Between the Bells

It was a positive run in New York overnight, with all three major benchmarks closing in the green, as the corporate earnings season continued. The Dow Jones registered its eighth straight day of gains, its longest winning streak since September 2019. 

Goldman Sachs reported in the US, announcing a miss on profit and a beat on revenue, while Netflix, Tesla, IBM, and United Airlines reported after the close. Netflix shares tumbled after reporting quarterly results, saying it was too early to assess the effects of its crackdown on its password sharing and revenue from the ad-supported offering.  Tesla shares fluctuated near the flatline after reporting record-high quarterly revenue, while United Airlines jumped after revenue topped analysts’ expectations. 

What to watch today:

• Our local market is set to open higher, with the SPI futures suggesting a slight rise of 0.03%. 
• Ahead of reporting season, that kicks off every soon, some companies are releasing their quarterly results, before their full year results are announced in August. Keep watch of the following quarterly reports out today, including BHP Group (ASX:BHP), Alumina (ASX:AWC), Evolution Mining (ASX:EVN) and Santos (ASX:STO). Also today, companies announcing their full year results are Zip Co (ASX:ZIP) and Telix Pharmaceuticals (ASX:TLX). And Bell Potter have updated their report on TLX – so more on that a little later. 
• In economic news, the unemployment rate for June will be announced today at 11:30am AEST, expected to remain unchanged a 3.6%. 
• And looking at commodities now, 
  • Crude oil is trading at around US$75 per barrel, as investors weigh demand concerns, China’s announcement to support economic growth, as well as signs of tightening global oil supplies. 
  • Gold is lower, hovering near its strongest levels in two months, amid weakness in the US dollar. 
  • While iron ore is up 0.9%, trading at US$116.50 per barrel, hovering close to the three-month high. Iron ore markets continue to weigh on Chinese resource demand as the likelihood of government stimulus for the construction industry. 

Trading Ideas:

• Bell Potter maintains a Buy rating on Telix Pharmaceuticals (ASX:TLX). The group specialises in the development and commercialisation of radiopharmaceuticals for imaging and treatment of certain cancers. They reported Q2 cash flows with revenue growth of 20.6% compared to the previous quarter, in line with Bell Potter’s expectations. FY23 EBITDA is lowered by approximately $14 million (down 13%), as Bell Potter reduce their gross margin assumption to 64%. The price target remains unchanged at $14.00, and at TLX’s current share price of $12.16, this implies 15.1% share price growth in a year. 
• And Trading Central have identified a bullish signal in oOh Media (ASX:OML), indicating that the stock price may rise from the close of $1.33 to the range of $1.45 to $1.49 over 38 days, according to the standard principles of technical analysis. 

US equities rallied on Tuesday with the Dow Jones closing higher for a 7th straight session, on the back of stronger-than-expected earnings results. Bank of America shares rose 4.2% after it reported earnings above expectations for the second quarter thanks to higher interest rates, while Morgan Stanley added 6.2% after a beat on both revenue and adjusted earnings per share. The Dow Jones closed up 1.06%, the S&P500 added 0.71% and the tech-heavy Nasdaq ended Tuesday’s session up 0.76%.

In Europe overnight, markets rallied as investors in the region assess earnings results out of both local and US corporations. 

The local share market fell 0.2% yesterday as investor sentiment was dampened by the release of the RBA’s latest meeting minutes whereby the prospect of more rate rises was outlined, if inflation in Australia doesn’t fall to the target range. This naturally caused investors to sell out of REIT stocks yesterday as rising interest rates devalues the properties owned by REIT companies and raises the costs associated with running the REIT assets.

Retailers took a big hit again yesterday as investor fears of rate hikes hit the consumer discretionary sector, which traditionally feels the full brunt of interest rate hikes in the form of higher costs and lowered demand. The big four banks all rallied yesterday though which offset some of the heavy losses for consumer discretionary and mining stocks.

Shares in manufacturing company Ansell tanked over 14% on Tuesday as investors responded to the company’s trading update outlining guidance for both FY23 and FY24 and the outlook for higher costs in FY24. The company’s guidance outlined the expectation for Industrial GBU sales for FY23 to have fallen over $12.5m from FY22, while organic growth was achieved in both Mechanical and Chemical divisions. Healthcare GBU sales were also down over $200m from FY22.

