Between the Bells

Wall St ended a strong month with a rise in stocks on Monday ahead of a busy earnings week. The Dow Jones finished the trading day up 0.28%, the S&P 500 rose 0.15% and the tech heavy Nasdaq added 0.21%. 

The S&P 500 had 5 months of consecutive growth for the first time since August 2021, finishing the month up 3.1%. The Dow made a 13-day advance during July, it’s longest streak of gains going back to 1987.

In recent weeks, investors have been growing more optimistic about a soft landing in the US on the back of favorable economic data and resilience in both the job market and on a GDP front. Earnings season has also proven to show better than expected results thus far.

Thursday is looking to be a big day of earnings season news with both Amazon and Apple’s set to release results, which could “set the tone” for the remainder of the month.

What to watch today:

• The Australian share market is set to open higher, with the SPI futures suggesting a 0.34% rise at the open this morning.
• In terms of economic data, the RBA interest rate decision will be announced at 2:30pm today with a consensus of 4.35% or 25 basis points, up from the previous 4.1%.
• Looking now at commodities,
  • Crude oil has jumped 1.43%, trading at US$81.74 a barrel after a tightening global supply and an increased demand increasing prices. 
  • The price of gold is slightly higher, up 0.31% trading at US$1,965.34 an ounce.
  • And iron ore has finished the day 0.87% lower as the idea of Chinese economy stabilization slows.
• AU$1.00 is buying US$0.68, 95.58 Japanese Yen, 51.63 British Pence and NZ$1.09. 

Trading Ideas:

• Bell Potter has slightly decreased the price target on AMA Group (ASX:AMA) from 28 cents per share to 26 cents per share and maintain a buy rating on Australia’s largest accident repair group following the release of the company’s fourth quarter update including underlying cashflows continuing to improve and closing cash up $8.4m to $28.9m as at 30th June. The reason for the 12-month price target decrease is due to increased uncertainty around the company’s capital SMART repricing.
• And trading central has identified a bullish signal on Infratil Ltd (ASX:IFT), following the formation of a pattern over a period of 15-days which is roughly the same amount of time the share price may rise from the close of $9.36 to the range of $9.70-$9.85 according to the standard principles of technical analysis.

Wall Street closed higher on Friday and notched out gains across the key indices for the week as investors welcomed favourable inflation data in the form of the personal consumption expenditures price index. The data is a key driver of the Fed’s interest rate decisions and gained just 0.2% month-on-month, the same reading as the prior month and well below the anticipated 4.2% rise.

Stronger than expected GDP in the US and a better-than-expected earnings season so far in the US has analysts’ believing markets could jump to new highs. On Friday, the Dow Jones rose 0.50%, the S&P500 added 0.99% and the Nasdaq lifted 1.9%.

Proctor & Gamble shares rose 3% on Friday after the company posted earnings and revenue that beat analysts’ expectations for the most recent quarter, while Intel jumped 6.6% on Friday as investors welcomed the tech company’s return to profitability.

Over in Europe, markets closed mixed as Germany’s economic growth stagnated in the second quarter indicating the economy is stuck between stagflation and a recession. The STOXX600 fell 0.2% on Friday while Germany’s DAX rose 0.4%, the French CAC added 0.15% and, in the UK, the FTSE100 lifted 0.02%.

The bank of Japan maintained its negative interest rate on Friday but announced it would allow “greater flexibility” in its targeted range for 10-year Japanese government bond yields which some analysts are taking as a sign of potential policy shift to come. The strict yield curve policy will now allow + and - 0.5% movements and the BoJ will now offer to purchase 10-year JGBs at 1% through fixed rate operations.

