal on Austal (ASX:ASB) 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 $1.82 to the range of $2.29 to $2.39 according to standard principles of technical analysis.

Over on in the US, Wall Street closed lower on Tuesday as the release of home sales and consumer confidence data in the region sparked investor concerns over the state of the US economy.  The Dow Jones is fell 1.14% in its worst session since March, the Nasdaq retreated 1.57% and the S&P500 is lost 1.47% at the closing bell on Tuesday.

August new home sales data missed expectations with homes under contract totalling 675,000 for the month, down 8.7% on July and below economists’ expectations of 695,000 which would have represented a lesser decline from July. The Conference Board’s consumer confidence index fell to 103 points in September, down from 108.7 in August and also below economists’ expectations of 105.5 points. Both of these readings falling short of economists’ expectations and being greater declines than expected indicate the greater impact interest rate hikes are having on the US economy to date.

Over in Europe, markets closed lower for a fourth straight session as negative investor sentiment impacted global stocks. The STOXX600 fell 0.6% on Tuesday weighed down by technology and automaking stocks falling 2% and 1.2% respectively, while Germany’s DAX lost just shy of 1%, the French CAC fell 0.7% and, in the UK, the FTSE100 closed flat. The muted day in the UK follows signs that the Bank of England and European Central Bank will hold rates steady while the Federal Reserve in the US may have another hike in store. Rising bond yields in the region are also weighing on European markets as investors opt for safer returns alternatives to equities in the current market environment.

The ASX fell 0.54% yesterday as interest-rate sensitive sectors weighed on the key index with the REIT and Tech sectors shedding 1.35% and 1.93% respectively as the market prepares for interest rates to remain higher for longer across not only locally, but among international economies too. Rising bond yields are also weighing on the ASX as investors turn to bonds over the higher-risk equities in the current environment.

Pro Medicus popped 9% on Tuesday after the leading health imaging company announced its wholly owned US subsidiary, Visage Imaging, has signed a $140m, 10-year contract with the largest not-for-profit healthcare system in Texas, Baylor Scott & White Health (BSWH). 

What to watch today:

• Ahead of the local trading session here in Australia the SPI futures are expecting the ASX to open 0.34% lower following the slide in global investor sentiment overnight.
• On the commodities front, oil is trading 1.07% higher at US$90.64/barrel, gold is down 0.83% at US$1899/ounce and iron ore is down 3.64% at US$119/tonne.
• AU$1.00 is buying US$0.64, 95.29 Japanese Yen, 52.73 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has raised the price target on Pro Medicus (ASX:PME) from $70/share to $75/share and maintain a hold rating on the leading health imaging IT provider after the company announced the signing of its largest ever deal in the US through a 10-year contract with Baylor Scott & White Health. With a shortage of radiologists and ongoing cuts to Medicare re-imbursement for radiology, companies like Pro Medicus are also expected to continue working with AI providers and researchers to facilitate the provision of AI tools in radiology, however the company is not developing its own applications as understood by Bell Potter.
• And Trading Central has identified a bearish signal on Charter Hall Long WALE REIT (ASX:CLW) following the formation of a pattern over a period of 40-days which is roughly the same amount of time the share price may fall from the close of $3.28 to the range of $2.50 to $2.65 according to standard principles of technical analysis.

Wall St closed higher on Monday, ending a 4-day losing streak, with all three major indexes ending the day in the green. The S&P 500 and the tech heavy Nasdaq both finished nearly half a percent higher, whilst the Dow Jones finished marginally higher by 0.13%.

JP Morgan upgraded chemical company Dow which saw it rise 1.7% with Amazon shares also increasing by 1% following an announcement of an investment of $4 billion in artificial intelligence firm Anthropic. Generally speaking, US stocks have struggled in September as the Federal Reserve signaled that higher interest rates are there to stay, therefore sending bond yields higher.

Over in Europe, markets finished lower on Monday following a number of Central Bank rate decisions at the end of last week and the potential of higher interest rates over a long period of time. The STOXX600 ended Monday down 0.6% with nearly all sectors finishing in the red. Travel and leisure stocks led losses by 3%, followed by household goods which lost 2% on Monday. The FTSE 100 ended 0.78% lower, whilst the German DAX and French CAC both closed nearly 1% lower to end the day.

Locally yesterday, the ASX 200 ended the day 0.11% higher led by advances in both the information technology and the communications services sectors up 1.92% and 1.19% respectively. This was slightly offset by the materials sector which retreated 0.73%.