China’s GDP for Q2 out on Monday came in at growth of 6.3% for the quarter which fell short of economists’ expectations and provided a further sign of the weak post-pandemic recovery out of the world’s second largest economy.

What to watch today: 

• Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open 0.54% higher following the global results-driven rally overnight.
• On the commodities front this morning, oil has rebounded from lows earlier in the week to trade 2.06% higher at US$75.68/barrel, gold is up 1.13% at US$1976.76/ounce and iron ore is down 1.28% at US$115.50/tonne.
• On the economic calendar today, the annual UK’s inflation rate data for June is out this afternoon with the market expecting a slight decrease to 8.2% from 8.7% in May.
• AU$1.00 is buying US$0.68, 94.58 Japanese Yen, 52.12 British Pence and NZ$1.08. 

Trading Ideas:

• Bell Potter has increased the price target on Cyclopharm (ASX:CYC) and maintain a buy rating on the healthcare company following the release of a trading update outlining revenues of $15.3m for the first half of FY23 comprising around $7.5m in Technegas revenues and the remaining $7.8m from 3rd party distribution sales. Cyclopharm is also on watch in the lead up to the FDA inspection of the Kingsgrove manufacturing facility ahead of the FDA approval decision expected on 29th September.
• And Trading Central has identified a bearish signal on Dicker Data (ASX:DDR) following the formation of a pattern over a period of 90-days which is roughly the same amount of time the share price may fall from the close of $7.96 to the range of $6.60 to $6.90 according to standard principles of technical analysis.

US equities closed higher on Monday as investor sentiment remains boosted by favourable inflation data released last week alongside some strong second quarter results released at the start of earnings season so far.

The Dow Jones closed higher for a 6th straight session, adding 0.22% at the closing bell on Monday, while the S&P500 rose 0.39% and the tech-heavy Nasdaq added 0.93% boosted by Apple and Tesla rising 1.7% and 3.2% respectively.

While Wall St is expecting a gloomy reporting season, the risk of recession is easing as predicted by Goldman Sachs and a number of economists given recent data out in the US reinforced confidence that the Fed’s aggressive rate hikes will be able to cool inflation without plunging the US into a recession.

Over in Europe, markets closed lower on Monday following the release of China’s GDP data coming in at growth of 6.3% for Q2 which fell short of economists’ expectations and provides a further sign of the weak post-pandemic recovery out of the world’s second largest economy. Earnings season in Europe also ramps up this week with Novartis and Ocado releasing results this week. The STOXX600 fell 0.6% on Monday while Germany’s DAX fell 0.23%, the French CAC lost 1.12% and, in the UK, the FTSE100 fell 0.38%.

Locally yesterday the ASX started the week in negative territory, down 0.06% at the closing bell, weighed down by a sharp selloff in energy stocks, which was slightly offset by a 0.88% rise for the technology sector. Energy stocks were likely sold off amid China’s GDP data coming in weaker than expected which contributed to a 1.75% decline in the price of oil to trade at US$74.10/barrel.

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 down 0.28%.
• Oil remains at US$74.10/barrel this morning, coal is up 2.85% at US$131.65/tonne, gold is up just 0.01% at US$1955/ounce, and iron ore is up 4% at US$117/tonne.
• On the economic calendar today, we may see the local markets move following the release of the RBA’s meeting minutes this morning pending how investors interpret the outlook for coming months of rate decisions.
• US retail sales data for June is also out this evening, with consensus expecting a 0.5% rise for the month which would provide another sign that the US economy remains resilient despite rising interest rates.
• AU$1.00 is buying US$0.68, 94.56 Japanese Yen, 52.10 British Pence and NZ$1.08. 

