Between the Bells

Wall Street wavered during the midweek session before closing mixed as investors fears of a banking crisis rise on the back of First Republic Bank’s first quarter results and subsequent 49% decline on Tuesday. Upbeat earnings out of Alphabet, Microsoft and Boeing softened the sharp losses but weren’t enough to turn Wall Street positive at the closing bell on Wednesday. At the closing bell, the Dow Jones fell 0.68%, and the S&P500 lost 0.38%, but the tech-heavy Nasdaq added almost half a percent buoyed by strong earnings results.

Over in Europe, markets closed lower as investor fears of a banking crisis worsened. London-listed bank Standard Chartered posted a 21% rise in pre-tax profit which beat estimates and helped restore some relief in the European banking sector. Germany’s DAX ended the midweek session down 0.48%, the French CAC dropped 0.86%, and in the UK, the FTSE100 fell 0.49%.

The local market rallied after midday yesterday following the release of Australia’s inflation data for Q1, showing inflation cooling to 7% over the twelve months to the March quarter, in a sign inflation has peaked down under. Quarter-on-quarter, inflation rose 1.4%, with the highest price rises from Medical and hospital services, up 4.2%, tertiary education, up 9.7%, and gas and other household fuels, up 14.3%. The rise to 7% for the March quarter was slightly above consensus expectations of a rise to 6.9% but does show inflation is beginning to cool.

The rise in medical and hospital services is to be expected in the March quarter as this is generally the period GPs and other health service providers review their fees, and the Medicare Safety Net is reset at the start of every calendar year. Tertiary education fees are also indexed at the start of the year. The significant rise in gas and other fuel costs reflects major events over the past year globally including Russia’s war with Ukraine and unplanned outages at coal fired power stations according to the ABS. At the closing bell of the midweek session though, a sharp sell-off in Utilities stocks weighed the local bourse down to close 0.08% lower.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are anticipating the local index to open 0.22% lower to start Thursday’s trading session in the red.
• On the commodities front this morning oil continues to trade sharply lower, down 3.68% at US$74.23/barrel, gold is down 0.41% at US$1989.7/ounce and iron ore is down 2.74% at US$106.50/tonne.
• On the economic calendar today, US GDP growth rate data for Q1 is released tonight with consensus expecting a decline in economic expansion to 2% from 2.6% in Q4.
• On the Aussie dollar front, AUD$1.00 is buying US$0.66, 88.32 Japanese Yen, 53.43 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased its price target on Gold Road Resources (ASX:GOR) from $1.90 to $2.05 and maintain a buy rating on the gold miner following the release of the company’s Q1 results including record quarterly free cash flow of $44.2m which beat Bell Potter expectations. The company also maintained production guidance and ended the quarter with cash and equivalents of $128m, up $47m. GOR is debt free and updated on retained stockpiles at Gruyere which stand at 5.9 million tonnes at 0.72 grams per tonne which provides an ongoing buffer against mining disruption.
• Trading Central has identified a bearish signal on Rio Tinto (ASX:RIO) following the formation of a pattern over a period of 94-days which is roughly the same amount of time the share price may fall from the close of $111.94 to the range of $98-$101 according to standard principles of technical analysis.

Wall Street closed lower on Tuesday as investor fears of a banking crisis reignited. Shares in First Republic Bank tanked more than 49% on the release of the regional bank’s latest quarterly results including deposits dropping 40% to US$104.5bn in Q1 but have since stabilised and the bank is instilling cost cutting measures including cutting head count by 20% to bolster its balance sheet. The results spooked investors about broader weakness in the banking sector following the recent collapses of Signature Bank and Silicon Valley Bank. The results are the first time this earnings season we have seen investors react as it has been a very uneventful reporting period so far. 