What to watch today: 

• The Australian share market is set to open lower, with the SPI futures suggesting a fall of 0.10% at the open this morning.
• In terms of commodities, 
  • Oil is down 0.20% to 89 US dollars and 85 cents a barrel, as the oil rally stalled last week, following the Federal Reserve’s decision to maintain rates. 
  • Gold is down 0.49% to 1915 US dollars an ounce as a strong dollar has a negative effect on the appeal of the metal resource. 
  • And iron ore is up 1.65% to 123 US dollars and 50 cents a tonne, following an increase in production in steel mills in the short run to undercut potential output cuts from the Chinese government.

Trading Ideas: 

• Bell Potter maintains a buy rating on Technology One (ASX:TNE) and has increased its price target by 25 cents to $17.75 with a current share price of $15.26. This recommendation has been upgraded from a hold to a buy as the FY23 results coming out on the 21st of November are expected to be modestly above the guidance and consensus.
• And Trading Central has identified a bullish signal in Baby Bunting Group (ASX:BBN), indicating that the stock price may rise from the close of $2.17 to the range of $2.60-$2.70 on a pattern formed over 30 days, according to the standard principles of technical analysis.

It was a turbulent session on Friday and week last week on Wall Street as investors digested signals that the Fed intends to continue raising interest rates for longer despite holding the U.S. cash rate at 5.25-5.5% at the September meeting. The Dow Jones fell 0.31% on Friday while the S&P500 and Nasdaq lost 0.23% and 0.09% respectively, marking a fourth consecutive day of losses on Wall St.

Bond yields also surged on Friday after the central bank forecasted one more rate hike for 2023, which further depleted the attractiveness of equities compared to bonds in the eye of investors.

Website building software company Squarespace rallied 5% on Friday after UBS initiated coverage of the company with a buy rating, while book and media publishing company Scholastic plummeted over 14% on missing earnings expectations on the top and bottom lines.

Over in Europe, investor sentiment in the region was dampened on Friday by signals of further rate hikes out of the Fed in the U.S. The STOXX600 fell 0.3% on Friday taking the week’s losses to 1.57%, while Germany’s DAX fell 0.09%, the French CAC lost 0.4% and, in the UK, the FTSE100 rose just 0.07% to close out the week. Higher for longer interest rates is also a fear of European investors from the ECB.

On Thursday last week, both the Swiss National Bank and the Bank of England ended their respective rate runs but said there is no room for complacency and will raise again if required.

Locally on Friday, the ASX rose just 0.05% to close the final trading session of the week in the green after a dull few days of trading. Real Estate stocks were the worst performers on Friday while the utilities and energy sectors led the gains on the market. Costa Group rose 6.5% on Friday after the agricultural company entered into a Scheme Implementation Agreement with a consortium led by PSP to acquire the remaining shares in Costa Group that the consortium does not already own at $3.20ps.

What to watch today:

• Ahead of the local trading session here in Australia the SPI future are anticipating the ASX to open the new trading week down 0.34%.
• On the commodities front this morning oil is trading 0.46% higher at US$90.44/barrel, gold is up 0.04% at US$1926/ounce and iron ore is up 1.65% at US$123.50/tonne.
• AU$1.00 is buying US$0.64, 95.55 Japanese Yen, 52.52 British Pence and NZ$1.08.
• Stocks trading ex-dividend today include Sigma Healthcare, Atlas Arteria and Auckland International Airport. If you’ve been thinking about these stocks it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.

Trading Ideas:

• Bell Potter has decreased the 12-month price target on Develop Global (ASX:DVP) from $3.80 to $3.70 and maintain a buy rating on the hybrid mining company following the company’s release of an update on its Woodlawn operations. While the Mine Life of 7-years was in line with Bell Potter’s prior estimate and is expected to grow to 9-years, OPEX came in higher than Bell Potter expectations.
• And Trading Central has identified a bearish signal on Goodman Group (ASX:GMG) following the formation of a pattern over a period of 25-days which is roughly the same amount of time the share price may fall from the close of $21.70 to the range of $20.40 to $20.70 according to standard principles of technical analysis.

Wall St fell for the third straight day amid concerns of higher rates which saw the major indexes all in the red on Thursday. The S&P 500 had its worst session since March which saw it drop by 1.64%. The Dow Jones and Nasdaq continued this trend lowering 1.08% and 1.82% respectively.