Trading Ideas:

• Bell Potter has increased the price target on Neuren (ASX:NEU) from $16.50 to $17 and maintain a buy rating on the pharmaceuticals company following the release of Neuren’s US partner, Acadia Pharmaceuticals Q2 sales of Daybue, which is Neuren’s Trofinetide drug in the US. The report came in at sales of US$21m-$23m and provided guidance for Q3 of US$45m - $55m – a significant beat of analysts’ expectations. The increase in price target is also on the back of Acadia Pharmaceuticals strengthening its licencing agreement with Neuren to a global scale, not just in the US moving forward.
• And Bell Potter has increased the price target on DroneShield (ASX:DRO) from 40 cps to 45 cps and maintain a buy rating on the defence technology company following the announcement out of DroneShield yesterday that it has won a record US$33m contract with the US government for DroneShield equipment and multi-year services subscriptions.

Wall Street closed mixed on Friday as earnings season kicked off in the US with a few big names posting better-than-expected results. This reporting period is particularly important in the eye of investors as to see how well US companies have performed during the high inflation, high interest rate environment. The Dow Jones rose 0.33%, while the S&P500 fell 0.1% and the tech-heavy Nasdaq lost 0.18% on Friday. For the week though, the three key indices posted gains with the Dow Jones adding 2.3%, the S&P rising 2.4% and the Nasdaq adding 3.3%.

UnitedHealth shares jumped more than 7% on Friday after the insurance company reported better-than-expected adjusted earnings and revenue for the first half. JPMorgan Chase also rose 0.6% after the big bank’s second quarter earnings also topped expectations.

Over in Europe, markets ended a 5-session winning streak on Friday with most closing lower, weighed down by sell-offs in oil and gas, and mining stocks. Investors had last week been assessed data out of the UK indicating wages grew by 7.3% in the three months to May, which is a significant concern for the Bank of England as it tackles the worst inflation among the group of seven nations including the US, Canada and France among others. The STOXX600 lost 0.1% on Friday, Germany’s DAX fell 0.22%, the French CAC added 0.06%, and in the UK, the FTSE100 fell 0.08%.

Locally on Friday, the key index rose 0.78% driven by a rally for technology stocks with the sector adding 1.68%, while communication services and materials stocks also had a strong session with each adding 1.66% and 1.35% respectively.

Telix Pharmaceuticals (ASX:TLX) rose 5.33% on Friday despite no price sensitive news out of the company on Friday, while Netwealth Group (ASX:NWL) fell 5.4% likely due to investors taking profits following the release of the company’s quarterly update including a record level of funds under administration.

What to watch today: 

• Ahead of the local trading session here in Australia, the SPI futures are expecting the ASX to open 0.03% lower.
• On the commodities front this morning oil is trading 0.67% lower at US$74.91/barrel, uranium is down 0.45% at US$55.40/pound, gold is down 0.3% at US$1954/ounce and iron ore is up 4% at US$117/tonne.
• AU$1.00 is buying US$0.68, 94.88 Japanese Yen, 52.46 British Pence, NZ$1.07. 

Trading Ideas: 

• Bell Potter has decreased the 12-month price target on RMA Global (ASX:RMY) from 21 cps to 18 cps and maintain a speculative buy rating on the emerging digital marketing business for real estate agents, following the release of the company’s Q4 update for FY23 including US claimed profiles growing to 259K, US reviews increasing to 722K, and subscription revenue of $3.6m. The reason for the decrease in price target is due to the Bell Potter analyst expecting US subscriber volumes to moderate due to the ongoing heightened interest rate environment.
• And Trading Central has identified a bullish signal on Woodside Energy (ASX:WDS) following the formation of a pattern over a period of 272 days which is roughly the same amount of time the share price may rise from the close of $36.28 to the range of $45.00 to $47.00 according to standard principles of technical analysis.

The Australian share market staged an upswing this week, advancing 2.91% (Mon – Thurs). The ASX200 leader board was painted green, with information technology posting the strongest gains, followed by real estate and materials. 

In this week's wrap, Grady covers: 

• (0:58) The REITs that are thriving vs. those that are struggling
• (3:38) One REIT that is trading at a discount in 2023
• (4.46) Best performing stocks in the ASX200
• (5:38) The most traded stocks & ETFs by Bell Direct clients
• (6:15) Three economic news items to watch out for

Read transcript article here.