The local market was closed yesterday for the ANZAC day public holiday but has started the week on a very turbulent note after some of the key iron ore miners revealed that production was lower in the March quarter, which comes at the same time iron ore slumped to its lowest level since December last week due to weaker-than-expected demand from Chinese steel mills and reports of stockpiles at ore ports. South32 was the worst performer, dropping 7.4% on Monday after revealing lower production of iron ore this quarter, while BHP Group (ASX:BHP) and Fortescue Metals Group (ASX:FMG) each fell 2% and 3.4% on Monday respectively. The red-hot lithium stocks of 2022 have continued coming under pressure in recent days after Chile’s government, which geographically boasts the world’s second largest reserves of lithium, announced a new plan for the country to take a majority stake in all lithium projects in the region. This bid for state control in Chile could be a positive for local Australian lithium miners and producers as it may push up prices of the green commodity and divert capital to other producers like in Australia.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the local index to start the midweek session 0.52% lower on the back of global market turbulence overnight.
• On the commodities front this morning, oil remains under pressure this morning, trading 2.08% lower at US$77.12/barrel, gold is up 0.4% at US$1996.91/ounce and iron ore is sharply lower, down 5.6% at US$109.50/tonne.
• On the Aussie dollar front, AUD$1.00 is buying US$0.66, 88.40 Japanese Yen, 53.57 British Pence and NZ$1.08.
• On the economic data front today we will see investors respond to Australia’s inflation rate data for Q1 released just after midday AEST with consensus expecting a fall to 6.9% for Q1 from 7.8% in Q4, which if it comes in at that level will imply inflation has peaked down under and the RBA’s rate hiking efforts are working. This data will also play a role in determining the RBA’s move next week on Tuesday as to whether another 25-basis point rate hike is required or if the pause can continue.
• The S&P Global Flash US Composite Purchasing Manufacturers Index climbed to an 11-month high of 53.5 in April, following 52.3 in March – indicating the business conditions remain resilient including and provides another case for the Fed to continue raising interest rates in 

Trading Ideas:

• Bell Potter has increased its rating on Cyclopharm (ASX:CYC) from a hold to a buy and has raised the price target from $1.70 to $2.80 on the medical device company following the FDA notifying the company that its response for the New Drug Application for Technegas is now complete and eligible for review with a goal date for the announcement of a potential approval of 29th September 2023.
• Trading Central has identified a bullish signal on Flight Centre (ASX:FLT) following the formation of a pattern over a period of 25-days which is roughly the same amount of time the share price may rise from the close of $19.19 to the range of $20.80 to $21.10 according to standard principles of technical analysis.

Wall Street ended little unchanged across the key indices on Friday, but down for the week as investors assessed mixed corporate earnings results against the increasing chance of a recession in the U.S. later this year. Shares in Proctor & Gamble (ASX:PG1) rose 3.5% on Friday after it reported a sales boost from higher prices introduced across the portfolio of consumer products. Albermarle (ASX:ALB), the world’s largest lithium producer, on the other hand tanked 10% after Chile said it would nationalise its lithium industry, a key operational region for Albermarle over the last 40-years.

Earnings season in the US has broadly kicked off in a very uneventful manner, with investors believing profits beating expectations are unsurprising as the expectations were set very low amid the high interest rates, and high-cost environment.

Over in Europe, markets closed higher as investors responded to corporate earnings results released in the region. German software giant SAP rose 5% on Friday after reporting higher revenue and operating profit that beat expectations, while Swiss building materials manufacturer Holcim also beat expectations for profits and revenue as well as raising its guidance.

Germany’s DAX rose 0.54% on Friday, the French CAC added 0.51% and, in the UK, the FTSE100 climbed 0.15% on Friday.

The local market closed almost half a percent lower on Friday as the miners and bankers weighed on the local bourse. A build up in port inventories of iron ore and lowered demand from Chinese steel mills caused a drop in the price of iron ore to a four-month low, which caused investors to sell out of materials stocks on Friday.

