Between the Bells

The all-important Australian budget was released last night in the first surplus for 15 years at a figure of $4.2bn surplus for 2022-2023 and massively reduced budget deficits in the forecasted years to come, with the key winners being aged care workers through receiving a pay increase of 15%, women through cheaper childcare and funding toward boosting the number of women in apprenticeships, and all Aussies through a cost of living package worth $14.6bn. The surplus budget has been driven by high commodity prices, a strong jobs market and a boost in net migration. 

The big banks have been caught up in a regional-banking fear sell-off over recent weeks and investors have responded negatively to some of the respective quarterly results updates, however for the likes of Westpac the latest results included a 22% jump in profit and the declaration of a 70-cps dividend. Investors have been hawk eyeing the big-banks provisions for doubtful debts which have risen and any declines in net interest margins which for NAB appear to have peaked, with NIM down at 1.77% and Bad and doubtful debts up to $393m, well above consensus expectations. CBA released quarterly results yesterday and despite profits jumping 10% on the PCP to $2.6bn, investors sold out as net interest margin came in 2% lower during the quarter and provisions rose to $5.7bn.

Over in the US today stocks closed lower as investors fear turbulence on the regional banking front, in addition to preparing for key inflation data readings out later this week in the form of US CPI and PPI readings. Investors are also keeping a close eye on the US debt ceiling progression. The Dow Jones fell 0.17% the S&P500 lost 0.46% and the tech-heavy Nasdaq fell 0.63% on Tuesday.

Investors in the US will be keeping a close eye on debates in the region over the coming weeks around the US debt ceiling, with US Treasury Secretary Janet Yellen saying failure to raise the debt ceiling would result in an economic catastrophe.

Over in Europe, markets closed lower as investors look ahead to US inflation data out this week, in addition to lower oil prices and weak Chinese trade data weighing on markets yesterday. Germany’s DAX closed flat, the French CAC fell 0.59% and, in the UK, the FTSE100 fell 0.18%.

The local index closed 0.17% lower yesterday, weighed down by a sell-off in real estate stocks possibly due to a number of reasons with investors maybe taking some profits from the rally in the sector last week, or the investor confidence in the sector sliding amid rising interest rates and predictions for an increasing number of defaults on mortgages to come.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open the midweek session 0.29% lower.
• On the commodities front this morning, oil is trading 0.51% higher at US$73.53/barrel, gold is up 0.76% at US$2036.69/ounce and iron ore is up 7.54% at US$107/tonne on speculation of additional policy support for China’s economic recovery.
• The Aussie dollar is buying US$0.68, 91.44 Japanese Yen, 53.96 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has downgraded the price target on Aeris Resources (ASX:AIS) from 95 cents per share to 89 cents per share following the release of the precious metal producer’s March quarter results including production of copper falling short of guidance and increased All-In-Sustaining-Costs higher than Bell Potter expected. The company also lowered its copper equivalent production and EBITDA guidance for FY23.
• Trading Central has identified a bearish signal on Myer (ASX:MYR) following the formation of a pattern over a period of 76-days which is roughly the same amount of time the share price may fall from the close of $0.81 to the range of $0.50 - $0.56 according to standard principles of technical analysis.

In New York overnight, there was little change as investors look ahead to key inflation readings, including April’s consumer price index report. The S&P500 closed with a small gain of 0.05%, the Nasdaq added 0.18% and the 30-stock Dow Jones closed 0.17% lower. 

European markets closed higher as traders digested rate hikes by the Federal Reserve and the European Central Bank at the end of last week. Traders now look ahead to more corporate earnings, economic data, and a Bank of England rate decision this week. 

