Between the Bells

Reporting season ramped up this week, with investors reactive to news both good and bad. The Aussie share market rose 0.44% this week (Mon-Thu) as a 2.73% gain for the energy sector offset losses in the tech and healthcare sectors.

In this week's wrap, Grady covers:

• (0:21) CBA’s (ASX:CBA) record cash profit
•  (0:49) Boral (ASX:BLD) & Cettire’s (ASX:CTT) strong results
•  (2:37) Downer’s (ASX:DOW) dampened trading
•  (3:05) What this week told investors & next week’s outlook
•  (3:56) US inflation data moving markets
• (5:04) Best performing stocks in the ASX200
•  (6:11) The most traded stocks & ETFs by Bell Direct clients
•  (6:45) Three economic news items to watch out for

Wall St closed slightly higher on Thursday following the release of key inflation data that came in line with consensus expectations of a slight month-on-month growth by 0.2% while the annual inflation rate rose to 3.2% from 3% in June. While this reading was a slight uptick in inflation, it was expected and the annual rate came in under expectations of 3.3%, indicating inflation in the region remains sticky, but not out of control. On an earnings front, Disney led the Dow Jones higher after releasing third quarter results including a earnings per share of $1.03 which beat expectations and the media giant announced an upcoming price hike for ad-free Disney+ subscriptions. 

The Dow Jones added 0.15%, the S&P 500 edged slightly higher by .03% and the tech heavy Nasdaq ended the day up 0.12%.

Over in Europe, markets closed higher on Thursday as positive earnings results were released in the region and investors reacted to US inflation data reading below expectations. The Stoxx 600 finished the day up 0.8% following a 2.2% growth in household goods stocks. The German Dax ended the day up 0.91%, the FTSE 100 closed 0.41% higher and the French CAC rose 1.52% by market close.

Locally yesterday, the Australian market closed 0.26% higher driven by strong gains for the energy and consumer discretionary sectors which rose 2.27% and 0.60% respectively. The strong gains were slightly dampened by a 1.79% drop in the info-tech sector.

What to watch today:

• The Australian share market is set to open lower, with the SPI futures suggesting a fall of 0.27% at the open this morning.
• On the commodities front this morning,
  • Oil is down 1.87%, trading at US$82.82/barrel as economic data concerns have renewed demand fears. 
  • Gold is down 2.52% at US$1912/ounce after the US announced slower than expected inflation growth. 
  • And iron ore is trading down 2% at US$103.50/tonne as disappointing economic data from China has reduced demand in the construction industry.

Trading Ideas:

• Bell Potter maintains a buy rating on luxury online fashion retailer, Cettire (ASX:CTT) and has increased the 12-month price target on the company from $3.90 to $4 on the back of the company releasing very strong results including sales revenue up 98% on the prior corresponding period, and a healthy demand environment across all of the company’s operating regions. 
• And Trading Central has identified a bullish signal on Perenti (ASX:PRN), following the formation of a pattern over a period of 29 days which is roughly the same amount of time the stock price may rise from the close of $1.22 to the range of $1.41 to $1.45, according to the standard principles of technical analysis.

Wall St closed lower again on Wednesday as investors await key inflation data out of the US later this week to gauge an insight into whether inflation is cooling or remains sticky which will give a hint as to the next rate move out of the Federal Reserve. The Dow Jones industrials index closed 0.54% lower, the S&P500 fell 0.7% and the tech-heavy Nasdaq lost 1.17%.

The US inflation reading for July is out on Thursday US time with economists expecting inflation to rise 3.3% in July from a 3% rise in June which would indicate inflation remains sticky in the world’s largest economy. Penn Entertainment soared 9.1% on Wednesday after the casino company said it is launching an online sportsbook with ESPN called ESPN Bet. Roblox on the other hand tanked 22% after missing Wall St expectations in second quarter results.

Over in Europe, markets recovered from Tuesday’s sell-off to close higher on Wednesday as investors digested China’s disinflation and Italy’s weakening of the surprise windfall tax on banks announced earlier this week. Italy’s finance ministry announced late on Tuesday that the tax on net interest income would be capped at 0.1% of risk-weighted assets – one fifth of the level that Citi had estimated it could reach according to CNBC. The STOXX600 closed 0.4% higher, Germany’s DAX added half a percent, the French CAC rose 0.72% and, in the UK, the FTSE100 climbed 0.8%.