What to watch today: 

• Ahead of the local session here in Australia, the SPI futures are anticipating the ASX to open 0.11% lower on the back of Wall Street’s turbulent end to last week.
• Taking a look at commodities this morning, oil is down 0.2% at US$77.80/barrel, gold is up just 0.03% at US$1982/ounce and iron ore is sharply lower, down 3.33% at US$116/tonne amid stockpiles in port inventories.
• On the foreign exchange front, AU$1.00 is buying US$0.67, 89.69 Japanese Yen, 53.45 British Pence and NZ$1.09.

Trading Ideas: 

• Bell Potter has decreased its price target on Lynas Rare Earths (ASX:LYC) from $8.06 to $8 but maintain a buy rating on the rare earths company following the release of the company’s quarterly report including the highest ever output of NdPr from its Malaysia plant. Bell Potter’s price target downgrade is due to the uncertainty faced for the company’s Malaysia plant which could face a potential forced shutdown from July 1 due to domestic regulator concerns about radiation levels from the process of cracking and leaching. The next 6-months will be a transitional period for Lynas and remains a high-risk to earnings as the company relocates its cracking and leaching operations from Malaysia to Australia.
• Trading Central has identified a bullish signal on Hearts & Minds Investments (ASX:HM1) following the formation of a pattern over a period 187-days which is roughly the same amount of time the share price may rise from the close of $2.40 to the range of $2.75-$2.83 according to standard principles of technical analysis.

The Aussie share market traded flat this week, rising just 0.01% (Mon-Thu), as a rally in Financial, REIT and consumer discretionary stocks was offset by the energy sector plunging over 2.8%. Energy stocks were rocked by falling commodity prices, especially gas dropping on news of a global oversupply, while oil prices dropped over 2% later in the week.

In this week's wrap, Grady covers:
 •    (0:48) Why has the healthcare sector outperformed the broader market
 •    (1:59) Neuren & Telix Pharmaceuticals making sound progress
 •    (4:11) The best performing stocks in the ASX200
 •    (5:03) The most traded stocks & ETFs by Bell Direct clients
 •    (5:38) Three economic news items to watch out for 

US equities closed lower overnight, with all three major benchmarks in the red. The decline followed a mixed bag of corporate earnings, including disappointing results from Tesla, which showed a fall in net income, and the company’s announcement of further price cuts. CEO Elon Musk stated that he was willing to sacrifice margins in a push for market share. All three major averages are on track for a week of losses. The Dow and the S&P500 on track for their worst weekly performances since March. 

European stocks were mostly lower and investors are considering the outlook for interest rates, after UK inflation unexpectedly held above 10%, while wage rises slowed by less than expected. 

What to watch today:

• The SPI futures are suggesting the Australian market will drop 0.52% at the open this morning, following the broad selling globally overnight. 
• In commodities: 
  • Oil prices have sharply fallen to a nearly-three week low, pressures by lingering concerns that higher interest rates could dampen growth and impact demand. 
  • Meanwhile gold is trading higher, recovering from yesterday’s losses to trading at around US$2,000 an ounce, as the US dollar declined, and yields eased. 
  • Iron ore is higher, bouncing back above the US$120 per tonne mark, however remains close to the 3 ½ month low hit earlier this week. 

Trading Ideas:

• Bell Potter maintain a buy rating on Allkem (ASX:AKE), expecting cash generation to lift substantially from 2023 with ongoing strength in lithium demand, commodity prices and production growth. AKE is aiming to maintain 10% share of supply in a global lithium market experiencing unprecedented growth. Bell Potter have increased their price target from $18.61 to $19.89. At AKE’s current share price of $11.64, this implies 71% share price growth in a year. 
• Trading Central have identified a bullish signal in Flight Centre (ASX:FLT), indicating that the stock price may rise from the close of $18.94 to the range of $21.20 to $21.70 over 30 days, according to the standard principles of technical analysis. 

