Between the Bells

Well looking at global markets overnight, US equities closed in the red, following a sell-off in technology companies, which have outperformed this year. The pullback in tech stocks saw the Nasdaq sharply drop, closing the session 1.16% lower. Meanwhile, the S&P500 fell 0.45% and the Dow slightly down 0.04%. 

In Europe, markets closed mixed, with Germany’s DAX, the FTSE 100 and the STOXX 600 all closing the session down just 0.1%, while France’s CAC was in the green. 

What to watch today:

• The Australian share market is set to open higher this morning, with the SPI futures suggesting a 0.28% rise at the open. 
• In commodities,              
  • Global oil prices were higher following news of an armed rebellion against Russian President Vladimir Putin. Prices rose as investors monitored a potential oil shortage. 
  • The price of gold has rebounded further from a three-month as global economic uncertainties and political instability in Russia drove some safe-haven demand for metal. 
  • And iron ore remains close to a two-month high as markets assessed concerns of lower demand against the possibility that the Chinese government will provide stimulus measures for its construction sector. 
• And today keep watch of Appen’s (ASX:APX) share price moments. The AI data services company faced further turbulence yesterday, with its share price plunging 12% on the release of an announcement outlining its CFO, Helen Johnson, has decided to stand down just two months after stepping into the role. 
• Also keep watch of Wesfarmers (ASX:WES), which rallied yesterday after the Australian conglomerate entered into a scheme implementation deed through its wholly-owned subsidiary, Australian Pharmaceutical Industries to acquire 100% of Silk Laser Clinics’ outstanding shares for $3.35 cash per share by way of a scheme of arrangement. The deal values Silk Laser Clinics at $180 million and the Silk board has unanimously recommended that shareholders vote in favour of the scheme. 

Trading Ideas:

• Bell Potter have downgraded their recommendation on DDH1 (ASX:DDH) from a Buy to a Hold, after the company announced that they entered into a binding Scheme Implementation Agreement. Perenti (ASX:PRN) will acquire 100% of the fully paid ordinary shares in DDH). Bell Potter have also downgraded their price target to the current implied acquisition price of $0.94 per DDH share. 
• And Trading Central have identified a bearish signal in Charter Hall (ASX:CHC) indicating that the stock price may rise from the close of $10.52 to the range of $9.30 to $9.60 over 57 days according to the standard principles of technical analysis. 

Wall Street slid on Friday with the key indices closing lower for the week and the Nasdaq snapping an 8-week winning streak as investors shift focus to the high potential of a US and possibly global recession. The Dow Jones fell 1.7% over the week, the S&P500 lost 1.4%, and the tech-heavy Nasdaq also fell 1.4%. Inflation around the world remains elevated, and stock markets have been on a solid rally of late, so investors have pulled back optimism and now assess the high likelihood of a US recession as the Federal Reserve maintains an aggressive stance toward tackling inflation. Shares in Goldman Sachs declined on Friday after CNBC reported the investment bank is likely to face a large write down for its 2021 acquisition of fintech firm GreenSky.

Over in Europe, markets in the region closed lower on Friday amid dampened global investor sentiment and on the back of a hawkish 50-basis point rate hike out of the Bank of England on Thursday. In the eurozone flash purchasing managers’ index data, a fall from 52.8 points to 50.3 points. A reading below 50 indicates a contraction, which is something to keep in mind for the euro zone over the month ahead. The STOXX600 fell 0.3% on Friday, Germany’s DAX fell 0.99%, the French CAC lost 0.55%, and, in the UK, the FTSE100 lost 0.54%. German energy company, Siemens Energy tumbled 37% on Friday after scrapping its profit guidance due to issues with its wind turbine division.

On the local index, the ASX200 dived 1.34% on Friday, weighed down by a near 4% loss in the energy sector as the price of oil dipped 3.15% last week to US$69.71/barrel as rate hike concerns and recession fears weigh on demand outlook for the commodity. The utilities and consumer staples sectors were the only two to close in positive territory on Friday.