Locally on Wednesday, the key index rose 0.37% led by financials stocks jumping 1.21% on the back of CBA releasing strong FY23 results. Healthcare stocks underperformed the market on Wednesday, with the sector closing down 0.9%, while tech stocks continued to rally, up 0.87% at the closing bell.

CBA’s results were the highlight of Wednesday’s trading session with the big bank announcing a record cash profit of $10.16bn boosted by higher interest rates, net interest margin up 17 basis points on FY22 to 2.07%, and dividends per share of $4.50 in FY23, up 17% on FY22. Investors responded positively to the results with the CBA share price rising 2.6% on Wednesday.

On the economic data front, China’s annual inflation rate came in at a reading of minus 0.3% year on year in July which is the first decrease since February 2021. Combining this data with Chinese PPI coming in recently at a -4.4% decline, a 10th straight month that prices have been negative, indicates the Chinese economy is well and truly in deflation mode and more stimulus out of the Chinese government is required to kickstart the economy back into growth mode.

What to watch today:

• Ahead of the local trading session here in Australia the SPI futures are expecting the ASX to open Thursday’s session 0.05% higher.
• On the commodities front this morning, oil is trading 1.63% higher at US$84.30/barrel, gold is down half a percent at US$1915/ounce and iron ore is up 1.44% at US$105.50/tonne.
• AU$1.00 is buying US$0.65, 93.82 Japanese Yen, 51.27 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has maintained a hold rating on A2 Milk (ASX:A2M) company whilst decreasing the 12-month price target on the dairy company from $5.95 to $5.70 ahead of the release of the company’s FY23 results and on the back of assessing key monthly takeaways that monitor A2’s performance. These data points include Australian exports to China remaining weak, China infant milk formula imports falling 9% year on Year and cost of goods sold continuing to fall with the average price down 22% year on year in the second half of FY23.
• Trading Central has identified a bullish signal on Evolution Mining (ASX:EVN) following the formation of a pattern over a period of 83-days which is roughly the same amount of time the share price may rise from the close of $3.75 to the range of $4.40 to $4.55 according to standard principles of technical analysis.

Wall Street reversed Monday’s rally to trade lower on Tuesday after credit rating agency Moody’s downgraded the credit rating on several banks including M&T Bank and Pinnacle Financial citing deposit risk as the reason for the downgrades. Moody’s also placed Bank of NY Mellon and State Street on review for a downgrade. This caused investor fears of a further banking crisis to resurface thus sparking the sell-off on Tuesday. The Dow Jones fell 0.45% on Tuesday, while the S&P500 lost 0.42% and the tech-heavy Nasdaq declined 0.79%.

And in the European region markets closed lower on Tuesday as investors await the release of significant inflation data out later this week alongside reactions to a shock banking tax announcement out of Italy in the form of a 40% windfall tax on banking profits which dragged down the banking sector on Tuesday. Banks led the losses in the region overnight while healthcare stocks bucked the trend to add 3.2%. The STOXX600 ended down 0.2% on Tuesday, Germany’s DAX fell 1.1%, the French CAC shed 0.69% and, in the UK, the FTSE100 fell 0.36%.

The local market rose just 0.03% on Tuesday as a selloff in consumer staples stocks was offset by strong gains in the healthcare sector, a sector which has been sharply beaten down this year.

We are preparing for the ramp up of earnings season this week which investors have already been particularly responsive to with companies that have reported, both good and bad results, experiencing double digit share price movement on the day of results being released. The US reporting season has proven to be stronger than expected, so we could see a similar outcome of results here in Australia.

James Hardie Industries released first quarter results yesterday that sent the company’s share price soaring 15%. The leading global supplier of fiber cement building products reported record global adjusted EBITDA of US$279.1m, with an adjusted EBITDA margin of 29.2%, net income up 13% and operating cash flow increased 64%.

JHX also provided outlook, which is a big tick for investors, but only for the second quarter of FY24, with the company expecting adjusted net income between US$170-$190m, North American, its biggest market, is expected to produce volumes to be in the range of 740-770 million and CAPEX of US$550m. 

