Between the Bells

The ASX started the week on a very positive note after a late-night phone call on Saturday between US President Joe Biden and House Speaker Kevin McCarthy ended the months-long debt ceiling negotiations with a compromised, tentative outcome being agreed to. The US was just under 2-weeks away from running out of money to pay its bills according to Treasury Secretary Janet Yellen, so the last-minute dash to achieve an outcome to present to congress for passing has boosted sentiment in global markets to start the new trading week higher. The deal still must pass through congress but at least gives the parties a few years of buffer before these negotiations start again.

The ASX rose 0.88% to start the new trading week on a positive note with the debt ceiling agreement being the key driver of the ASX rallying. The debt ceiling agreement also sparked a rally for commodity prices too with oil up 0.67% to US$73.16/barrel and iron ore up 3.55% to US$102/tonne on positive demand outlook now the debt ceiling agreement has been reached. Real Estate stocks led the gains yesterday adding almost 2% on eased fears of global economic turmoil resulting from the lifting of the US debt ceiling, while materials stocks rose 1.62% and financials added almost 1.4% to start the week. The only sector that closed lower yesterday was consumer discretionary stocks. The debt ceiling agreement being reached doesn’t rule out a recession soon for the world’s largest economy, with analysts’ still factoring in a 68% chance of the US heading into a recession in Q3. Locally, the pressure is mounting for embattled accounting and consulting giant PwC Australia as the company directed nine senior partners to go on leave effective immediately following the company’s CEO, Tom Seymour, resigning over the tax law leaks three weeks ago. Acting PwC CEO Kristin Stubbins has issued an apology on behalf of the firm for sharing confidential government tax policy information and betraying the trust placed in the company. The scandal involves dozens of PwC partners receiving emails related to plans to use confidential government tax policy information in a bid to win new clients. And WA Premier Mark McGowan announced his shock resignation yesterday which may have some impact on the market in coming months as we assess how his successor takes forward or changes McGowan made especially in the mining sector.

US markets were closed on Monday for the Memorial Day holiday, but the expectation is for a rally on Tuesday in the US as investors respond to the debt ceiling negotiation agreement being reached. In Europe overnight, markets closed lower in the region as investors now shift focus to future rate hikes expected out of the European Central Bank and Bank of England, both of which were expected to pause and look to pivot before recent economic data complicated the outlook. Germany’s DAX fell 0.2% while the French CAC lost 0.21%. The UK market was also closed on Monday for the Late May bank holiday.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the local market to open 0.11% lower as global investors shift focus to rate hike outlook out of the key central banks in months to come.
• On the commodities front this morning, oil is trading 0.67% higher at US$73.15/barrel, gold is down 0.16% at US$1943.12/ounce and iron ore is up 3.55% at US$102/tonne.
• AU$1.00 is buying US$0.65, 91.81 Japanese Yen, 52.95 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased the price target on Catapult Group (ASX:CAT) from $1.00 to $1.20 and maintain a buy rating on the leading global provider of elite athlete wearing tracking solutions company following the release of Catapult’s FY23 results including wearables growing strong up 17% and the outlook for continual development of an advanced video analysis or insights tool called MatchTracker, which

US markets are set to rally on Monday following the conclusion of a length negotiations process over raising the U.S. debt ceiling which finally concluded on Saturday (US time). Stocks in the US rallied on Friday as investors grew hopeful of an outcome in the debt ceiling negotiations between President Biden and House Speaker Kevin McCarthy. The Dow Jones rose 1%, the S&P500 added 1.3%, and the tech-heavy Nasdaq rallied 2.2%. On Saturday night in the US, President Biden and Kevin McCarthy held a 90-minute-long phone call to discuss the deal where a compromise was reached and an agreement in principle has been decided. House speaker Kevin McCarthy expects congress to pass the debt deal, which is called a compromise and is good for the country because according to Biden, ‘it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastates and millions of jobs lost’.