Locally on Friday the key index fell 0.7% driven by the US sell-off on Thursday, however for the week the ASX200 posted a 1.23% gain. The REIT sector took the biggest hit locally on Friday while consumer discretionary stocks also fell 0.88% following the release of retail sales data for June. The data showed the full impact the RBA interest rate hikes are having on consumer spend with the reading coming in at a decline of 0.8% for the month of June, down from a 0.8% rise in May and below what consensus was expecting of a flat reading on the prior month.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the local index to open the first trading session of the new week up 0.26%.
• On the commodities front this morning, oil is trading 0.11% lower at US$80.49/barrel, gold is up 0.76% at US$1959.85/ounce, iron ore is down 0.87% at US$114.50/tonne.
• AU$1.00 is buying US$0.67, 93.77 Japanese Yen, 51.63 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased the 12-month price target on Capricorn Metals (ASX:CMM) to $5.19 from $4.95 and maintain a buy rating on the gold exploration and development company following the release of the company’s June quarter update including Capricorn Metals producing 120,014 ounces of gold at its Karlawinda Gold Project over FY23 at all-in-sustaining-costs of $1208/ounce which fell slightly short of production expectations by Bell Potter analysts’ however the AISC were below BP expectations. The company also boasts some of the lowest costs in the sector and consistently generates strong cash margins.
• And Trading Central has identified a bearish signal on Regis Resources (ASX:RRL) following the formation of a pattern over a period of 72-days which is roughly the same amount of time the share price may fall from the close of $1.71 to the range of $1.32 to $1.42 according to standard principles of technical analysis.

The release of economic data around the world was the key driver of market movements this week in addition to speculation around China’s support policy announcement and investors responding to earnings season results. The Aussie share market rose 1.94% this week (Mon-Thu) with every sector posting a modest gain led by the Communication Services sector jumping 3.46%, while energy added 3.42% and REIT stocks felt some much-needed relief, lifting 3.32%.

In this week's wrap, Grady covers:

• (0:10) The release of economic data around the world
• (0:22) Two key reasons big miners stole the show locally
• (1:31) Updates on Rio Tinto (ASX:RIO) & Fortescue Metals Group (ASX:FMG)
• (4:33) Best performing stocks in the ASX200
• (5:39) The most traded stocks & ETFs by Bell Direct clients
• (6:14) Three economic news items to watch out for

Wall St closed lower on Thursday following the Fed’s interest rate hike of 25-basis points, and US GDP data coming in at 2.4% growth for Q2 which beat economists’ expectations. The strength in US economic growth is in-line with the Fed’s expectations for inflation in the world’s largest economy to remain sticky for a little while to come. The Dow Jones snapped its longest rally since 1987 closing down 0.67%, the S&P500 fell 0.64% and the tech-heavy Nasdaq dropped 0.55% on Thursday.

Social media giant Meta jumped 4.4% after reporting a jump in second quarter advertising revenue and topping expectations for quarterly results. Meanwhile, Southwest airlines posted a dip in quarterly profit which sent shares in the carrier down 8.47%.

Over in Europe, the European Central Bank hiked the region’s cash rate by 25-basis points overnight to 3.75%, with central bank officials noting that while inflation in the region is falling, the hike is to ensure inflation continues to fall. Stocks in the region closed higher on Thursday on the outlook for rates to pause as early as the September ECB meeting. The STOXX600 rose 1.4%, Germany’s DAX rose 1.7%, the French CAC added 2.05%, and, in the UK, the FTSE100 lifted 0.2%.

Locally yesterday, the ASX200 closed 0.73% higher buoyed by a 3.33% rise for the REIT sector as investor appetite for real estate stocks rose on optimism that the Fed has now finished its monetary tightening cycle. The energy and materials sectors were the only two sectors to close Thursday’s session in the red.

What to watch today: 

• Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open the last trading session of the week down 0.59% on the back of the US sell-off overnight.
• On the commodities front this morning, oil is trading 1.1% higher at 79.65 US dollars a barrel, gold is trading 1.36% lower at 1945 US dollars an ounce, and iron ore continues its rally, trading 0.86% higher at 117 US dollars and 50 cents a tonne.
• AU$1.00 is buying US$0.67, 93.54 Japanese Yen, 52.69 British Pence and NZ$1.08. 