What to watch today:

• Ahead of the local trading session here in Australia the SPI futures are expecting the ASX to open the midweek session down 0.07%.
• On the commodities front this morning, oil is trading 1.05% higher at US$82.8/barrel, gold is down 0.53% at US$1926/ounce and iron ore is down 2.35% at US$104/tonne amid declining demand and robust inventories of the commodity.
• AU$1.00 is buying US$0.65, 93.73 Japanese Yen, 51.19 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has reduced the price target on Smartpay (ASX:SMP) from $2.10 to $1.97 and maintain a buy rating on the payment solutions provider on the back of competitor Block releasing a quarterly update shining light on the payment space. Bell Potter has adjusted forecasts across FY24-FY26 on the grounds of material reductions to the company’s Australian transaction segment revenues on the assumption of slowing Average Revenue Per Unit reflecting an overall slowdown in consumer spending, and softer EBITDA is expected for FY24 before Bell Potter’s assumed margin expansion kicks in. Bell Potter remain positive on Smartpay however have slightly reduced the price target on these grounds.
• And Trading Central has identified a bullish signal on Pilbara Minerals (ASX:PLS) following the formation of a pattern over a period of 57-days which is roughly the same amount of time the share price may rise from the close of $5.32 to the range of $5.95 to $6.10 according to standard principles of technical analysis.

The four day sell-off on Wall St came to an end on Monday as corporate earnings results boosted investor sentiment ahead of another big reporting season week and the release of key inflation data out later this week. The Dow Jones advanced 1.16%, it’s best day in almost 2-months. The S&P 500 added 0.9%, and the tech heavy Nasdaq ended Monday’s session up 0.61%, however was restricted by a 1% drop in Tesla.

Corporate earnings season has kicked off with a bang, with results stronger than expected. Of the 85% of companies that have posted their quarterly results so far 80% have beat Wall St forecasts according to FactSet. 

Over in Europe, markets closed mixed on Monday amid the ongoing release of corporate earnings results and ahead of the release of two key inflation prints later in the week. The STOXX 600 closed 0.1% higher, however the German DAX ended the day marginally lower. In the UK, the FTSE 100 fell 0.13% and the French CAC finished the day off 0.06% higher.

The local market closed 0.22% lower on Monday, weighed down by investors selling out of the healthcare and financials sectors. ResMed continued its sell-off yesterday, with the healthcare company falling a further 4.23% on the back of poor performance for the stock in the US on Friday. Despite this, Goldman Sachs has said while ResMed’s latest update was disappointing on a margins front, performance should improve soon and this dip in the share price presents as a buying opportunity. 

What to watch today:

• The Australian share market is set to open higher this morning with the SPI futures suggesting a rise of 0.4% at the opening bell.
• In terms of economic data, both the Westpac consumer confidence data for August and the NAB business confidence data for July will be released today with the market expecting a decline in both readings.
• On the commodities front this morning,
  • Oil is trading down 0.32% at US$82.56 dollars/barrel as Saudi Arabia has hinted at further production cuts 
  • Gold is trading 0.27% lower at US$1936 dollars/ounce. 
  • And iron ore, trading at yesterday’s reading of US$106.50/tonne.

Trading Ideas:

• Bell Potter maintains a buy rating on Aeris Resources (ASX:AIS) however has significantly reduced the 12-month price target on the copper miner following the release of June quarter results including further deferrals of production at Mt Colin and Jaguar being placed on care and maintenance mode, contributing to higher overall costs and lower production.
• And Trading Central has identified a bearish signal on Platinum Capital (ASX:PMC), following the formation of a pattern over a period of 20-days which is roughly the same amount of time the share price may fall from the close of $1.30 to the range of $1.21-$1.23, according to the standard principles of technical analysis.

Mixed jobs data sparked a sell-off on Wall St on Friday with the key indices closing lower for the session and the week. While the number of jobs added in the month of July fell short of expectations at 187,000, unemployment ticked lower to 3.5% and average hourly wages came in above expectations rising 0.4% for the month and 4.4% annually.