And over in Europe, markets closed higher as investors looked ahead to a crucial weekend for the U.S. debt ceiling negotiations. Technology stocks in the region rallied late in the week following the release of chipmaker Nvidia’s strong results. Germany’s DAX rose 1.2% on Friday, the French CAC rose 1.24% and, in the UK, the FTSE100 added 0.74%.

The local index closed 0.23% higher on Friday, buoyed by a rally for technology stocks, also on the back of Nvidia’s strong results which fuelled a rally for tech stocks around the world. Investor appetite is also growing for technology stocks as rate hike pauses and potential cuts are on the horizon in the future. Materials stocks also had a strong end to the week with the sector rising 0.93% on Friday on a solid rebound in the price of iron ore which has been slammed lately on weakened demand outlook out of China.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open almost 1% higher, driven by a boost in sentiment as debt ceiling negotiations come to a close.
• On the commodities front this morning, oil is trading 0.86% higher at US$73.32/barrel, coal is flat at US$160/tonne, gold is up 0.14% at US$1943/ounce and iron ore is up 3.55% at US$102/tonne.
• Stocks trading ex-dividend today include Dalrymple Bay Infrastructure and Infratil. 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.
• AU$1.00 is buying US$0.65, 91.83 Japanese Yen, 52.8 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has decreased the price target on Eagers Automotive (ASX:APE) from $15.25 to $15 but maintain a buy rating on the leading automotive retailer following the release of the company’s trading update at its AGM which was slightly below Bell Potter expectations with underlying NPAT before tax for the first four months of the year only in line with the PCP. Bell Potter expects a stronger H2 due to further improvement in deliveries from the big three – Toyota, Mitsubishi and Mazda as well as BYD.
• Trading Central has identified a bullish signal on APM Human Services International (ASX:APM) following the formation of a pattern over a period of 17-days which is roughly the same amount time the share price may rise from the close of $2.04 to $2.14 to $2.18 according to standard principles of technical analysis.

The Aussie share market declined 1.94% (Mon-Thu), as a sharp sell-off in materials stocks on the back of lower iron ore prices due to weakened demand from China's steel mills.

In this week's wrap, Grady covers:

• (0:11) Cost-of-living pressures in Australia
• (0:39) Why income stocks are gaining attention
• (1:19) Bell Direct's Strategy Builder
• (2:13) High dividend stock selection
• (4:11) The best performing companies in the ASX200
• (5:02) The most traded stocks & ETFs by Bell Direct clients
• (5:36) Three economic news items to watch out for

Read the transcript here.

In New York overnight, US equities closed mixed, as investors watch for debt ceiling updates. While the Dow Jones closed 0.11% lower, the S&P500 gained 0.9% and the Nasdaq advanced 1.7%. 

European markets ended lower. The benchmark Stoxx 600 finished 0.24% lower after a choppy day, weighed down the most by oil and gas stocks, down around 2%. 

What to watch today:

• The Australian market is set to open lower this morning, with the SPI futures suggesting a drop of 0.08%. 
• As for companies to watch today, Fisher & Paykel Healthcare (ASX:FPH) will be releasing its earnings report today, and InvoCare (ASX:IVC) will hold its AGM today. 
• In commodities, 
  • Oil prices have sharply fallen, ending a three-day winning streak, after the Russian Deputy Prime Minister ruled out additional production cuts by OPEC+. 
  • The Gold price is hovering at around US$1,941 an ounce, levels not seen in over two months, pressured by a rise in Treasury yields and the US dollar. Traders are also monitoring the ongoing debt ceiling conversations and the likelihood of prolonged higher interest rates. 
  • Iron ore is lower with reduced steel production in China and a decrease in supply disruptions. 