Trading Ideas:

• Bell Potter has downgraded the rating on Paragon Care (ASX:PGC)  from a buy to a hold and significantly decreased the 12-month price target from 45 cents per share to 26 cents per share following the release of a trading update out of the medical equipment, devices and consumables company. The update outlined the EBITDA growth expectation at around 30% which is a miss of Bell Potter expectations, while the company also announced the closure of the Lovell manufacturing business, which entail a $3m one off charge in FY23 and the company ends FY23 with net debt of $64m. Bell Potter’s analyst sees the growth outlook as opaque and appears dependent on revenue growth in Asia, which is the primary reason for the downgrade to a hold and decreased price target.
• And Trading Central has identified a bullish signal on Stockland Corp. (ASX:SGP) following the formation of a pattern over a period of 26-days which is roughly the same amount of time the share price may rise from the close of $4.27 to the range of $4.48 to $4.54 according to standard principles of technical analysis.

Wall Street closed mixed on Wednesday with the Dow Jones closing higher for a 13th straight session, adding 0.23%, while the Nasdaq and S&P500 ended the session in the red, down 0.02% and 0.12% respectively. Investors digested the Federal Reserve’s announcement of a 25-basis point rate hike, taking the US cash rate to 5.25%-5.50%, the highest level in more than 22-years. Markets slipped in afternoon trade following the rate hike and comments out of fed chair Jerome Powell that another rate hike may be required in September pending the economic data readings over the coming months.

Google parent company, Alphabet, jumped 5.8% on Wednesday as cloud revenue growth boosted the company to report a better-than-expected quarter. Aircraft manufacturer Boeing also lifted 8.7% on Wednesday after also reporting a second-quarter beat on the back of increased commercial aircraft deliveries.

Over in Europe, markets closed lower in the region following the announcement of the Fed’s rate hike in the US in addition to the release of corporate earnings results in the region. The STOXX600 fell 0.6%, Germany’s DAX lost 0.5%, the French CAC fell 1.35%, and, in the UK, the FTSE100 shed 0.2%. Deutsche Bank shares rose 1.36% on Wednesday after the big bank reported a net profit of 763 million euros which beat expectations despite being a 27% decline year-on-year.

It’s a big week for central bank rate decisions with the Bank of Japan rate decision out on Friday and the European Central Bank decision announced on Thursday European time.

In Australia, the ASX rose 0.85% on Wednesday on the release of Australia’s CPI data for Q2 coming in at a quarterly rise of just 0.8% to an annual rate of 6%, which is well below the annual Q1 rate of 7% and below the 6.2% economists’ were expecting. The inflation reading boosted market sentiment as investors see the falling inflation as a sign of rate pauses on the horizon out of the RBA. While 6% in still above the RBA’s target range of 2-3%, the 1% decline in the annual inflation rate over the quarter is a strong sign the RBA’s rate hikes are working to cool inflation.

What to watch today:

• Ahead of the local trading session here in Australia the SPI futures are anticipating the local index to open just 0.01% lower following the Fed’s interest rate decision causing global markets to sell-off overnight.
• On the commodities front this morning, oil is trading 1% lower at US$78.84/barrel, gold is up 0.36% at US$1971.61/ounce, and iron ore is up 0.87% at US$116.50/tonne.
• AU$1.00 is buying US$0.68, 94.78 Japanese Yen, 52.69 British pence and NZ$1.09.

Trading Ideas:

• Bell Potter has increased the 12-month price target on Catapult Group (ASX:CAT) from $1.20 to $1.35 per share and maintain a buy rating on the leading global provider of elite athlete wearable tracking technology and software provider, following the release of the company’s first quarter update. Over the quarter, Catapult reported revenue growth over 20%, annual contract value rose over 20% year-on-year on a constant currency basis, and the company hopes to achieve Free Cash Flow positivity in FY24.
• And Bell Potter has slightly decreased the 12-month price target on Develop Global (ASX:DVP) from $3.90 to $3.80 and maintain a buy rating on the hybrid model mining company following an update including Develop withdrawing from the Kathleen Valley underground mining contract tender process due to expanded scope of the contract, whilst also noting the forthcoming restart of the Woodlawn operations coinciding with peak revenue generation from the Bellevue mining contract, underpinning a significant ramp up in earnings and future cash flow generation.