Wall Street had another lacklustre session overnight as investors continue to assess first quarter results as earnings season ramps up into full swing. The Dow Jones industrials index lost 0.23%, the S&P500 fell 0.01% and the tech-heavy Nasdaq gained 0.03%.

Netflix and Morgan Stanley headlined the results released on Wednesday. Netflix shares fell 3.2% after the streaming giant pushed back plans to crack down on password sharing, but for the quarter Netflix beat analysts’ estimates on earnings per share.

Morgan Stanley shares rose 0.7% despite the big bank reporting weaker-than-expected margins for investment banking, wealth, and asset management. This earnings season investors are looking out for slowing earnings growth and signs of weakening demand likely to hit corporate profits in the second half of FY23 as the Fed continues its rate hike path toward the end of the tightening cycle.

Over in Europe, markets closed mixed as investors digested the latest CPI data out of the UK. UK CPI or inflation data came in at 10.1% for March, down from 10.4% in February but well above economists’ expectations of a fall to 9.8%, in a sign inflation remains stubbornly high in the UK. Data out on Tuesday though showed wages growth in the UK slowed by less than expected in the three months to March which may encourage the Bank of England to continue raising rates at the next monetary policy meeting. Germany’s DAX rose 0.08%, the French CAC added 0.21% and, in the UK, the FTSE100 fell 0.13%.

On the local bourse yesterday, it was a muted day on the ASX, with the key index closing 0.07% higher as strong gains for materials stocks were offset by sharp losses in the consumer discretionary sector. Gold stocks did most of the heavy lifting yesterday amid a rise in the price of the precious commodity, while Telix Pharmaceuticals (ASX:TLX) was the top performing stock for a second straight session after releasing record-setting results to start the week.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open 0.09% lower following lacklustre sessions on global markets overnight.
• On the commodities front this morning oil is trading 2.26% lower at US$79.03/barrel, gold is down 0.51% at US$1994.70/ounce and iron ore is up 2.54% at US$121/tonne.
• AU$1.00 is buying US$0.67, 90.43 Japanese Yen, 53.93 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has increased its price target on RMA Global (ASX:RMY) from 20 cps to 21 cps and maintain a speculative buy rating on the company amid the digital real estate marketing company’s success in penetrating the large US market including US claimed profiles growing to 250,000 up 6.4% quarter-on-quarter, while US reviews increased 97% year-on-year.
• Bell Potter has downgraded its price target on Frontier Digital Ventures (ASX:FDV) from $1.23 to $1.05 but maintain a speculative buy rating on the company following the company completing a capital raise and the headwinds faced through difficult trading conditions in Pakistan.

The RBA meeting minutes for April were released yesterday which spooked the market into sell-off mode with hints that the RBA is eyeing off further rate hikes after pausing in April to assess economic conditions. The RBA’s board believe there is a strong case for further rate hikes to come amid concerns that the growing population and ongoing wages growth in the public sector are still not under control and in line with the slowdown in economic growth previous rate hikes have been targeting. CBA and some economists now expect the RBA to hike the nation’s cash rate by a further 25-basis points in May which will take the cash rate to 3.85%, while ANZ says the RBA could go either way. The local bourse responded negatively to the release of the RBA’s minutes yesterday, with the ASX closing the second trading session of the week down 0.29% led by a sharp sell-off in energy and consumer staples stocks. The energy sector was weighed down amid declining gas prices on the back of excess global LNG supply.

It was a big day for healthcare companies yesterday with some big news moving some key names in the sector. Drug development company Neuren Pharmaceuticals (ASX:NEU) jumped over 5% yesterday reaching a record high share price after announcing it has earned US$40m as an earnout payment from its US partner, Acadia Pharmaceuticals, for the first commercial sale of the company’s drug Trofinetide in the US. Telix Pharmaceuticals (ASX:TLX) led the market gains yesterday, soaring over 12% a day after the commercial-stage biopharmaceutical company released its quarterly cash-flow statement and accompanying activities report for the first quarter including revenue of $100.1m.

