Between the Bells

Wall Street rebounded to rally on Wednesday as investor fears of a global banking crisis continue easing, boosting high growth stocks in the technology sector. Micron led the charge on the Nasdaq after the memory chip company forecast a drop in third quarter revenue in line with Wall Street expectations but gave a positive outlook for 2025 with artificial intelligence predicted to boost sales. The Dow Jones closed the midweek session 1% higher while the S&P500 also rose 1% and the tech-heavy Nasdaq added 1.5%. While the banking system stresses are far from over, analysts at the Bank of America said ‘banking system stresses remain high but there are some signs of stabilisation’.

Over in Europe markets also rebounded to close higher across the board. Investor fears of large bank collapses in the region are easing, especially after UBS announced former Chief Executive Sergio Ermotti will return as Chief Executive to guide the takeover of Credit Suisse, coming in to replace Ralph Hamers. The return of Ermotti sent shares in UBS up 3.72% on Wednesday. Germany’s DAX added 1.23% on Wednesday, while the French CAC rose 1.39% and, in the UK, the FTSE100 rose 1.07%.

Australia’s consumer price index data for February out yesterday showed the country’s inflation rate rose 6.8% in the year to February 2023, which is the second consecutive month of disinflation from the peak inflation rate of 8.4% in December 2022, and is an eight-month low for the inflation indicator. The most significant contributors to the annual increase seen in February were Housing up 9.9%, food and non-alcoholic beverages up 8%, transport up 5.6% and recreation and culture up 6.4%. Inflation falling to 6.8% in February from 7.4% in January provides further evidence that consumer prices have peaked, especially ahead of the RBA’s interest rate meeting next week. Consensus were expecting a rise of 7.1%, so inflation coming in lower than expectations supports the notion for a pause in rate hikes at the RBA’s meeting next week.

The local index rose 0.23% yesterday as investor sentiment was boosted by the slowing of inflation growth in the country. The materials and energy sectors topped the gains on the local index yesterday with each adding over 1.2% on the back of rising commodity prices and boosted global demand outlook for key commodities.

What to watch today:

• Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open 0.68% higher on the back of that global rally overnight.
• On the commodities front this morning, oil is trading 0.31% lower at US$72.97/barrel, gold is down almost half a per cent at US$1964/ounce and iron ore is up 1.63% at US$124.50/tonne.
• The Aussie dollar is buying US$0.67, 88.79 Japanese Yen, 54.89 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has increased it’s price target on Liontown Resources (ASX:LTR) from $2.81 to $3.35 and maintain a speculative buy rating on the lithium producer following the company announcing it has received and rejected a takeover offer worth $5.5bn from the world’s largest lithium producer, Albermarle. The corporate interest in Liontown Resources from a high-profile US-based industry participant speaks to the quality of Liontown’s Kathleen Valley project.
• Trading Central has identified a bullish signal on Piedmont Lithium (ASX:PLL) following the formation of a pattern over a period of 27-days which is roughly the same amount of time the share price may rise from the close of $0.82 to the range of $1.05 to $1.11 according to standard principles of technical analysis.

A number of Australian economists are now expecting a 25-basis point rate hike in April following the release of Australian retail sales data for February indicating a rise of 0.2% for the month or 6.4% from February 2022, on the back of a 1.8% rise in January. The retail data shows consumers are still spending despite the increasing cost of living pressures down under, with $35.14bn spent last month. Department stores had the biggest increase in monthly turnover, while household goods retailing remained flat which isn’t great news for the likes of Temple & Webster (ASX:TPW) and Nick Scali (ASX:NCK).  UBS though, is adamant the RBA won’t hike rates at next week’s meeting but will instead hike by 25-basis points in May. Australia’s consumer price index or inflation data is out today for February which will give a greater insight into how successful the RBA’s monetary tightening policy has been to date and will give the RBA a better idea of whether a pause or hike is most appropriate at next week’s interest rate meeting.

Locally yesterday, the ASX rallied 1.04% led by a surge in energy stocks, with the sector jumping over 4%. Lithium mining and production companies felt some much-needed relief yesterday following a recent sell-off amid declining demand outlook. The reason for yesterday’s boost in lithium stocks was due to lithium giant Liontown Resources (ASX:LTR) announcing it had received and rejected a takeover offer from Abermale, the world’s largest lithium producer, in a deal worth $5.5bn on the grounds of the offer substantially undervaluing Liontown and its assets. The announcement sent shares in Liontown soaring 68.5%.

Over in New York, Wall St had a mixed session on Tuesday as rising bond yields placed pressure on high-growth technology stocks. The yield on the 2-year U.S. Treasury note climbed back above 4%, which makes future profits for growth companies, less attractive as higher rates mean that earnings years from now are worth less today. The Dow Jones ended Tuesday’s session down 0.12% while the S&P500 lost 0.16% and the tech-heavy Nasdaq took the biggest hit ending the session down almost half a percent.