Trading Ideas:

• Bell Potter maintains their Buy rating on Eagers Automotive (ASX:APE), after the company provided a trading update at its AGM which was slightly below Bell Potter’s expectations, with underlying net profit before tax for the first four months of the year only in line with the PCP. Bell Potter had been expecting some growth, but the first half has been negatively impacted by a number of issues including lower deliveries on key brands (e.g. Toyota, Mitsubishi and Mazda), two wet weather events in New Zealand and some cost pressies such as interest costs on inventory. 
• Trading Central have identified a bullish signal in Lendlease Group (ASX:LLC), indicating that the stock price may rise from the close of $7.77 to the range of $8.60 to $8.75 over 8 days, according to the standard principles of technical analysis. 

Wall St closed the midweek session lower, extending the debt ceiling talks-related sell off into Wednesday as another day passed and no set plan has been decided, which investors take as a sign of concern. House Speaker Kevin McCarthy said at a press conference late on Wednesday morning that negotiators remain at odds over a debt ceiling outcome. The US FOMC meeting minutes were also released in the early hours of this morning, outlining that the members are split on the need for the Fed to further raise interest rates in the future, which also weighed on investor sentiment in the US through afternoon trade. The Dow Jones closed 0.77% lower, the S&P500 fell 0.73% and the tech-heavy Nasdaq lost 0.61% lower on Wednesday.

Over in Europe, markets also closed lower again as investors see stalls in US debt ceiling negotiations as a concern ahead of the looming June 1 possible default date according to Treasury Secretary Janet Yellen. Germany’s DAX fell almost 2%, the French CAC lost 1.7% and, in the UK, the FTSE100 fell 1.75% on Wednesday. UK inflation data out overnight showed a decline from 10.1% year-on-year in March to 8.7% year-on-year in April, which shows signs of cooling but was above economists expectations of a drop to 8.2%.

The local market extended its red run into Wednesday as investors sold out of materials stocks on the back of concerns surrounding weaker demand out of China’s steel mills causing a decline in the price of iron ore. Healthcare stocks also fell 1.13% on Wednesday, while energy stocks rose 0.7% on the price of oil rising 1.76%. Consumer discretionary stocks also took a hit on Wednesday over concerns of mounting demand headwinds signalled by Universal Stores which caused a 24% plunge in the retailers’ share price.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the local market to open 0.43% lower as the debt ceiling driven sell-off continues around global markets.
• On the commodities front this morning oil remains strong, up 1.81% at US$74.23/barrel, coal is down 0.22% at US$160/tonne, gold is down 0.88% at US$1958/ounce and iron ore is down 2.83% at US$103/tonne.
• One Aussie dollar is buying US$0.65, 91.19 Japanese Yen, 52.86 British Pence, and NZ$1.07.

Trading Ideas:

• Bell Potter has downgraded its price target on EROAD (ASX:ERD) from $1.50 to $1.25 but maintain a buy rating on the fleet management technology company following the release of the company’s FY23 result which was in line with Bell Potter forecasts if not better in some metrics. The downgrade in price target comes amid the company’s EBIT loss of NZ$4.5m coming in larger than Bell Potter expectations of NZ$4.4m, and as a result Bell Potter has modestly adjusted forecasts for the company heading into FY24 and beyond.
• Trading Central has identified a bearish signal on Super Retail Group (ASX:SUL) following the formation of a pattern over a period of 70-days which is roughly the same amount of time the share price may fall from the close of $11.90 to the range of $9.90 to $10.30 according to standard principles of technical analysis.

Wall Street closed lower on Tuesday as negotiations over the debt ceiling appear to be making little progress. Monday’s meeting between President Biden and House Speaker Kevin McCarthy was productive with President Biden saying a default was off the table, however no set resolution has been decided yet. The S&P500 dropped 1.12%, the Dow Jones fell 0.69% and the tech-heavy Nasdaq lost 1.26%. And in Europe, markets closed lower on Tuesday as investors in the region also keep a close eye on US debt ceiling negotiations, whereby talks continue with no clear resolution in check yet. 