What to watch today:

• The Australian market is set to open higher this morning, with the SPI futures suggesting a rise of 0.42%. 
• Today watch Commonwealth Bank (ASX:CBA)’s share price movements as they’re set to release their quarterly report. Yesterday, Westpac announced a $4 billion profit from October to March, 22% higher than the corresponding amount from the previous financial year. 
• Coronado Global Resources (ASX:CRN) is also reporting today. 
• In commodities, 
• The price of oil has rebounded further from a one-and-a-half year low on a weaker US dollar, expectations of supply cuts by OPEC and as concerns eased over an economic downturn in the US economy. 
• Gold is also trading higher, recovering some earlier losses from the previous session. Last week, gold reached nearly record highs after the Fed announced the 25-basis point hike. 
• And iron ore is trading at its lowest level in five months, due to evidence of low demand from Chinese steelmakers. 

Trading Ideas:

• Bell Potter maintains a BUY rating on Lynas Rare Earths (ASX:LYC) and have increased their price target by 11% to $8.90. At LYC’s current share price of $7.37, this implies 21% share price growth in a year. 
• And Trading Central have identified a bullish signal in Region Group (ASX:RGN) indicating that the stock price may rise from the close of $2.56 to the range of $2.76 to $2.80 over 50 days according to the standard principles of technical analysis. 

It was turbulent week on global markets last week following the announcements of rate hikes across the major global markets which in some cases were expected, while others, like out of the RBA, came as a shock to investors.

Wall St rallied on Friday after robust jobs data indicated the economy is faring better than expected despite the Fed’s aggressive rate hike stance to date. April’s job data for the US showed jobs growth accelerated by 253,000 new jobs in April, unemployment fell to 3.4% and wage gains increased solidly regional banks felt some much-needed relief across the US on Friday on analysts’ upgrading a number of banks believed to have been oversold. PacWest Bankcorp soared almost 82% while Western Alliance jumped 49.2%. Apple shares lifted over 4.5% on Friday after the tech giant released quarterly results including sales declining just 2.5% which beat expectations. The Dow Jones industrials index added 1.7% in its biggest 1-session rise since January 6th, while the S&P500 rose 1.9% and the tech-heavy Nasdaq added 2.3%.

Over in Europe markets also closed higher on Friday as investor assess the monetary tightening cycle in the region and await key economic data out this week. German activewear giant Adidas lifted 8% on Friday after releasing better-than-expected results. Germany’s DAX added 1.44% on Friday, the French CAC rose 1.26% and, in the UK, the FTSE100 rose almost 1%.

The local market closed 0.37% higher on Friday, led by a surge in REIT stocks with the sector adding over 2%, while technology, consumer discretionary and communication services stocks offset some of the market’s gains, with these sectors ending Friday’s session in the red.

What to watch today:

• Ahead of the local trading session, the SPI futures are anticipating the ASX to open 0.89% higher to start the new trading week higher on the back of Friday’s global rally. 
• On the commodities front this morning, oil has rebounded from last week’s slump to trade 4.05% higher at US$71.34/barrel, gold is down 1.7% at US$2016.28/ounce and iron ore is own 3.86% at US$99.50/tonne.
• On the economic data front today, NAB Business Confidence data for April is released today with the forecast of a rise to 1 point from -1 point in March, in a sign the market expects conditions to begin easing for local businesses.
• The Aussie dollar is buying US$0.68, 91.13 Japanese Yen, 52.67 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has downgraded its price target on Janus Henderson (ASX:JHG) from $43.81 to $41.29 following the release of the company’s first quarter results. Bell Potter noted that while the company continues to make progress on the new strategy, short-term investment case remains relatively weak, with uncertainty on performance fees, no operating margin improvement and no obvious catalyst to spark re-rating.
• Trading Central has identified a bullish signal on Region Group (ASX:RGN) following the formation of a pattern over a period of 45-days which is roughly the same amount of time the share price may rise from the close of $2.53 to the range of $2.65 to $2.69 according to standard principles of technical analysis.

The Aussie share market declined this week, falling 1.6% (Mon-Thu), with only the utilities sector making gains. Financials and energy weighed down on the market the most. Also contributing to the market's decline were interest rate hike announcements in some of the key markets around the world.  
 