European and US markets rallied overnight after US PPI data came in lighter than expected. This built on optimism after US CPI on Wednesday was also less than anticipated. The data supports signs that inflation is cooling, therefore boosted economic sentiment, and raising hopes of a less aggressive path ahead. However, markets are still expecting a 25-basis point rise by the Fed this month. It was the fourth consecutive day of gains for the major averages, with the Dow Jones added 47 points or 0.14%. The S&P500 closed 0.85% higher, while the tech-heavy Nasdaq advanced 1.58%. 

European markets also closed higher after the US inflation reading, as well as a drop in UK gross domestic product. UK GDP pulled back slightly, amid the focus on ongoing inflation, particularly after strong wage growth data was announced this week. 

What to watch today:

• Our local market is set for a positive start, following the US overnight, with the SPI futures suggesting a 0.61% rise at the open this morning. 
• Looking at commodities, 
  • Crude oil is trading higher as OPEC maintain a positive outlook on world oil demand, raising its growth forecast for 2023 and predicting a slight slowdown in 2024. This is driven by strong fuel consumption in China and India. 
  • Gold is slightly in the green, holding at its highest level in one month, as renewed evidence of softer inflation has boosted sentiment. So watch gold miners today. 
  • And iron ore is strong, trading 1.83% higher at US$111.50 per tonne, sharply rebounding from a one-month low, amid hopes of strong demand. China’s hot metal production averaged 2.5 million tonnes per day in June, which was the highest level since October 2020, therefore suggesting that steel mills in are returning to full capacity in China, the world’s top iron ore consumer. So keep watch of iron ore stocks today including Fortescue Metals (ASX:FMG), Rio Tinto (ASX:RIO) or BHP (ASX:BHP). 

Trading Ideas:

• Bell Potter maintains a Speculative Buy rating on Pharmaxis (ASX:PXS) and value the drug developer at $0.10. At PXS’s current share price of $0.05, this implies 96.1% share price growth in a year. 
• And Trading Central have identified a bullish signal in Northern Star Resources (ASX:NST) indicating that the stock price may rise from the close of $13.14 to the range of $13.55 to $13.70 over 15 days, according to the standard principles of technical analysis. 

US equities hit a 15-month high on Wednesday after CPI data came in lower than expected, which boosted investor sentiment. The annual inflation rate in the US slowed to 3% in June, the lowest level since March 2021, down from 4% in May and also below the consensus expectation of 3.1% in a sign the Federal Reserve’s hawkish stance on hiking rates is having a significant impact on cooling inflation. The Dow Jones rose 0.25% on Wednesday, the S&P500 added 0.74%, and the tech-heavy Nasdaq did most of the heavy lifting with the index rising 1.15% at the closing bell.

Despite inflation falling, the market is still expecting the Fed to announce another 25-basis point rate hike at the next FOMC meeting as wages inflation, services inflation and housing inflation, despite moderating, are still stubbornly high.

Over in Europe, markets in the region also had a strong rally on Wednesday as investor sentiment was boosted by inflation cooling in the US. The STOXX600 rose 1.5%, Germany’s DAX added 1.47%, the French CAC rose 1.57%, and in the UK, the FTSE100 surged 1.83%.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open Thursday’s session up 0.87% following the inflation-data driven rally in the US overnight.
• Locally yesterday, the ASX lifted 0.38% buoyed by a near 2% rise for the energy sector as oil is trading 1.36% higher and up 5.65% over the last week following speculation that China may move to introduce further policy to stimulate its economy through the sluggish post-pandemic recovery.
• Gold miners also extended their recent rally into the midweek session on strength in the price of the commodity while the worst performing sectors yesterday were information technology and health care.
• On the commodities front this morning, oil is trading 1.34% higher at US$75.83/barrel, gold is up 1.32% at US$1957.57/ounce and iron ore is up 1.39% at US$109.50/tonne.
• AU$1.00 is buying US$0.68 cents, 93.96 Japanese Yen, 51.97 British Pence and NZ1.08.

Trading Ideas:

• Bell Potter has initiated coverage of Smartpay Holdings (ASX:SMP) with a buy rating and a 12-month price target of $2.16/share amid terminal growth outlook from Bell Potter’s analyst. Smartpay is a full-service provider of end-to-end payment solutions and the Bell Potter analyst sees SMP has considerable uplift to gross profit and margins from implies revenue per unit as the company expands its Australian customer base.
• And Trading Central has identified a bearish signal on NIB Holdings (ASX:NHF) following the formation of a pattern over a period of 11-days which is roughly the same amount of time the share price may fall from the close of $8.43 to $7.80 to $7.90 according to standard principles of technical analysis.