The local market had a lacklustre session yesterday as a more than 1% loss in the consumer discretionary sector offset strong gains for financial and real estate stocks. Markets have been moving over the last week in line with progress and lack there of negotiations in debt ceiling talks between US President Joe Biden and House Speaker Kevin McCarthy. As negotiations on Tuesday were inconclusive, investor optimism took a slide and caused the negative end to a lacklustre session on the ASX. Qantas shares dipped over 2% on Tuesday despite the flying kangaroo forecasting it would reach up to $2.5bn in pre-tax profit for the 2023 financial year. Investor sentiment in the airline was shaken by the warning that softening fuel prices would put downward pressure on airfares, which in-term will cause a reduction in margins for Qantas. There is also more capacity coming online post-pandemic both through Qantas’ new fleet and as international carriers ramp up operations back into Australia, which will also contribute to the downward pressure on Qantas airfares in the highly competitive market.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open the midweek session almost half a percent lower on the back of the global market sell-off overnight as debt ceiling negotiations push on.
• On the commodities front this morning, oil is trading 1.01% higher at US$72.77/barrel following a sharp decline earlier this week amid weakened demand fears out of China as the country’s emergence out ofCOVID-19 lockdowns has been much weaker than expected. Gold is up 0.34% at US$1976.08/ounce and iron ore is down 2.3% at US$106/tonne.
• Taking a look at economic data out today, UK inflation rate data for April is released at 5pm AEST with consensus expecting a decline to 8.2% from 10.1% in March, in a sign the Bank of England’s rate hikes are taking effect on cooling inflation in the UK.
• AU$1.00 is buying US$0.66, 91.55 Japanese Yen, 53.47 British Pence and NZ$1.06.
• Stocks trading ex-dividend today include Orica (ASX:ORI), Nufarm (ASX:NUF) and Aristocrat Leisure (ASX:ALL). 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 IDP Education (ASX:IEL) from $30.45 to $30.00 and maintain a hold rating on the global education services provider following the company announcing the acquisition of UK-based technology company The Ambassador Platform in a deal worth $16.8m which IDP will fund through its existing cash balance. The slight decrease in price target comes off the back of the acquisition with factoring in the total consideration for the acquisition of 9 million pounds or the equivalent of $16.8m Aussie dollars.
• Trading Central has identified a bullish signal on APM Human Services International (ASX:APM) following the formation of a pattern over a period of 16-days which is roughly the same amount of time the share price may rise from the close of $1.95 to the range of $2.05-$2.07 according to standard principles of technical analysis.

It was a mixed session on Wall Street overnight as investors focus ahead to the pivotal debt ceiling negotiation talks at 5:30pm on Monday evening in the U.S. where President Biden will meet again with house speaker Kevin McCarthy to continue debt ceiling talks with just 10-days left until the earliest date that Treasury Secretary Janet Yellen said the US could default. The S&P500 rose 0.02% on Monday, the Dow Jones fell 0.42% and the tech-heavy Nasdaq rose 0.5%. Reporting season is coming to an end, but investors are still awaiting the release of first quarter earnings results out of Zoom Video, and Lowe’s. The US has also agreed to back the development of Australia’s critical minerals industry after the two country’s agreed to coordinate policies and investment to support the industry’s growth. This is a major deal for Australia’s local miners and producers as Australia supplies around half of the world’s lithium and other minerals like rare earths.

Over in Europe, markets closed mixed as investors in the region await key signs of progress toward raising the U.S. debt ceiling to avoid the catastrophic potential outcome of defaulting on debts. In Greece, the Athens General Composite Index soared 7% on Monday after the New Democracy, ruling Conservative Party, secured a firm lead in the elections on Sunday. Germany’s DAX fell 0.32% on Monday after closing at a record high on Friday, while the French CAC fell 0.18% but, in the UK, the FTSE100 rose 0.18%.