What to watch today:

• Ahead of the local trading session, the SPI futures are anticipating the ASX to open Monday’s trading session down 0.23% on dampened global investor sentiment.
• Taking a look at commodities this morning, oil is up 1.06% to start the new trading week at US$69.89/barrel, coal is down 0.2% at US$125.50/tonne, gold is up 0.16% at US$1923.68/ounce and iron ore is flat at US$114.50/tonne.
• On the economic data front, the European Central Bank Forum on Central Banking begins today in Portugal where central bank governors, and officials meet to exchange views on current policy issues and discuss the forum’s outlook for longer-term perspective.
• AU$1.00 is buying US$0.67, 96 Japanese Yen, 52.35 British Pence and NZ$1.09.

Trading Ideas:

• Bell Potter has increased the price target on Delta Lithium (ASX:DLI) from $1.05 to $1.25 and maintain a buy rating on the lithium explorer following the release of high-grade drilling results and updated deposit dimensions. The company reported drilling results from its Yinnetharra Lithium Project in WA and notes ‘Malinda boasts a lithium Mile’ comprising two major parallel ore zones M1 and M35 each now drilled out over 1.6km in strike length. The company’s Mt Ida asset it also a near-term producer, targeting direct shipping operation from Q4FY23.
• Trading Central has identified a bearish signal on Helloworld Travel (ASX:HLO) following the formation of a pattern over a period of 49-days which is roughly the same amount of time the share price may fall from the close of $2.47 to the range of $1.95 to $2.05 according to standard principles of technical analysis.

The Aussie share market fell 0.77% this week (Mon-Thu) as the recent rally for information technology stocks lost steam with the sector closing 3.13% lower over the four days. Investors bought into consumer staples stocks which are generally more likely to hold their value in a high interest rate, high inflation environment.

In this week's wrap, Grady covers:

•  (0:34) Understanding the EV movement
•  (1:04) Updates on Rio Tinto (ASX:RIO) & BHP Group (ASX:BHP)
•  (2:46) Updates on Delta Lithium (ASX:DLI) & Talga Resources (ASX:TLG)
•  (3:57) Investing in the battery metals sector
•  (4:33) Best performing stocks in the ASX200
•  (5:35) The most traded stocks & ETFs by Bell Direct clients
•  (6:08) Three economic news items to watch out for

 Read the article here. 

European stocks closed lower overnight after the Bank of England opted for a more hawkish 50 basis point rate hike. The STOXX 600 is down 0.5%, trimming earlier losses of more than 1%. The index has posted declines in all four sessions so far this week. 

US equities saw little improvement overnight as Wall Street heads for a losing week. The Nasdaq performed best as investors boosted tech stocks, after a three- day breather from the market rally and Apple shares moved to a new all-time high. The Nasdaq closed 0.95% higher, the S&P500 up 0.37%, while the Dow Jones closed flat. 

What to watch today: 

• The SPI futures are suggesting our local market will drop 0.1% at the open this morning. 
• In commodities, 
  • Crude oil has dropped more than 4% to approach US$69 a barrel, as hawkish messages from major central banks raised concerns that interest rates will continue to march higher for longer, therefore impacting demand further. 
  • The price of gold extended losses hitting its lowest in over three months, following the hawkish outlook for major central banks, which continues to pressure the demand for non-interest-bearing bullion assets. 
  • Iron ore is also trading in the red, as concerning macro data out from China underscored its struggle to recover from the pandemic lockdowns, particularly in the property sector. 

Trading Ideas:

• Bell Potter maintains a buy rating on Gold Road Resources (ASX:GOR) following the company’s production report. Production was impacted by reliability and utilisation of the production drills and availability of blasting resources and a significant rain event. Bell Potter have reduced their price target from $2.05 to $1.95. At GOR’s current share price of $1.60, this implies 21.9% share price growth in a year. 
• And Trading Central have identified a bearish signal in MAAS Group Holdings (ASX:MGH) indicating that the stock price may fall from the close of $2.57 to $2.19 to $2.27 over 33 days, according to the standard principles of technical analysis. 