The release of US CPI data will be a key event this week in helping the Fed determine its next rate move following the stronger-than-expected jobs data.

On Friday, the Dow Jones fell 0.43%, the S&P500 shed 0.53% and the tech-heavy Nasdaq dropped 0.36%. For the week the Nasdaq and S&P500 fell over 2% each and the Dow Jones lost 1.1%. On the earnings season front, Amazon rallied 5.5% on Friday after releasing solid second quarter results including a return to double-digit revenue growth and boosted second half guidance. Booking holdings, the parent company of Booking.com, Agoda and other travel companies, rose 7.9% on strong results amid the ongoing surge in travel demand.

Apple also weighed on Wall St on Friday after the tech-giant slid more than 4% following the release of earnings results that included iPhone sales stalling more than expected in the latest quarter.

Over in Europe, markets closed slightly higher on Friday as investors continued digesting corporate earnings results alongside the Bank of England’s rate hike decision. The STOXX-600 rose 0.3% on Friday, Germany’s DAX added 0.37%, the French CAC rose 0.75% and, in the UK, the FTSE100 gained 0.47% on Friday.

Rolls Royce shares rose 6% on Friday after the company reported a strong recovery in profit.

The local market fell in morning trade on Friday on the back of the global sell-off on Thursday before rebounding to close Friday’s session up 0.19%. Healthcare took the biggest hit on Friday as CSL and ResMed weighed on the sector.

Gold miners also lost ground on Friday as the price of the precious commodity trade down over 1% last week. The 2023 favourite technology sector boosted the market into positive territory at the session’s end today with the sector climbing 0.92% at the closing bell.

Trading volumes were also especially light last week so the market was likely down due to investors taking a pause ahead of the ramp up in reporting season locally this week.

What to watch today:

• Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open the first session of the new trading week down 0.15%.
• On the commodities front this morning oil is trading almost half a percent higher at US$83.20/barrel, gold is up 0.15% at US$1945/ounce, iron ore is down 1.84% at US$106.50/tonne and coffee is trading down 2.06% at US$161/pound amid concerns of oversupply.

Trading Ideas:

• Bell Potter has increased the rating on City Chic Collective (ASX:CCX) from a hold to a buy and significantly increased the price target on the plus size fashion company from 42cps to 70cps following the company’s divestment of its Evans business and EMEA inventory which helps reduce the company’s high inventory build that has been dampening performance in recent times. Bell Potter sees the divestment as providing a clearer pathway to profitability for City Chic.
• And Trading Central has identified a bullish signal on South32 (ASX:S32) following the formation of a pattern over a period of 69 days which is roughly the same amount of time the share price may rise from the close of $3.94 to the range of $4.31 to $4.39 according to standard principles of technical analysis.

Reporting season kicked off this week with a small list of key names releasing results, while overseas was possibly the busiest results week in Europe and the US earnings season. Other key events driving markets were the Fitch Ratings downgrade on the US, China’s stimulus policy and Australia’s RBA rate pause. The Aussie share market fell 1.24% this week (Mon-Thu) as the local market took lead from the global market sell-off.
 
In this week's wrap, Grady covers:

• (0:30) China’s stimulus package
•  (1:45) Global large caps releasing results
•  (4:18) Local company results  
•  (4:50) Best performing stocks in the ASX200
•  (5:56) The most traded stocks & ETFs by Bell Direct clients
• (6:29) Three economic news items to watch out for

Wall St closed lower on Thursday amid increasing pressure from rising bond yields, which have been on the rise since the Fitch downgrade earlier this week. The S&P 500 fell for the third straight day, closing the session down 0.25%, while the Dow Jones shed 0.19% and the tech-heavy Nasdaq closed marginally lower, down 0.1%.

US bond yields are trading at 4.18%, close to the highest levels since November 2022. This has had a significant impact on the real estate sector which closed more than 1% lower on Thursday.

After rallying for the most part of the year, it is expected that the US market may slow after both the S&P 500 and tech heavy Nasdaq secured their 5th straight month of gains earlier this week.

Over in Europe, markets in the region closed lower again on Thursday as investors assessed the latest slew of corporate earnings results alongside the Bank of England announcing a 25-basis point rate hike in a bid to tackle the stubbornly high inflation in the region. 