The local market closed the first trading session of the week 0.22% lower, weighed down by investors selling out of real estate and communication services stocks, which offset a 1.5% rally for the tech sector. Tyro Payments (ASX:TYR) tanked over 16% on Monday after Potentia Capital walked away from takeover talks with the payments company following Potentia’s completion of due diligence into Tyro. New regulations in the buy now, pay later sector also sent shockwaves through the share prices of key players like Zip Co (ASX:ZIP) and Block (ASX:SQ2), parent company of Afterpay. The regulations set to be imposed on the BNPL providers will include tougher requirements for credit checking to avoid consumers taking on unaffordable debt through use of the pay later options.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are expecting the local market to open 0.07% higher.
• On the commodities front this morning, oil continued its decline into a third day on Monday as investors continue to assess the stop-start negotiations underway in the US over the debt ceiling crisis. Investors are concerned about the impact the pending debt ceiling outcome will have on energy demand from China’s lacklustre economic recovery, in addition to the possibility of a recession in the US. Oil has rebounded this morning to trade 0.64% higher at US$72.15/barrel. Gold is trading 0.22% lower at US$1972.14/ounce and iron ore is down 1.81% at US$108.50/tonne.
• AU$1.00 is buying US$0.67, 92.16 Japanese Yen, 0.53 British Pence and NZ$1.06.
• Stocks trading ex-dividend today include Amcor (ASX:AMC) and Elders (ASX:ELD). 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 increased the rating on AFT Pharma (ASX:AFP) from a hold to a buy and have increased the price target on the drug development company from $3.16 to $4 following the release of the company’s FY23 results including a 27% increase in product sales revenue to $156.5 million and a 180 basis points increase in gross profit margin to 46.3%. The company also has a short-term catalyst in October 2023 in the upcoming approval date for Maxigesic IV (4) in the US where commercial launch triggers a $6 million milestone.
• Trading Central has identified a bearish signal on Magell

The Aussie share market advanced 0.44% this week (Mon-Thu), led by the energy sector gaining almost 2% and the information technology sector adding 1.97%. Investors have regained appetite for technology stocks as inflation eases in the US.

In this week's wrap, Grady covers the:

• (0:17) US debt debate and important next steps
• (1:40) Bank of England's rate hike decision 
• (2:17) Healthcare sector movers and shakers
• (4:22) Best performing stocks in the ASX200
• (5:29) Most traded stocks & ETFs by Bell Direct clients
• (6:01) Three economic news items to watch out for 

On Wall Street overnight, US equities closed mixed. While the Nasdaq closed the higher, the Dow Jones closed more than 200 points lower, or 0.66%, the fourth straight day of losses, and the S&P500 dropped 0.17%. The major benchmarks were dragged down my Disney shares falling 8% the day after the media giant released its fiscal second-quarter results. The results showed that higher prices helped to narrow Disney’s losses, however subscriber growth was significantly lower. Disney is also taking on impairment charges of US$1.5 to US$1.8 billion, as the company removes more content from its streaming platforms. 

Also overnight, the producer price index in the US, which is measuring wholesale prices, increased very slightly by 0.2% in April. This PPI data followed the consumer price index report out earlier this week, which showed that US inflation rose 4.9% from a year ago, which was below expectations. 

European markets closed marginally lower, following the Bank of England’s interest rate hike, which was a 25-basis point hike to 4.5%. The announcement is in line with expectations in the UK, and is the 12th consecutive rate increase. 

What to watch today:

• Following global markets overnight, the Australian market is set to open lower this morning, with the SPI futures suggesting a fall of 0.11%. 
• In economic data today, Westpac’s consumer confidence data for May will be out at 11:30am AEST. Consumer confidence is expected to fall by 4.3% this month, after it rose by 9.4% in April to its highest since June last year. 
• As for company announcements to watch out for today, News Corp (ASX:NWS) and REA Group (ASX:REA) are set to release quarterly earnings. And Ampol (ASX:ALD) and QBE Insurance (ASX:QBE) will hold their AGMs today. 
• In commodities, 
  • Oil prices are lower, amid persistent demand concerns. 
  • Silver has sharply declined, retreating from a 14-month high as concerns of lower industrial demand outweighed the Fed’s dovish outlook. 
  • Copper is trading at its lowest level in four months, as low demand outweighed tight supply, and as the reopening of the Chinese economy has not lived up to expectations of a sharper recovery. 
  • And iron ore is currently flat, after rebounding from the five-month low touched last week on hopes that demand could pick up in the second quarter. 