Overseas, China’s GDP growth rate data released yesterday came in at 4.5% growth year on year in the first quarter, which beat expectations of 4% growth and up from 2.9% growth in Q4 as the country ramps up operations after emerging from length COVID-19 lockdowns. Chinese retail sales also grew the most in nearly 2-years in March, increasing by 10.6% year-on-year as sales picked up especially for gold and silver jewellery.

What to watch today:

• Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open 0.12% higher to start the midweek session in the green.
• Taking a look at commodities this morning, oil is down 0.23% at US$80.65/barrel, gold is up almost half a percent at US$2004.24/ounce and iron ore is down 1.67% at US$118/tonne.
• AU$1.00 is buying, US$0.67, 90.13 Japanese Yen, 53.99 British Pence and NZ$1.08.
• There is no local economic data out today however over in the UK, the country’s inflation rate data for March will be released at 5pm AEST with consensus expecting a slight decline to 9.8% from 10.4% in February.

Trading Ideas:

• Bell Potter has downgraded its price target on Regis Resources (ASX:RRL) from $2.88 to $2.77 but maintain a buy rating on the company after the gold miner released preliminary group gold production for the March quarter 2023 of 103.7 thousand ounces which fell short of expectations and was down 11.6% quarter-on-quarter.
• Trading Central has identified a bullish signal on Cleanaway Waste Management (ASX:CWY) following the formation of a pattern over a period 32-days which is roughly the same amount of time the share price may rise from the close of $2.49 to the range of $2.61 to $2.65 according to standard principles of technical analysis.

US equities kicked off earnings week on a positive note, with all three major benchmarks making gains overnight, in fact, all three benchmarks closed 0.3% higher. US financials will be in focus this week with the Bank of America reporting tonight and Morgan Stanley reporting on Wednesday. Investors have been keeping a close eye on the banking sector after the collapse of Silicon Valley Bank last month. 

European markets closed mixed. Germany’s Dax, France’s CAC and the STOXX 600 were all lower, while the FTSE 100 rose just 0.1% by the close. 

What to watch today:

• The Australian market is set to open 0.23% lower this morning, according to the SPI futures. 
• BHP’s (ASX:BHP) takeover of OZ Minerals (ASX:OZL) was approved yesterday and will be finalised in early May. In December last year, OZ Minerals announced that it had entered a Scheme Implementation Deed with BHP. The implementation date is May 2nd, when BHP will pay $26.50 per OZL share as the Scheme Consideration, and OZ Minerals will pay $1.75 per OZL share as a fully franked special dividend. 
• In economic data, today the RBA’s meeting minutes will be released at 11:30am AEST, which will provide some insights into the meeting when the central bank decided to hold the cash rate steady for the first time in 10 months. And attention this week will be on China’s gross domestic product report on Tuesday and UK CPI numbers on Wednesday. 
• In commodities, 
  • The oil price is trading over 2% lower, as concerns mounted that further rate hikes from the Fed will hurt growth even more. However, also note that GDP growth data for China that is due to be released tomorrow, which should offer some relief for a fall in oil demand. 
  • Gold is 0.4% lower as investors continue to assess the monetary policy outlook. 
  • Iron ore is trading flat. 
• Auckland International Airport (ASX:AIA) and Hub24 (ASX:HUB) are set to release quarterly reports today, so keep watch of those share price movements today. 

Trading Ideas:

• Bell Potter have initiated coverage on Brickworks (ASX:BKW) with a buy rating. BKW is a building materials and property developer. Bell Potter says that on face value, the company looks reasonably priced relative to listed peers, however, a high presence of equity accounting masks what is relatively low-cost exposure to a residential housing recovery, with BKW’s core Building Products business trading at an approximately 11% discount to the peer group. Bell Potter’s price target is $27.00. At the stock’s current share price of $23.56, this implies 14.6% share price growth in a year. 
• Trading Central have identified a bullish signal on Core Lithium (ASX:CXO) indicating that the stock price may rise from the close of $0.93 to the range of $1.12 to $1.16 over 17 days, according to the standard principles of technical analysis. 