The STOXX600 fell 0.7% with tech leading the losses, closing down by 1.8% as global sentiment remains shaky on the Fitch US downgrade. Oil and gas stocks rallied though after Saudi Arabia said it would extend output cut to 1 million barrels per day. Germany’s DAX closed 0.8% lower, the French CAC lost 0.72% and, in the UK, the FTSE100 fell 0.43%. 

Locally, the Australian market closed 0.58% lower as a sentiment-driven sell-off in technology stocks weighed on the key index, while materials ended the day down 1.06%. The sell-off locally yesterday was driven by global market turbulence which has been the central theme over the last few days following the Fitch downgrade of the US. 

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, extending the theme from global turbulence overnight.
• In terms of economic data, at 11:30am AEST the RBA is set to make a statement on monetary policy.
• On the commodities front this morning,
  • Oil has jumped 2.80%, trading at US$81.61 per barrel. The price has rebounded after both Russia and Saudi Arabia announced an extension in oil output cuts. 
  • Gold rose marginally by 0.01%, however is at its lowest level in the past three weeks with incoming pressure from a strong dollar. 
  • And Iron ore has fallen 1.35% to US$109.50 after a fourth straight contraction in China’s factory activity. 

Trading Ideas:

• Bell Potter maintains a buy rating on IVE Group (ASX:IGL) as a lack of trading update suggests the FY23 guidance is set to be met or exceeded. Trading currently at $2.31, Bell potter has a 12-month price target on the company of $3.00, which suggests a 29.9% share price growth in a year.
• And trading central has identified a bearish signal on Ingenia Communities Group (ASX:INA), indicating that the stock price may fall from the close of $4.05 to the range of $3.35-$3.50 over a period of 18 days, according to standard principles of technical analysis.

Fitch Ratings downgrading the US credit rating to AA+ from AAA sparked a panic sell off on Wall St overnight with the Dow Jones closing the day down almost 1%, while the S&P500 lost 1.38% and the tech heavy Nasdaq tumbled 2.17%. The Nasdaq has its worst day since February as the Fitch ratings cut on the long-term foreign currency issuer default rating on the U.S. citing “expected fiscal deterioration over the next three years” as the reason behind the move. The last time the US was downgraded was in 2011 by Standard’s and Poor. Economists and analysts alike are expecting the risk-driven sell-off to be short lived and the impact of the downgrade to be temporary.

Norwegian Cruise Line shares fell 3% on Wednesday, a day after the company issued weaker-than-expected guidance for the third quarter. SolarEdge Technologies tanked 19% after the company reported revenue of US$991m which fell short of analysts’ estimates of US$992m, and the company also issued weaker-than-expected guidance for Q3 revenue.

Over in Europe, markets closed lower across the region as investors digested the U.S. credit rating downgrade alongside the release of key corporate results. The STOXX600 fell 1.35%, Germany’s DAX fell 1.36%, the French CAC lost 1.26%, and, in the UK, the FTSE100 fell 1.36%.

Siemens Healthcare fell just under 7% on Wednesday after the company reported a third quarter profit decline.

The local index closed 1.29% lower yesterday with every sector ending the midweek session in the red on the back of a sell-off in New York on Tuesday. Utilities stocks took the biggest hit, with the sector closing down 2.19% while REIT stocks gave up all of Tuesday’s gains to close down just shy of 2%.

The big iron ore miners also took a hit yesterday with BHP (ASX:BHP), Rio (ASX:RIO) and FMG (ASX:FMG) falling 1.1%, 0.9% and 2% respectively on a decline in the price of iron ore to US$111/tonne. Pilbara Minerals rallied yesterday after the lithium miner announced an update on the final investment decision for its mid-stream demonstration plant with the board granting approval for construction of the plant to produce value added lithium product at Pilgangoora. The plant will cost $105m, $20m of which will be funded by an Australian government grant.