US and European markets declined overnight, following the Federal Reserve’s Chairman’s latest comments on inflation, that weighed on the investor sentiment. Jerome Powell said that more rate hikes are likely ahead to combat inflation. US equities were flat in overnight trading, after the market suffered three consecutive days of declines, as the tech-power rally has started to fade. All three major benchmarks fell for three days in a row, with the S&P500 marking its worst daily performance this month. 

 What to watch today: 

• The SPI futures are suggesting our local market will drop 0.14% at the open this morning, after markets closed in the red overnight. 
• In economic data, the Manufacturing and Services Flash PMI will be out this morning. That’s the producer’s managers index, that looks at economic trends in the manufacturing and services sectors. The flash PMI is a forward-looking estimate of the final PMI out next Wednesday. And remember a PMI above 50, illustrates an expansion from the month prior. 
• Looking at commodities, 
  • The price of oil is trading 2% higher at US$72.60 a barrel, the highest in two weeks, on optimism about strong demand in the United States. 
  • The gold price is lower, extending losses from this week, to their lowest in three months, following the comments made by the Fed. 
  • And iron ore is now slightly lower, however is hovering near its seven-week high of US$115.50 per tonne, amid bets of incoming stimulus rollouts from Beijing. 

Trading Ideas:

• Bell Potter maintains a Buy rating on Lynas Rare Earths (ASX:LYC) and have decreased their price target by 4% to $8.55 from $8.90. Bell Potter says that LYC is a high-quality business, and a key supplier of separated rare earths to Western economies. The price target of $8.55 and the current share price of $7.43, implies 15% share price growth in a year.  
• And Trading Central have identified a bearish signal on Flight Centre (ASX:FLT), indicating that the stock price may fall from the close of $19.90 to the range of $18.30 to $18.70 over 35 days, according to the standard principles of technical analysis. 

The RBA meeting minutes were released yesterday hinting at the potential for further rate hikes to come, possibly taking the nation’s cash rate to 4.60%, as the outlook for price pressures to become embedded raises concerns for the RBA especially if wages continue rising against stagnant productivity output. Stagnant productivity was a key inclusion in the RBA meeting minutes as members discussed the importance of growing productivity amid output per hour worked not increasing over the past 3 years, hence leading to GDP data growth actually worsening in Q1FY23. 

The ASX closed 0.86% higher yesterday, extending the ASX rally of late into a 7th straight session, buoyed by a surge in energy stocks with the sector closing just shy of 2% higher on Tuesday.

In Australia, retail stocks took another hit yesterday after Best & Less (ASX:BST) downgraded profit guidance by 65% as the consumer discretionary sector as a whole feels the brunt of declining consumer spend. The company now expects net profit between $3.6m and $4.2m in H2FY23, down from the initial guidance issued of $10m to $12m.

Over in New York on Tuesday, stocks are trading lower on the first trading session of the week on Wall St as the recent lengthy rally took a slight breather ahead of Federal Reserve Chair Jerome Powell’s congressional testimony. The Dow Jones fell 0.72% on Tuesday while the S&P500 lost 0.47% and the Nasdaq declined 0.16%. On the earnings front, FedEx reports FY23 results after the closing bell on Tuesday. Adding to investor uncertainty was homebuilding projects data in the US out for May showing a surge in single-family homebuilding projects. 

In Europe, markets closed lower across the board on Tuesday as investor sentiment remains cautious particularly following recent data from China and the lacklustre return to full operational capacity in the region weighing on global economies. The STOXX600 fell 0.6% on Tuesday, Germany’s DAX fell 0.55%, the French CAC lost 0.27% and, in the UK, the FTSE100 lost 0.25%.