Wall Street closed lower on Friday as investors assessed a mixed bag of economic data against big bank first quarter earnings results. Retail sales data for March was released in the US late last week showing a 1.2% decline for the month compared to expectations of a 0.4% drop. Despite this reading, unfavourable results from consumer sentiment and industrial production data add further support for the Fed to raise the nation’s cash rate by 25-basis points at the next FOMC meeting. The Dow Jones industrials index fell 0.42%, the S&P500 lost 0.21% and the tech-heavy Nasdaq fell 0.35%.

Big banks began releasing first quarter results on Friday with BlackRock (ASX:BKT) rising 3% after beating profit expectations, alongside Citigroup, and JPMorgan rallying on bumper earnings results that also beat expectations. Earnings reports being released by the banks enters full swing this week so we can expect the markets to move accordingly based on how well the big banks performed in the first quarter, especially in the wake of the regional banking crisis earlier this month.

Over in Europe, markets ended the final trading session of the week higher, led by a rise in the banking sector after JPMorgan Citigroup and Wells Fargo beat estimates for the first quarter and ahead of earnings season this week for the big banks. The STOXX600 rose 0.53%, Germany’s DAX rose half a percent, the French CAC added 0.52% and, in the UK, the FTSE100 rose 0.36%.

The local index closed 0.51% higher on Friday after a turbulent session on Thursday following the release of unemployment data showing the country’s unemployment rate remains ultra-low at 3.5%, in a sign for the RBA to continue its rate hike journey in May after April’s pause. Investor sentiment was lifted on Friday though by a rally for materials stocks amid a rise in commodity prices and demand outlook, while financials stocks were lifted by strong earnings results out of some big banks in the US.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open 0.16% higher to start the new trading week on a positive note.
• On the commodities front this morning oil is trading 0.44% higher at US$82.52/barrel, gold is down 1.75% at US$2004/ounce and iron ore is flat at US$120/tonne.
• There is no local economic data released today however investors will be eagerly awaiting the release of the RBA’s meeting minutes for April out tomorrow to gain an insight into how the RBA are thinking about future rate hikes to tackle Australia’s current level of inflation.
• Stocks trading ex-dividend today include New Hope Corporation (ASX:NHC). If you’ve been thinking about this coal mining stock, 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 downgraded its rating on Breaker Resources (ASX:BRB) from a buy to a sell and has downgraded the price target from $0.62 to $0.53 following the receipt of a takeover offer from Ramelius Resources that has been unanimously recommended by Breaker’s board and major shareholders to accept the offer. The takeover offer is worth $130.7m and implied a share price offer of $0.40/share at the time of the all-scrip takeover offer being received.
• Trading Central have identified a bullish signal on ARB Corporation (ASX:ARB) following the formation of a pattern over a period of 76-days which is roughly the same amount of time the share price may rise from the close of $32.61 to the range of $40.25 to $42.00 according to standard principles of technical analysis.

The Aussie share market advanced 1.46% (Mon-Thu), as investors shook off fears of a global banking crisis and digested key inflation data out of the US. Materials stocks led the charge this week with the sector rising 3.16%, buoyed by iron ore prices rising on the back of a cyclone forming off WA's Kimberley coast, a key region of iron ore export for Australia.
 
 In this week's wrap, Grady covers:
 •   (0:25)  Outlook for the lithium sector
 •   (4:17 ) Where Bell Potter sees opportunities in lithium
 •   (5:11) The best performing stocks in the ASX200
 •   (5:57) The most traded stocks & ETFs by Bell Direct clients
 •   (6:27) Two economic news items to watch out for