 In this week's wrap, Sophia covers:

• (0:22) The RBA's unexpected announcement
• (1:14) What happened to banking stocks this week
• (1:51) The impact of recent moves by the Federal Reserve
• (4:21) The best performing stocks in the ASX200
• (4:43) The most traded stocks & ETFs by Bell Direct clients
• (5:23) Five economic news items to watch out for

Wall Street closed the midweek session in negative territory after the Federal Reserve announced a 25-basis point rate hike overnight, marking the 10th straight rate hike in the US in a bid to tackle the country’s 40-year high inflation. Early investor optimism was dented after Fed Chair Jerome Powell ruled out cutting interest rates as he doesn’t expect inflation to fall quick enough. The Dow Jones industrials index fell 0.8%, the S&P500 lost 0.7% and the tech-heavy Nasdaq dropped 0.46%. While interest rates have risen again in the US, there are signs of the tight labour market loosening as US job openings fell for a third straight month in March and layoffs increased to the highest level in more than 2-years. The manufacturing sector is also contracting, and the consumer is struggling with the rising cost of living in the world’s largest economy. On the contrary, the US ISM Services PMI increased to 51.9 points in April from 51.2 points in March, which was higher than expectations and marks the fourth consecutive month of growth in the services sector.

The local market closed almost 1% lower on Wednesday in the aftermath of the RBA’s shock 25-basis point rate hike announcement on Tuesday. Further turbulence in the US banking sector and a slump in oil prices caused investors to flee financial and energy stocks on Wednesday, while communications services and consumer staples stocks were the only sectors to end the midweek session in the green. The energy sector dived over 2% on Wednesday as oil fell 1.5% on Wednesday to US$70.60/barrel amid concerns about the US economy discussing ways to avoid a debt default and investors preparing for further rate hikes to come in the region. US Treasury Secretary Janet Yellen said the US government could run out of money within a month while the White House said President Joe Biden would not negotiate over the debt ceiling, but said he will discuss starting a ‘separate budget process’. While it was a red day on the ASX yesterday, gold stocks rallied as investors shifted into the safe-haven assets amid rising fears of further banking turbulence to come. Gold Road Resources led the winners on the local bourse yesterday, rising 4.68%, while West African Resources added 4.28% and Evolution Mining lifted 3.74%.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open almost half a percent lower on Thursday.
• On the commodities front this morning, the price of oil has dived over 8% to trade at US$65.99/barrel following the Fed’s rate hike decision, while gold is up 1.7% at US$2050/ounce and iron ore is flat at US$105/tonne.
• The Aussie dollar is buying US$0.67, 89.65 Japanese Yen, 53.20 British Pence and NZ$1.07.
• Stocks trading ex-dividend today include Jupiter Mines (ASX:JMS) and Waterco (ASX:WAT). 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:

• Trading Central has identified a bearish signal on Fortescue Metals Group (ASX:FMG) following the formation of a pattern over a period of 29-days which is roughly the same amount of time the share price may fall from the close of $19.99 to the range of $16.60 to $17.20 according to standard principles of technical analysis.
• Trading Central has also identified a bearish signal on Nine Entertainment (ASX:NEC) following the formation of a pattern over a period of 202 days which is roughly the same amount of time the share price may fall from the close of $2.03 to the range of $1.57 to $1.65 according to standard principles of technical analysis.

The Federal Reserve meeting has kicked off, which saw European markets close lower, with oil and gas stocks weighing down on the market the most. 

In the US, the Dow Jones tumbled more than 300 points or 1.08% amid concerns on the banking sector and ahead of the Fed’s rate decision. The S&P500 and the Nasdaq also both declined more than 1%. 

What to watch today:

• The SPI futures are suggesting our local market will drop 0.56% at the open, following the global sell-off. 
• Looking at commodities, 
• Oil has sharply fallen further, currently trading 5.4% lower at around US$71.56 per barrel. This marks a five-week low and is due to concerns about a possible recession resulting from interest rate hikes by central banks, as this could ultimately affect energy demand. The RBA unexpectedly raised rates yesterday, and the Federal Reserve and the European Central Bank are set to make announcements this week. 
• Meanwhile iron ore is trading flat. 
• Gold is approaching a 13-month high due to evidence of a slower job market, and concerns over small-cap US banks. 