 
 What to watch today: 

• Ahead of the local trading session the SPI futures are anticipating the local index to open 0.4% lower amid global markets turbulence overnight.
• On the commodities front this morning, oil is down 1.03% at US$71.18/barrel, gold is down 0.67% at US$1937/ounce, copper is up 2.24% at US$3.87/pound, and iron ore is flat at US$117/tonne.
• Economic data out today includes UK annual inflation rate data with the market expecting a decline to 8.4% in May from 8.7% in April.
• Investors in the UK will be awaiting the rate decision out of the Bank of England tomorrow with the expectation for a 25-basis point rate hike which will take the British cash rate to 4.75% for the month ahead.
• AU$1.00 is buying US$0.68, 95.85 Japanese Yen, 53.70 British Pence and NZ$1.10. 

Trading Ideas:

• Bell Potter has downgraded the price target on Mineral Resources (ASX:MIN) from $95 to $90 per share but maintain a buy rating on the mining giant after the company updated the market on its lithium business including the termination of the Mount Marion toll treatment agreement with Ganfeng Lithium Co. but MIN will still sell its Mount Marion spodumene concentrate to Ganfeng at market prices. Mineral Resources also updated the market on a second natural gas discovery at North Erregulla Deep-1, and early results of exploration for lithium at Mount Marion confirmed exploration potential at depth.
• And Bell Potter has initiated coverage of COSOL (ASX:COS)with a Buy rating and a price target of $1 noting the specialised digital IT solutions and data management company offers a compelling value proposition in the Enterprise Asset Management industry with strong financial growth, a diverse client base, strategic partnerships and actively supports its clients’ sustainability goals.

The local market started the new trading week 0.6% higher, carrying the ASX rally into a 6th straight session driven by a rally for healthcare stocks, namely, CSL as investors took last week’s update-driven sell-off as an opportunity to buy into Australia’s largest biotech company on Monday.

Locally, PointsBet (ASX:PBH) jumped 19% during the session after updating the market on its non-binding indicative proposal from DraftKings to acquire PointsBet’s US business for a headline purchase of US$195m on a debt-free and cash-free basis. Yesterday’s announcement saw the PointsBet board share that DraftKings offer could be ‘reasonably expected to lead to a Superior Proposal’, which would further boost the PBH share price, especially as Fanatics Betting is also in the race to acquire the online sports betting company. 

On the mining front, Lake Resources (ASX:LKE) tanked 16% on Monday after releasing a two-phase development to targeted production of 50,000 tonnes per annum of battery grade lithium carbonate at its Kachi project in Argentina. The update outlines significantly higher capital costs, a 3-year delay to the expected production date commencement at the mine and a 50% reduction to the target amount of tonnes per annum of lithium from the project. 

Wall St was closed overnight for the Juneteenth National Independence day holiday, however all eyes will be on Fed Chair Jerome Powell’s testimony on Thursday night Australian time to determine what the rate hike movements look like for the coming months. The Nasdaq was the winning index last week, gaining 3.3% as investor appetite for technology stocks continues to grow amid the hype around AI and its ability to drive hyper operational efficiency across many industries.

Over in Europe, equities fell on Monday as investors’ concerns over weakened demand recovery from China weighed on resources companies in the region, and healthcare stocks took a hit on dampened corporate forecasts. The STOXX600 fell 1% on Monday with all sectors ending the session in negative territory, while Germany’s DAX lost almost 1%, the French CAC closed 1.01% lower and, in the UK, the FTSE100 fell 0.71%. 
 
 What to watch today: 

• Ahead of the local trading session here in Australia, the SPI futures are expecting the ASX to open Tuesday’s session 0.15% higher, extending the local green run into a 7th straight session.
• On the commodities front this morning, oil is trading 0.8% lower at US$71.21/barrel, coal is down 5.52% at US$128.45/tonne, gold is down 0.4% at US$1949.70/ounce and iron ore is up 0.43% at US$117/tonne.
• Stocks trading ex-dividend today include Premier Investments (ASX:PMV). If you’ve been thinking about this stock it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.
• AU$1.00 is buying US$0.68, 7.20 Japanese Yen, 53.75 British Pence, and NZ$1.10. 