Wall Street rallied on Tuesday as all eyes focus on the release of US inflation data out at 10:30pm tonight Australian Eastern Standard time while investors also welcomed comments from Federal Reserve officials earlier today suggesting US interest rates may be nearing their peak.

Salesforce shares rose 0.6% after the company said it would increase prices across the board in August, while American video game company Activision Blizzard jumped over 10% after a Federal Judge denied the Federal Trade Commission’s request for a preliminary injunction to stop Microsoft acquiring the video game maker, meaning the two companies are closer to completing their acquisition deal.

In Europe, markets closed higher in the region led by a boost for mining and construction stocks. The STOXX600 finished Tuesday’s session up 0.7%, Germany’s DAX rose 0.75%, the French CAC added 1.07% and, in the UK, the FTSE100 rose 0.12%.

On the back of weak inflation data being released earlier this week, China signalled more economic support measures are coming through the adoption of more property supportive policies in addition to measures aimed at boosting business confidence, as per reports out of Bloomberg.

Locally, gold and lithium miners advanced yesterday with lithium miners boosted by Patriot Battery Metals (ASX:PMT) soaring over 7% on speculation of the company being a takeover target, while gold rallied on strength in the price of the precious commodity.

The ASX rose 1.5% yesterday with every sector of the ASX closing in positive territory, led by the 2023 favourite sector, information technology, surging 2.41%. The local rally yesterday was spurred on by strength in the US on Monday in addition to the release of positive economic data which boosted investor sentiment.

Westpac consumer confidence data and NAB business confidence data were released yesterday with both coming in on the upside. Westpac consumer confidence rose 2.7% from 0.2% in June in a sign consumers are optimistic about the month ahead, possibly on the back of the rate pause out of the RBA. While, NAB business confidence data for June hit zero, up from -4 in May, indicating business confidence is also rising following months of tougher business conditions.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the local index to open the midweek session half a percent higher following the strength in both European and the US markets overnight.
• On the commodities front this morning, oil is trading 2.38% higher at US$74.73/barrel, gold is up 0.33% at US$1931.34/ounce and iron ore is down 4% at US$108/tonne in the wake of weak economic data out of China earlier in the week.
• AU$1.00 is buying US$0.67, 93.73 Japanese Yen, 52.02 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased the price target on Janus Henderson (ASX:JHG) from $41.29 to $42.64 and maintain a hold rating on the global asset management company ahead of the release of the company’s H1 results on August 1st with Bell Potter expecting to see an uptick in funds under management by around 2.8% to US$319.4bn and expect Janus Henderson to produce Adjusted operating income of US$118.9m up from US$105.6m in Q1. These expected upticks are on the back of stronger US and European markets in Q2 while government bond returns were slightly negative.
• And Trading Central has identified a bullish signal on Ramelius Resources (ASX:RMS) following the formation of a pattern over a period of 17-days which is roughly the same amount of time the share price may rise from the close of $1.30 to the range of $1.51 to $1.57 according to standard principles of technical analysis.

It was a positive session in New York overnight, as all three major averages snapped a three-day decline. Shares were broadly higher with the Dow Jones closing 0.6% higher, while the S&P500 and the Nasdaq gained 0.2%. Industrials led seven of the eleven S&P500 industry sectors higher as the closing bell neared, while communication services led the decliners. 

And markets are waiting for US inflation data out tomorrow night is expected to show a modest decline of an annual rate of 4% in May to 3.1%. 

What to watch today: 

• The Australian market is set to open higher this morning, with the SPI futures suggesting a 0.62% rise at the open. 
• In economic data, today Westpac will release its data on consumer confidence and NAB will release its data on business confidence. Both are expected to announce an increase in confidence month-on-month. 
• Looking at commodities, 
  • Crude oil has fallen, trading at around US$73 per barrel as concerns about a global economic slowdown that could reduce demand for oil outweighed the prospects of tighter global supplies from Saudi Arabia and Russia. 
  • Gold is trading flat, as investors weigh the prospects of further monetary tightening against concerns about a global economic slowdown, while poor performance of China’s consumer and producer prices reduced confidence of a recovery and increased deflation risks. 
  • And iron ore continued to drop towards US$100 per tonne, so keep watch of iron ore stocks today including Fortescue Metals (ASX:FMG), Rio Tinto (ASX:RIO) or Mineral Resources (ASX:MIN). 