The US 10-year treasury yield hit its highest level since 2007 as a result of jobless claims data displaying a still strong labour market which may encourage the Federal Reserve to hike rates.

In terms of US stocks this week, tech has seen the biggest losses with Tesla, Alphabet and Nvidia all losing more than 2%.

 Over in Europe, markets closed lower following interest rate decisions from the Central Banks in England, Turkey, Sweden, Switzerland and Norway. The STOXX 600 ended Thursday lower by 1.3% with travel and leisure stocks seeing the biggest drop, losing 3.2%. Germany’s DAX and the French CAC both lost well over 1% whilst the FTSE 100 also lost 0.69% by market close.

 Locally yesterday, the ASX 200 closed 1.37% lower with all sectors ending down on Thursday. The losses were lead by the energy and financial sectors which both closed 1.96% and 1.76% lower respectively.

 What to watch today: 

• The Australian share market is set to open lower, with the SPI futures suggesting a fall of 1.36% at the open this morning.
• In terms of commodities, 
  • Oil is steady at 89 US dollars and 54 cents a barrel, after increasing off the back of Russia announcing a ban on fuel exports, raising further concerns about tight supplies. 
  • Gold is down half a percent to 1930 US dollars an ounce after the US Federal Reserve delivered a hawkish pause on the cash rate. 
  • And iron ore is up by 0.81% to 124 US dollars a tonne with JP Morgan raising target prices for the iron ore sector as China’s infrastructure expansion limited drawbacks from lower property development.

Trading Ideas: 

• Bell Potter maintains a speculative buy rating on Genetic Signatures (ASX:GSS), despite lowering its price target from $0.95 to $0.90 with a current share price of 51 cents a share. Bell Potter has maintained  a speculative buy rating as the company is about to complete a respiratory kit clinical trial as well as launching commercially in the US.
• And Bell Potter also maintains a speculative buy rating on Mesoblast (ASX:MSB) and its price target remains at $0.58 with a current share price of $0.37. Bell Potter upgraded to a speculative buy based on share price movement in FY24.

Well US equities declined overnight after the Federal Reserve announced that it would leave interest rates unchanged but indicated another rate hike later this year and a delayed beginning to the rate cuts in 2024, which was different to previous rate expectations. 

All major US benchmarks closed lower, with the Nasdaq down the most, weighed down by Microsoft and Alphabet. And 2-year US Treasury yields climbed to the highest level since 2006, while the 10-year yield reached 4.4%. 

What to watch today:

• Following US markets, the SPI futures are suggesting that the Australian share market will open 0.3% lower this morning. 
• In commodities, 
  • Crude oil is trading in the red, coming down from its over ten-month high, reached in the previous session, after the Energy Information Administration showed that US crude inventories fell by more than 2 million barrels last week, in line with expectations. 
  • Gold is trading flat after the Fed kept the Fed Funds rate steady. 
  • And iron ore has dropped, easing from the five-month high hit mid-September, as markets weighed on uncertainty from Chinese property developers. 
• And stocks going ex-dividend today include Capital Health (ASX:CAJ), Genesis Energy (ASX:GNE), NRW Holdings (ASX:NWH) and Pacific Smiles Group (ASX:PSQ). 

Trading Ideas:

• Bell Potter maintains a Buy rating on Life360 (ASX:360) in anticipation of a strong Q3 result and a chance of an upgrade to 2023 guidance. The market leading app for families includes a range of features from communications to driving safety and location sharing. Bell Potter have increased their price target by 5% to $11.00, which is a 28% premium to the share price. 
• And Bell Potter also maintains a Speculative Buy rating on Conrad Asia Energy (ASX:CRD). The company is focused on progressing several gas projects located in offshore Indonesia. Bell Potter have lowered their valuation from $2.40 to $2.30, and at the current share price of $1.38, this implies 67% share price growth in a year. 

Wall St closed lower on Tuesday as investors look forward to the results of this week’s Federal Reserve policy meeting. All three major benchmarks closed lower on Tuesday with the Dow Jones losing 0.31%, the S&P 500 falling 0.22% and the tech-heavy Nasdaq sliding 0.23%.

In terms of US shares, Disney lost more than 3% following it decision to announce plans to almost double investment on its cruise and parks business. Agricultural manufacturer, Deere also lost nearly 3% after investment bank Evercore ISI downgraded the stock due to agriculture production concerns.