Trading Ideas:

• Bell Potter has initiated coverage of Matrix Composites & Engineering (ASX:MCE) with a Hold rating and a price target of $0.35 noting the near-term earnings and free cash flow outlook is leveraged to increases in global offshore energy development activity, which Bell Potter estimates is currently at a 5-year high, resulting in an uplift in outstanding product orders to be delivered of 2H FY23 and FY23.
• And Bell Potter has downgraded the price target on Bega Cheese (ASX:BGA) from $4.10 to $4.00 and maintain a buy rating on the dairy company amid forecasts for movements in the cash rates, implied yield curves and impact of the strengthened Aussie dollar to USD on AUD commodity returns.

On Wall St, stocks closed lower on Friday but higher across the key indices for the week as investor sentiment was boosted by a rate pause out of the fed, encouraging inflation data and ongoing strength in the technology sector which saw the Nasdaq rise 3.3% for the week, marking an eight-week winning streak. The Dow Jones added nearly 1.3% for the week and the S&P500 rose 2.6% on the week. Software giant Adobe rose 0.9% on Friday after beating expected results and issuing upbeat earnings guidance, while Virgin Galactic rose 13% after announcing on Thursday that it will launch its first commercial space tourism flight this month.

Over in Europe, markets closed higher on Friday as investors digested the latest monetary policy decision out of the European Central Bank in the form of a 25-basis point rate hike for the month ahead. ECB president Christine Lagarde said they are not thinking about pausing yet. Germany’s DAX rose 0.41% on Friday while the French CAC added 1.34% and, in the UK, the FTSE100 rose 0.19%.

The local market jumped over 1% on Friday led by a 3.5% surge in the energy sector led by Whitehaven Coal rallying over 8%, while Santos added 4.1% and Woodside Energy jumped 3.5%.

AGL Energy was the winning stock of Friday’s session after the electricity and gas provider released a guidance update on Friday revealing it expects underlying profit for 2023-2024 double with an expected increase between $580m and $780m, which is a significant jump from the guidance issued this year of between $255m and $285m. The strong profit guidance is driven by higher wholesale power prices and improved power plant operations.

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 week down 0.04%.
• On the commodities front this morning, oil is trading 0.48% lower at US$71.44/barrel, coal is down 5.52% at US$128.45/tonne, uranium is up 4.05% at US$57.75/pound, gold is down 0.03% at US$1957/ounce, and iron ore is up 0.43% at US$117/tonne.
• There is no local economic data out today however investors will be awaiting the release of the RBA’s latest meeting minutes out tomorrow which will give an insight into how hawkish or dovish the RBA are regarding interest rate hikes over the coming months.
• AU$1.00 is buying US$0.69 cents, 97.55 Japanese Yen, 53.75 British Pence and NZ$1.10 dollar.

Trading Ideas:

• Bell Potter has downgraded the price target on Australian Vintage (ASX:AVG) from 65cps to 50cps and maintain a hold rating on the Australian wine company following the release of a trading update outlining revenue and EBITDAS guidance for FY23 that were broadly in-line with expectations but significantly lower than FY22 as growing conditions worsened during key yield development months earlier in the year. As a result of the conditions, AVG’s company owned and leased crush came in materially below previous guidance, representing a 20% decline on yield vs 2022. The upside for AVG is the company continues to win market share in the premium product segments.
• Trading Central has identified a bullish signal on Woodside Energy Group (ASX:WDS) following the formation of a pattern over a period of 13-days which is roughly the same amount of time the share price may rise from the close of $35.63 to the range of $38.10 to $38.70 according to standard principles of technical analysis.

The Aussie share market rose 0.74% this week (Tue-Thu) as information technology stocks rallied whilst the health care sector headed to the chopping block. 