US equities closed higher on Tuesday with the Dow Jones posting a positive close for a 12th straight session, the longest winning streak in 6-years. The tech-heavy Nasdaq and S&P500 also closed higher as investors respond to the latest earnings results and await the key interest rate decision out of the Federal Reserve tomorrow.

In Europe, markets also mostly rallied on Tuesday as investors in the region also responded to earnings results from big names including Unilever which beat analysts’ expectations to report a 7.9% rise in underlying Q2 sales. The European Central Bank also meets on Thursday where it is widely expected that a 25-basis point rate hike will be announced. The STOXX600 rose 0.47% on Tuesday, buoyed by mining stocks rising on the back of new Chinese stimulus measures, Germany’s DAX added 0.13%, the French CAC fell 0.16% and, in the UK, the FTSE100 added 0.17%.

China’s leaders pledged on Monday to step up the government’s policy support for the extremely weak post-COVID recovery in the region, with a focus on boosting domestic demand and aiding recovery in the building sector. Looking at China’s Q2 growth rate data, the world’s second largest economy grew only 0.8% QoQ vs 2.2% growth in Q1, in a sign economic recovery is stalling. 

The local market rallied almost half a percent yesterday boosted by the iron ore miners jumping on the back of speculation that China will introduce further stimulus policy to reignite the nation’s recovery post-pandemic, causing a rise in the price of iron ore today. BHP added 3.84% yesterday, Fortescue rallied 4.55% and Rio Tinto jumped 3.4%.

Technology stocks weighed on the market yesterday with the sector closing down 0.25% on the back of the Nasdaq-100’s special rebalancing which is aimed at reducing the concentration of heavyweight companies that account for nearly half of the index’s weight. Stocks involved in the rebalancing include Microsoft, Apple and Tesla which account for 43.8% of the index weight coming down to 38.5% as a result of the rebalancing.

What to watch today:

• Ahead of local trading session here is Australia, the SPI futures are anticipating the ASX to open the midweek trading session up 0.26%.
• Taking a look at commodities, the price of wheat hit a 5-month high yesterday after Russia launched a drone attack at a port in the Ukraine, destroying a grain hangar storing wheat grain. Oil is up 0.88% at US$79.43/barrel, gold is up almost half a percent at US$1963/ounce, and iron ore is down 0.43% at US$115.50/tonne.
• Locally today, Australia’s inflation data for Q2 is out just before midday which may cause some market movements pending on how the data reads. If the reading comes in, in-line with consensus expectations of a decline in the annual inflation rate to 6.2%, we could see the market rally in anticipation of rate pauses to come, however if inflation remains around 7% or higher than expected.
• AU$1.00 is buying US$0.68, 95.68 Japanese Yen, 52.36 British Pence and NZ1.09.
  
  

Trading Ideas:

• Bell Potter has increased the price target on Mader Group (ASX:MAD) from $5.10 to $6.10 and maintain a hold rating on the leading provider of specialised labour services, following the release of the company’s Q4 results including a 12th consecutive quarter of revenue growth, underpinned by growth across Australian operations and reflecting robust demand for Mader’s core mechanical services and new vertical service offerings, as well as North American penetration and growth in Canada.
• And Trading Central has identified a bullish signal on BHP Group (ASX:BHP) following the formation of a pattern over a period of 59-days which is roughly the same amount of time the share price may rise from the close of $45.82 to the range of $50-51 according to standard principles of technical analysis.

US equities had a positive run overnight, with all three major benchmarks closing the session in the green, as a busy week of earnings season begins and as investors await the Fed’s next policy decision.