Trading Ideas:

• Bell Potter maintain a Speculative Buy rating on Pentanet (ASX:5GG). The company is a licensed telecommunications carrier and cloud gaming provider based in Perth. 5GG released a third consecutive flat quarterly update, as the company is focusing on increasing its capacity to serve higher margin on-net subscribers. Bell Potter’s recommendation is based on a successfully scaled rollout of the company’s next-gen network and cloud gaming services, which can meet global tends in entertainment and data proliferation from evolving media consumption. They have lowered their valuation to $0.12, and at the stocks current share price of $0.08, this implies 46.4% share price growth in a year. 
• Trading Central has identified a bearish signal in Woodside Energy (ASX:WDS) indicating that the stock price may fall from the close of $33.38 to the range of $31.40 to $31.80 over 7 days according to the standard principles of technical analysis. 

The ASX started the week on a positive note closing yesterday’s session in the green. Utilities led the market yesterday, while tech stocks came under pressure. Gold stocks were also sold off with the price of the commodity down almost half a per cent.

Energy stocks advanced on the price of oil rallying more than 2% on Friday following strong earnings results out of the U.S. Yesterday however, oil fell 1.4% to trade below US$76/barrel on weak Chinese manufacturing activity data.

Overnight, US equities declined as investors prepare for the Fed’s meeting. Investors were focused on the banking sector, following the announcement that JP Mogan won the auction for First Republic Bank. 

On another note, investors are also watching out for news on the debt ceiling, after Treasury Secretary Janet Yellen warned the US may run out of measures to pay its debts as early as June 1st. 

What to watch today:

• Following New York overnight, the SPI futures are suggesting the Australian market will open 0.07% lower this morning. 
• In commodities: 
  • Oil has extended a two-week decline, as unexpected weak manufacturing Chinese data raised demand concerns for the crude importer. 
  • Iron ore continues to decline due to the low demand from Chinese steelmakers. 
  • Looking at the gold price – overall for April, the gold price increased for the second consecutive month. Currently however, gold is trading lower as investors await another rate hike by the Fed this week. The Fed is widely expected to raise rates by 25 basis points on Wednesday, in response to robust US economic data and persistent inflationary pressures. 
• That brings us over to economic news this week, as other central banks including the European Central Bank and the RBA are also announcing monetary policy decisions this week. At 2:30pm today, the RBA will announce the latest interest rate decision for May with much of the market now expecting a second consecutive pause.

Trading Ideas:

• Bell Potter have upgraded their recommendation on GrainCorp (ASX:GNC) from a Hold to a Buy, and maintain their price target of $8.00. At the stock’s current share price of $6.95, this implies 15.1% share price growth in a year. 
• Trading Central has identified a bearish signal in oOh media (ASX:OML) indicating that the stock price may fall from the close of $1.61 to the range of $1.50 to $1.52 over 20 days, according to the standard principles of technical analysis. 

The Australian market is set to start the week higher, after Wall Street ended last week with all three major benchmarks rallying. The Dow Jones had its best month since January, gaining 250 points, while the S&P500 closed 0.8% higher and the Nasdaq up 0.7%. 

What to watch today:

• This morning, the SPI futures are suggesting that our local market will rise 0.74% at the open. 
• In commodities, 
  • Oil has advanced almost 3%, regaining earlier losses, after prospects of a global economic slowdown hurting energy demand, weighed signs of tightening supplies. 
  • Gold is also in the green as heightening global economic uncertainties and a weaker US dollar lifted demand for the safe-haven asset. 
  • Iron ore has fallen a further 2.8%, now trading around US$105 per tonne, the lowest since early December, as a demand downturn from steelmakers risked the oversupply of iron ore. 