In this week's wrap, Grady covers: 

• (0:10) Investor sentiment
• (0:30) The turmoil surrounding Domino’s (ASX:DMP), CSL (ASX:CSL) & DGL (ASX:DGL)
• (4:05) Downgrades as the key driver of guidance revisions
• (5:20) Best performing stocks in the ASX200
• (6:07) The most traded stocks & ETFs by Bell Direct clients
• (6:40) Three economic news items to watch out for

Wall Street closed mixed on Wednesday as investors assessed favourable PPI data, and the federal reserve holding the cash rate at 5%-5.25% for another month, against the Fed signalling more rate hikes are expected in the coming months.
 US producer purchasing price index data for May came in at a decline of 0.3%, beating expectations of a 0.1% drop and well below the unexpected rise of 0.2% in April, in another sign the Fed’s aggressive rate hike strategy is cooling economic growth and inflation. Goods prices fell 1.6%, the largest decrease since July 2022 mainly due to a 13.8% decline in gas prices and a 1.3% drop in food prices. The federal reserve’s FOMC meeting wrapped up overnight with the fed announcing a pause in rate hikes after 10 consecutive rises, but signalled more rate hikes by the end of the year in anticipation of inflation remaining sticky and above the target of 2%. The S&P500 rose 0.08%, and the Nasdaq added 0.39%, but the Dow Jones fell 0.68%.

Over in Europe, markets closed higher as investors looked ahead to the expected rate pause announcement out of the US which came after hours in European time. UK GDP data out yesterday also came in-line with expectations at a rise of 0.2% which was largely driven by growth in services. Germany’s DAX rose just under half a percent, the French CAC added 0.52% and, in the UK, the FTSE100 rose 0.1%.

Locally, the ASX rose 0.32% yesterday buoyed by a rally for materials stocks on the back of rising commodity prices driven by optimism that China may reveal a broader economic policy to stimulate economic recovery post pandemic in the very near future. On Tuesday, China’s central bank lowered a short-term lending rate for the first time in 10-months in a bid to boost its struggling-post pandemic recovery, which boosted hopes for a wider policy to be announced soon. Iron ore rallied over 2.2% yesterday, while copper added 2.93% on the news.
 Biotech giant CSL fell over 7% on Wednesday after the company released an update guiding to lower profits for FY23 due to adverse currency movements. These adverse currency movements mean that CSL will now realise a negative impact to their fiscal 2023 forecast profit of between US$230 and US$250m.

What to watch today:

• On the back of the global rally overnight, the SPI futures are anticipating the local index to open the second last trading day of the shortened week 0.28% higher.
• On the commodities front this morning, oil is down 1.07% at US$68.69/barrel, coal is down 1.31% at US$132.25/tonne, uranium is up 4.05% at US$57.75/pound, iron ore is up 2.24% at US$114/tonne, and gold is down just 0.01% at US$1943/ounce.
• AU$1.00 is buying US$0.68, 95.25 Japanese Yen, 53.70 British Pence and NZ$1.10

Trading Ideas:

• Bell Potter has decreased the price target on Frontier Digital Ventures (ASX:FDV) from 89 cents per share to 83 cents per share and maintain a speculative buy rating on the online marketplace investment company following a revisit by the Bell Potter analyst to the company’s exposure and forecasts regarding Pakistan-exposed portfolio companies following the recent meeting of State bank of Pakistan’s Monetary Policy Committee. The Committee resolved to keep its interest rate steady at 21%, as inflation rose to 38% in May. Following this, Bell Potter analysts expect demand in the region to be subdued, having negative implications for Pakistan-exposed companies in Frontier Digital Ventures portfolio including Zameen and PakWheels.
• And Trading Central has identified a bullish signal on Sandfire Resources (ASX:SFR) following the formation of a pattern over a period of 21-days which is roughly the same amount of time the share price may rise from the close of $6.18 to the range of $6.65 to $6.75 according to standard principles of technical analysis.