The Dow Jones pisted its 11th straight day of gains, advancing 0.52%. The S&P500 also gained as energy stocks led the index, with the sector up almost % after gas and oil futures approached a three-month high. And the tech-heavy Nasdaq added 0.2%, as investors await the earnings report from some big tech names. Companies set to report this week include Alphabet, Microsoft, and Meta.

In Europe, Germany’s DAX, the FTSE 100 and the STOXX 600 all closed in the green, while France’s CAC was the only benchmarks to close lower. It’s a busy week ahead for central bank meetings in Europe, as well as corporate earnings and the inconclusive results of the Spanish election, which were held on Sunday.

What to watch today:

• Following Wall Street overnight, the SPI futures are suggesting that our local market is set to rise 0.56% at the open this morning.
• There is no local economic data out today, markets are waiting for the inflation rate announcement out tomorrow.
• Stocks to watch today include gold miner Newcrest Mining (ASX:NCM), which is set to release its quarterly report today. And Blackmores (ASX:BKL) which is set to go ex-dividend today. So remember that this often sees the share price fall, as investors take their profits.
• Looking now at commodities,
  • Crude oil is jumped 2.4% and is current trading at around US$78.91 per barrel. The price is at a three-month high amid an outlook for tighter global supply, as well as an increase in Chinese demand. So keep watch of energy producers today including Woodside Energy (ASX:WDS), Santos (ASX:STO) or Ampol (ASX:ALD).
  • The price of gold is slightly lower as investors await the rate decisions from central banks this week.
  • And iron ore is hovering around a three-month high as investors assess the likelihood that the Chinese government will provide stimulus to boost resource demand and the country’s economic outlook.

Trading Ideas:

• Bell Potter maintains its BUY rating on Life360 (ASX:360) a market leading family app with driving safety and location sharing features. 360 is scheduled to report its second quarter results mid-August, and Bell Potter are expecting solid results. However, there are areas they’re not expecting strong results, with factors in consideration such as price rises for Android users in the US. They have increased their price target from $9.00 to $9.25, and at 360’s current share price of $7.82, this implies 18.3% share price growth in a year.
• And Trading Central have identified a bullish of signal on Whitehaven Coal (ASX:WHC), indicating that the stock price may rise from the close of $7.23 to the range of $8.50 to $8.80 over 38 days according to the standard principles of technical analysis.

It was a mixed session in the US on Friday as investors digested the latest slew of earnings results and the Dow Jones extended its rally to 10 sessions, the longest for the key index since 2017. American Express shares slipped around 4% on Friday after the company reported second quarter revenue of US$15.05bn which fell short of analysts’ expectations at US$15.48bn. 

Corporate earnings so far have been mixed with 75% of S&P500 companies that have reported, exceeding analysts expectations according to FactSet. For the week, the Dow Jones rose 2.08%, the S&P500 added 0.7% and the tech-heavy Nasdaq fell 0.57% over the 5 trading days. 

Over in Europe on Friday, a results-driven rally fuelled markets to close higher in the region as investors responded to key corporate earnings results released. UK retail sales data for June was released on Friday coming in at a rise of 0.7% month-on-month, in a sign UK consumer spend remains resilient despite rising inflation and interest rates. Swiss miner Glencore released results on Friday including profits around US$4bn as the commodity market continues to normalise after a particularly strong 2022. 

Europe’s earnings season ramps up into full swing this week with key Pharmaceuticals, banks and automotive companies releasing results. On Friday the STOXX600 rose 0.3%, Germany’s DAX fell 0.17%, the French CAC rose 0.65%, and, in the UK, the FTSE100 rose 0.23%.