Trading Ideas:

• Bell Potter maintains their Buy rating on Perpetual (ASX:PPT), after the company’s Q3 update showed Funds Under Management in the asset management business increased to $210 billion, a 4% increase over the quarter based on the proforma PPT Assets Under Management of $93.7 billion after the inclusion of $110.2 billion of Funders Under Management from Pendal. Bell Potter says that they believe the shares were heavily sold off in late 2022 over fears of continued outflows and doubts about the achievability of the merger. They have increased their 12-month price target by 3% to $30.60, and at PPT’s current share price of $24.53, this implies 24.8% share price growth in a year. They expect the shares to perform well as investors realise the value being created in the combined business. 
• Bell Potter also maintain a Buy rating on Telix Pharmaceuticals (ASX:TLX), following the recent quarterly report which delivered a 20% beat against Bell’s revenue targets, FY23/24 revenues are upgraded by 24% and 29% respectively, along with large increases to earnings. Bell Potter’s price target has been upgraded by 55% to $14.00, and at the stock’s current share price of $10.15, this implies 37.9% share price growth in a year. 

The Aussie share market declined this week, falling 0.5% (Mon-Thu), as the materials sector weighed down on the market the most, dropping 2.2%. Financials, consumer discretionary and utilities are also lower, while communication services and industrials advanced. 
 
 In this week's wrap, Sophia covers:

• (0:16) The demand outlook from the leading iron ore importing country
• (1:08) China's crippling property market
• (1:49) Bell Potter's forecast for Mineral Resources (ASX:MIN)
• (2:48) The best performing stocks in the ASX200
• (3:57) The most traded stocks & ETFs by Bell Direct clients
• (5:00) Four economic news items to watch out for

In New York overnight, markets had a strong run with all three major benchmarks closing with strong gains. The Dow Jones and the S&P500 both had their best session since January, closing 1.6% and 1.96% higher respectively. Meanwhile the Nasdaq rallied 2.43% higher, as strong results from Meta Platforms boosted tech-related companies. Meta shares leapt 14%, after the company reported quarterly revenue that topped expectations, and issued a positive forecast. 

European markets were also in the green, as strong corporate earnings overcame the concerns around the US banking sector. 

What to watch today:

• The Australian market is set to jump 0.75% at the open this morning, following Wall Street’s advance. 
• In commodities, 
• Oil is trading higher, after losing nearly 6% in the past two sessions, as recession fears and renewed concerns about the banking sector outweighed falling US inventories and the prospect of weaker global supplies. The US oil benchmark also gave up all the gains from earlier this month when OPEC+ announced a surprise production cut.
• Gold is at its lowest level in over three weeks with a rebound in risk sentiment and expectations of tighter monetary policy from the Fed. 
• And iron ore prices fell under US$110 per tonne, the lowest since December, as a demand downturn rom steel makers risked the oversupply of iron ore. 
• Quarterly reports from the following companies are set to be released today, so keep watch of the share price movements of these stocks. These include Coles (ASX:COL), IGO (ASX:IGO), Mirvac Group (ASX:MGR), Origin Energy (ASX:ORG), Oz Minerals (ASX:OZL), ResMed (ASX:RMD) and Volpara Health Technologies (ASX:VHT). 

Trading Ideas: 

• Bell Potter have a Speculative Buy rating on PointsBet Holdings (ASX:PBH), after a recent media report suggested the company could be considering a potential sale of its US business for around US$500 million. Bell Potter says the value looks reasonable or even conservative if other media reports are accurate. The company has also considered the potential sale of its Australian business for around AUD $250 million. Bell Potter have increased their valuation from $2.75 to $3.00, and at the stock’s current share price of $1.65, this implies 81.8% share price growth in a year.
• Trading Central have identified a bearish signal in Austal (ASX:ASB) indicating that the stock price may fall from the close of $1.65 to the range of $1.46 - $1.50 over 18 days, according to the standard principles of technical analysis.