The US Central bank’s meeting started overnight with there being an expectation amongst investors that the Federal Reserve will not raise rates when its decision comes out on Wednesday in the US.

 Over in Europe, markets closed marginally lower as European investors await the results of the Federal Reserve meeting over in the US. The STOXX 600 closed slightly lower with retail stocks posting the biggest losses, whilst banks and oil slightly offset this with gains of around 1%. The FTSE 100 and French CAC finished the day marginally higher while the German Dax saw a close in the red of 0.40%.

 Locally yesterday, the ASX 200 ended Tuesday 0.47% lower with materials and real estate sector finishing the day in the red. This was slightly offset by the energy sector ending the day 0.21% higher.

 What to watch today: 

• The Australian share market is set to open lower, with the SPI futures suggesting a fall of 0.22% at the open this morning.
• In terms of commodities this morning,
   
  • Oil is down 0.38% to 91 US dollars and 13 cents a barrel following Saudi Arabia and Russia announcing oil supply cuts. 
  • Gold is down 0.13% to 1930 US dollars and 61 cents an ounce as the Federal Reserve is expected to maintain a hold on interest rates. 
  • And iron ore is 0.40% lower to 125 US dollars a tonne amid expectations of stronger demand coming from China.

Trading Ideas:

• Bell Potter maintains a speculative buy rating on Azure Minerals (ASX:AZS) and maintains it’s valuation of $4.90 with its current share price trading at $2.49. Bell Potter believes that they are well funded to pursue its lithium exploration target with them also starting exploration of areas where some of the highest ranked lithium targets are located.
• And Bell Potter maintains a hold rating on Altium (ASX:ALU) and have increased their price target from $40 to $44, with a current share price of $45.20. Bell Potter believes the stock is trading around fair value for FY24, hence maintaining its hold rating.

Well, a renewed focus on the outlook for interest rates meant that there wasn’t much movement in US equities overnight. Investors are awaiting the Fed’s policy meeting that’s scheduled for tonight in the US, with the market expecting the central bank stays put when it releases its rate decision on Wednesday. Also, on Wednesday in the US, the Fed will release its market forecasts.

Overnight, although we didn’t see much movement, the three major US benchmarks all closed in the green, inching slightly higher by the close.

It was a different story over in Europe however, with markets closing sharply lower to start the trading week. The STOXX 600 declined 1.2%, with all sectors in negative territory, with healthcare, travel and banks falling the most. Germany’s DAX, France’s CAC, and the FTSE 100 all closed in the red.

What to watch today:

• Our local share market is set to open lower this morning, with the SPI futures suggesting a 0.29% drop at the open this morning. 
• In economic news, the RBA will release the minutes for its September meeting today. This was the final meeting under Governor Philip Lowe, when the central bank announced an extension of the rate pause for the third month in a row, in line with market consensus. The RBA also stated that inflation had passed its peak, however readings remain high, emphasising that further monetary tightening may be required to bring inflation back to the target range. 
• Looking at commodities now, 
  • Crude oil is trading higher and is hovering at the highest levels in more than ten months, as expectations of a widening market deficit in Q4, following more supply cuts in Saudi Arabia and Russia. There are also hopes of a Chinese demand recovery. So, keep watch of ASX- listed energy producers today. 
  • Gold is also trading in the green, rising for the third straight session, so keep watch of gold mining stocks as well. 
  • And iron ore is up 2.5% and has reaches its highest level since March 31st at US$125.50 per tonne, off the back of expectations of stronger demand in China. 

Trading Ideas:

• Bell Potter maintains a Buy rating on Vitura Health (ASX:VIT). The company is a market leader in the distribution of medicinal cannabis products in Australia. Bell Potter says that whilst there are an increasing number of smaller distributors entering the space, Vitura holds significant market share and is ideally positioned to capture this industry growth. Their price target is $0.70, and at the current share price of $0.33, this implies 112% share price growth in a year. 
• And Bell Potter have initiated coverage of Burgundy Diamond Mines (ASX:BDM). Their key asset is the Ekati Diamond Mine located in Canada’s Norwest Territories, which was developed by BHP in the late 1990s, and was ranked top 10 of global diamond mines by volume. It’s a highly strategic asset in the global luxury goods value chain. Bell Potter’s price target is $0.50 and at BDM’s current share price of $0.18, this implies 170% share price growth in a year.