Trading Ideas:

• Bell Potter maintains a Buy rating on Propel Funeral Partners (ASX:PFP) after the company announced two acquisitions in New Zealand at AU$38 million. They have decreased their price target by approximately 5% to $5.60 per share, and at PFP’s current share price of $4.11 this implies 36% share price growth in a year. 
• Bell Potter also maintains their Buy rating on Vitura Health (ASX:VIT) and they believe the company has solidified its position as market leader in medicinal cannabis distribution. Their price target remains unchanged at $0.90, and at VIT’s current share price of $0.54 this implies 66.7% share price growth in a year. 

Investor fears of further rate hikes in the US sparked a sell-off in US equities on Friday despite favourable jobs data being released. The US Labour Department’s June jobs report revealed payrolls increased less than expected by 209,000 for the month following an addition of 306,000 in May, in a sign the tight labour market in the US is continuing to ease. The US unemployment rate came in at 3.6%, down from 3.7% in May. Despite the favourable jobs data, the three key indices posted losses for the week as investors digested the latest FOMC meeting minutes with concerns the Fed will begin raising rates again as soon as the end of this month. The Dow Jones fell 1.16% over the week, while the S&P500 lost almost 2% and the tech-heavy Nasdaq declined 0.92% from Monday to Friday.

Over in Europe, markets edged slightly higher on Friday following the release of the favourable US jobs report. Germany’s DAX rose almost half a percent, the French CAC added 0.42%, while in the UK, the FTSE100 fell 0.32% weighed down by OSB Group as the British financial services provider tanked 28% after the company said it expects net income to drop by up to 180 million pounds or $230m as mortgage customers move away from high-rate products.

Locally on Friday the ASX tumbled 1.69% on Friday as every sector closed the last trading session of the week in negative territory, with REIT stocks taking the biggest hit as the sector closed 2.6% lower. The ASX sell-off on Friday was sparked by investor concerns of a robust jobs report out of the US, which was released after our local closing bell and came in quite the opposite to what local investors had been expecting.

What to watch today: 

• With the favourable jobs report in mind, the SPI futures are anticipating the local index to open Monday’s session on a much brighter note, up 0.36% to start the new trading week on a positive note.
• On the commodities front this morning, oil is trading 0.32% lower this morning at US$73.57/barrel, uranium is down almost 1% at US$55.65/pound, gold is up 0.15% at 1927.93/ounce, and iron ore is down 0.88% at US$112.50/tonne.
• Taking a look on the economic calendar, China’s highly anticipated annual inflation rate data for June is out today with consensus expecting a rise to 0.2% from 0.1% in May, as the economy continues its struggle to rebound on the growth front post the end of lengthy pandemic restrictions easing.
• AU$1.00 is buying US$0.67, 95.18 Japanese Yen, 51.94 British Pence and NZ$1.08. 
• Shares trading ex-dividend today include Collins Foods (ASX:CKF), Red Hill Minerals (ASX:RHI), and Turners Automotive Group (ASX:TRA). 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 price target on Clarity Pharmaceuticals (ASX:CU6) from $1.40 to $1.30 and maintain a speculative buy rating on the healthcare equipment and services company following the company announcing that it will commence a phase three trial of its diagnostic agent in prostate cancer, targeting high risk prostate cancer patients prior to prostatectomy. There is currently no marketed MTR products for this indication hence according to the Bell Potter analyst, if the trial meets the primary endpoints of sensitivity and specificity, the product will become highly differentiated from its peers.
• And Trading Central has identified a bearish signal on Wesfarmers (ASX:WES) following the formation of a pattern over a period of 110 days which is roughly the same amount of time the share price may fall from the close of $47.09 to the range of $41.50 to $42.50 according to standard principles of technical analysis.