What to watch today:

• The sell-off on Wall St is likely to impact the local market today with the SPI futures anticipating the ASX to open Thursday’s session down 0.79%.
• On the commodities front this morning oil is trading 2.02% lower at US$79.64/barrel, uranium is up 0.18% at US$56.24/pound gold is down almost half a percent at US$1935/ounce and iron ore is flat at US$111/tonne.
• AU$1.00 is buying US$0.65, 93.72 Japanese Yen, 51.52 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased the price target on PSC Insurance (ASX:PSI) from $5.86 to $6.41 and maintain a buy rating on the diversified insurance company following the release of the company’s trading update outlining that it expects it expects to deliver underlying EBITDA of $111m for FY23 subject to audit and signoff, which is well above the previously guided range.
• And Bell Potter has decreased the 12-month price target on Calix (ASX:CXL) from $9 to $8.70 and maintain a speculative buy rating on the emerging environmental technology company following the release Pilbara Minerals’ update on the final investment decision for the mid-stream demonstration plant which signifies a key de-risking milestone as the plant is a joint venture between PLS and Calix. The FID reflects a satisfactory level of technical and economic feasibility and lithium phosphate marketing completed to date to advance the project into construction.

US equities closed mixed on Tuesday as investors digested corporate earnings results against the release of key economic data. The S&P500 fell 0.27%, and the tech-heavy Nasdaq lost 0.43% but the Dow Jones reversed earlier losses to close up 0.2%.

The key economic data released in the US again came in favourable showing signs of resilience in the US economy against cooling inflation to support the idea that a soft landing is expected over a recession. JOLTs Job Openings data for June showed the economy added 9.582m jobs over the month, down slightly from May’s reading of 9.616m and US PMI manufacturing for July came in at 46.4 points, a slight uptick from the 46 points recorded in June.

In Europe, markets closed lower on Tuesday as investors digested corporate earnings results during this busy week of corporate results being released. The STOXX600 fell 0.88%, Germany’s DAX lost 1.26%, the French CAC shed 1.22% and, in the UK, the FTSE100 shed 0.43%. Eurozone manufacturing activity also fell in July at the fastest pace since the start of the COVID-19 pandemic, while a report on eurozone inflation showed inflation eased further in July in the region, gaining just 1.9% through the month according to Eikon data.

Locally yesterday, the ASX200 rose 0.54% as investors and Australians alike breathed a deep sigh of relief as the RBA announced a hold on rate hikes for a second consecutive month. Every sector closed in the green yesterday but the sectors that benefit from lower interest rates felt the biggest rally, led by the tech sector jumping almost 1.14%, while consumer discretionary and real estate stocks rose 0.77% and 0.43% respectively.

The RBA has held the nation’s cash rate at 4.1% for the month ahead which sparked a sharp rally on the local index in afternoon trade. RBA governor Phil Lowe said the pause ‘will provide further time to assess the impact of the increase in interest rates to date and the economic outlook’. In a similar note to last month though, Mr Lowe also warned further interest rate hikes may be required to get inflation to the target range of 2-3%, from the current annual rate of 6%. 

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are expecting the ASX to open 0.53% lower for the midweek session.
• On the commodities front this morning, oil is trading down half a percent at US$81.39/barrel, gold is down almost 1% at US$1944/ounce and iron ore is down 3.06% at US$111/tonne.
• All eyes have been on the Chinese government over the last few weeks amid speculation further stimulus policy will be announced. This came on Monday in the form of China releasing a policy document containing 20 measures to restore and boost consumption including increasing consumer loans to encourage car purchases and building more affordable homes for young people.
• AU$1.00 is buying 66 US cents, 94.76 Japanese Yen, 51.94 British Pence and NZ$1.08. 

Trading Ideas:

• Bell Potter has increased the price target on Gold Road Resources (ASX:GOR) from $1.95 to $2.05 and maintain a buy rating on the gold miner and producer following the release of the company’s second quarter CY23 report including 76,000 ounces of gold produced which topped Bell Potter’s expectations and all-in-sustaining-costs came in at $1620/ounce which fell below Bell Potter’s expected $1885/ounce. The company also upgraded guidance for the calendar year and Gold Road is setting up for a big CY24.
• And Trading Central has identified a bullish signal on Cedar Woods Properties (ASX:CWP) following the formation of a pattern over a period of 397-days which is roughly the same amount of time the share price may rise from the close of $5.19 to the range of $6.80 to $7.20 according to standard principles of technical analysis.