Locally on Friday, the ASX200 closed the last trading session of the week down 0.15%, weighed down by a 2.73% sell-off in the technology sector while energy stocks offset some of the heavy losses, closing up 1.3% at the session’s end. The local tech sell-off followed a slide in the Nasdaq on Wall St on the back of a disappointing revenue forecast out of Netflix and Tesla reporting a drop in tis gross margins.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open the new trading week up 0.4%.
• Looking at commodities this morning, oil is trading almost half a percent lower at US$76.75/barrel, coal is up 0.76% at US$133/tonne, gold is up 0.04% at US$1962.57/ounce and iron ore is down 0.85% at US$116/tonne. 
• AU$1.00 is buying US$0.67, 95.42 Japanese Yen, 52.36 British Pence and NZ$1.09.
• This week we may see some market movements following the release of key economic data including Australia’s annual inflation rate data for Q2 out on Wednesday with consensus expecting a fall from 7% in Q1 to 6.2% in Q2. 
• Overseas, the US interest rate decision is out on Thursday with the expectation of the Fed’s to announce a 25-basis point rate hike, which will take the cash rate in the US to 5.5%. 

Trading Ideas:

• Bell Potter has decreased the price target on Coronado Global Resources (ASX:CRN) from $2.15/share to $2/share and maintain a buy rating on the coal miner and producer following the release of the June trading update including quarterly saleable coal production of 4.5 million tonnes and sales volume of 4 million tonnes. This was an improvement on the prior weather impacted quarter however revenue fell 5% quarter-on-quarter driven by lower index and realised prices. Net cash for the company also fell from US$256m to US$192m over the quarter, and Bell Potter expects a lift in second half production and CAPEX which are the factors contributing to the price target decline to $2/share.
• And Trading Central has identified a bullish signal on GrainCorp (ASX:GNC) following the formation of a pattern over a period of 180-days which is roughly the same amount of time the share price may rise from the close of $8.12 to the range of $9.60 to $10 according to standard principles of technical analysis. 

Incorporating environmental, social and governance (ESG) factors into investment decision-making has been a growing interest for investors and companies. An ESG criteria evaluates a company’s sustainability and ethical impact and has had a notable impact on the share market by navigating investor preferences and capital allocation.

In this week’s wrap, Grady covers:

• (0:10) The importance of ESG goals for corporations
• (0:51) Companies kicking goals on the ESG front
• (2:21) The beginning of earnings season
• (3:48) Best performing stocks in the ASX200
• (5:04) The most traded stocks & ETFs by Bell Direct clients
• (5:38) Three economic news items to watch out for

US equities closed mixed in New York overnight. The Dow Jones gained more than 100 points or 0.47% to notch its first 9-day rally since 2017. A rally came after better-than-expected results from Johnson and Johnson. However, the broader market suffered after post-earnings declines in trader favourites Netflix and Tesla. The S&P500 slipped 0.7%, while the Nasdaq tumbled more than 2%. 

What to watch today:

• The SPI futures are suggesting that our local market will rise 0.08% at the open this morning. 
• In commodities, 
  • Crude oil is up 0.6%, approaching US$76 per barrel, after facing heightened volatility in recent sessions, as investors continued to weigh outlook for the oil market for the rest of this year. 
  • Gold is hovering at its strongest levels in two months as easing US inflation raised hopes that the Federal Reserve is close to the end of its current monetary policy tightening cycle. So keep watch of ASX gold miners today. 
  • And iron ore is currently trading flat, hovering close to a three-month high at US$116.50 per tonne, as markets continued to weigh on Chinese resource demand. So also keep watch of iron ore miners, including Grange Resources (ASX:GRR), Mineral Resources (ASX:MIN) and Fortescue Metals (ASX:FMG). 
• Companies to watch today include Atlas Arteria Group (ASX:ALX) and Coronado Global Resources (ASX:CRN), both set to release quarterly reports today. 

Trading Ideas:

• Bell Potter maintains its Speculative Buy rating on Pentanet (ASX:5GG). The telecommunications carrier and cloud gaming provider released a Q4 update with FY23 revenue and gross profit growth in line with Bell Potters expectations. They have upgraded their valuation to $0.14 on improving cost performance. At 5GG’s current share price of $0.09, this implies 42.9% share price growth in a year. 
• And Bell Potter also maintains a Buy rating on Select Harvest (ASX:SHV) and maintain their $5.50 price target, which implies 31% share price growth in a year.