Trading Ideas:

• Bell Potter maintains its buy rating on Neuren (ASX:NEU) and have increased their 12-month price target from $13.67 to $16.50. At NEU’s current share price of $13.37, this implies 23.4% share price growth in a year. 
• Trading Central has identified a bearish signal in South32 (ASX:S32), indicating that the stock price may fall from the close of $4.06 to the range of $3.50 to $3.60 over 13 days, according to the standard principles of technical analysis. 

Next week, we’ll be brining you the Morning Bell in written format, while we are travelling for conferences, so keep an eye on Bell Direct’s social media platforms for our market commentary. 

Wall Street closed mixed on Wednesday after US inflation data for April was released showing the CPI rose 4.9%, the lowest level since April 2021, which was also lower than economists’ expectations of a 5% rise. The reading remains above the Fed’s target zone however is a sign that that aggressive rate hike strategy so far, but the fed is starting to have an effect in cooling economic growth. 

Over in Europe, markets closed lower as investors in the region digested the latest inflation report out of the U.S. Technology stocks in Europe rose as investors in the region, like in the U.S., saw the inflation reading as a positive sign for high growth stocks, while investors also await an interest rate decision out of the Bank of England today, which is expected to be a 12th consecutive rate hike.

The local market closed 0.12% lower on Wednesday, as a near 1% rise for healthcare stocks was offset by losses in the financials and communication services sectors. Healthcare stocks were boosted by the release of the Australian Budget on Tuesday with the inclusion of through $3.5bn to triple the bulk-billing incentive that GPs receive, and hundreds of millions to better coordinate healthcare through digitisation of records and increasing Medicare rebates. The government has also promised $263.8m over 4-years for a new lung cancer screening program, $113 million for the National Immunisation Program, and $445.1m for the Workforce Incentive Program to help practices employ nurses and other health professionals.

The local financial sector had a lacklustre Wednesday possibly due to a few reasons. Firstly, National Australia Bank (ASX:NAB) and Bank of Queensland (ASX:BOQ) went ex-dividend yesterday, which generally means the stock will trade lower on the ex-dividend date. Westpac (ASX:WBC) goes ex-dividend today and ANZ Group (ASX:ANZ) trades ex-dividend on the 15th May so we might see some slides in their respective share prices on those key dates.

What to watch today:

• On the commodities front this morning, oil is trading 1.24% lower at US$72.80/barrel, gold is down just 0.24% at US$2029/ounce and iron ore is flat at US$107/tonne.
• On the economic data front today, Westpac Consumer Confidence data for May is released with the market expecting a decline from 85.8 points in April to 82.1 points in May amid ongoing rate hikes out of the RBA and tough economic conditions. China’s inflation rate data for April is also released today with consensus expecting a decline to 0.4% from 0.7% in March. And the Bank of England will release its interest rate decision, with the market expecting a 25-basis point rate hike to be announced.
• The Aussie dollar is buying US$0.68, 91.07 Japanese Yen, 53.6 British Pence and NZ$1.06.
• Stocks trading ex-dividend today include Westpac Banking Corporation and Challenger. 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 its price target on Appen (ASX:APX) from $2.25 to $2.05 and maintain a sell rating on the AI data services tech company after the company released a trading update saying ‘’the challenging external operating and macroeconomic conditions that were notes at the FY22 result have persisted into FY23’ and included results for the first four months of the year of NPAT dropping 24.7% and revenue down 21.4%.
• Trading Central has identified a bullish signal on Cleanaway Waste Management (ASX:CWY) following the formation of a pattern over a period of 51-days which is roughly the same amount of time the share price may rise from the close of $2.67 to the range of $2.90 to $2.96 according to standard principles of technical analysis.