In Europe overnight, investor concerns over the unfolding banking crisis in the region led to a muted trading day across the key markets in Europe. Germany’s DAX closed up just 0.09%, the French CAC added 0.14% and, in the UK, the FTSE100 rose just 0.17%.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the local market will open 0.37% lower to start the midweek trading session.
• On the commodities front, oil has advanced 1.10% to trade at US$73.6/barrel amid supply concerns held after a legal dispute halted around 400,000 barrels a day of oil exports from the Ceyhan Port in Turkey this week. Gold is up 0.84% at US$1973/ounce and iron ore is flat at US$122.50/tonne.
• The Aussie dollar is buying US$0.67, 87.58 Japanese Yen, 54 British Pence and NZ$1.07.

Trading Ideas:

• Bell Potter has downgraded its rating on United Malt Group (ASX:UMG) from a buy to a hold and have significantly increased the price target on the company from $4.25 to $5.00 following the company announcing it has entered into a process and exclusivity deed with Malteries Soufflet for the takeover of UMG in a deal worth $1.5bn. Bell Potter sees the takeover offer and subsequent share price rise by 30% after the announcement well exceeds Bell Potter’s passive valuation for UMG and therefore justifies the downgrade to a hold from a buy rating.
• Trading Central has identified a bullish signal on AMP Limited (ASX:AMP) following the formation of a pattern over a period of 27-days which is roughly the same amount of time the share price may rise from the close of $1.06 to the range of $1.17 to $1.19 according to standard principles of technical analysis.

Wall Street ended Friday’s session on a positive note as investors responded to the Fed’s interest rate hike of 0.25% and signals that the Fed is near the end of its monetary tightening cycle. The positive sentiment boost from the Fed was a much-needed relief following a week of turbulence in the global banking sector. The Dow Jones rose 0.41%, the S&P500 added 0.56% and the tech heavy Nasdaq jumped 0.3%.

Over in Europe, it was a different story with markets in the region ending lower on Friday as investor fears of a global banking crisis worsened. Deutsche Bank fell 8.5% on Friday after its credit default swaps, a form of insurance for bond holders, pushed higher. Germany’s DAX fell 1.66%, the French CAC lost 1.74%, and in the UK, the FTSE100 fell 1.26%.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open 0.04% lower to start the new trading week.
• Locally, the ASX ended almost 0.2% lower on Friday, weighed down by a sharp sell-off in financials stocks, and for the week the key index lost 0.57%. Block Inc (ASX:SQ2) was the worst performing stock on the local bourse in the final trading session of the week on claims made by famed short-seller Hindenburg Research, that the company is committing widespread fraud.
• On the commodities front to start the week, oil is trading lower again, down 1% at US$69.26/barrel, gold is down 0.75% at US$1978.57/ounce and iron ore is up 0.41% at US$122.50/tonne.
• The Aussie dollar is buying US$0.67, 86.85 Japanese Yen, 54.89 British Pence and NZ$1.07.
• Stocks trading ex-dividend today include Australian Clinical Labs (ASX:ACL), and Lycopodium (ASX:LYL). 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.
• There is no local economic data released today however investors will be eagerly awaiting the release of preliminary Australian retail sales data for February, which is out tomorrow, with consensus expecting a rise of 0.5% from a 1.9% jump in January.

Trading Ideas: 

• Bell Potter has increased its price target on Aeris Resources (ASX:AIS) from $0.92 to $0.95 and maintains a buy rating on the company following the copper production and exploration company discovering a new massive sulphide lens at the Bentley deposit at the company’s 100%-owned Jaguar Operations in WA.
• Trading Central has identified a bullish signal on Lifestyle Communities (ASX:LIC) following the formation of a pattern over a period of 35-days which is roughly the same amount of time the share price may rise from the close of $15.03 to the range of $20 to $21 according to standard principles of technical analysis.

The Aussie share market declined 0.37% (Mon-Thu), following the recent US banking system turmoil. Additionally, the Federal Reserve increased the Fed Funds Rate by 0.25% to 4.75% - 5%, announcing a continued commitment to quantitative tightening. 

In this week's wrap, Sophia covers:

• (0:39) Fed projections for the Fed Funds Rate (FFR)
• (1:33) The growing banking crisis 
• (2:22) The sale of Credit Suisse to UBS
• (3:14) The best performing stocks in the ASX200
• (4:42) The most traded stocks & ETFs by Bell Direct clients
• (5:21) Two economic news items to watch out for

Following a volatile trading session overnight, US equities closed higher, as investors bet that the Federal Reserve may be nearing the end of its rate hiking cycle. The Dow and the S&P500 rose 0.2% and 0.3% respectively, while the Nasdaq closed just over 1% higher, as tech stocks outperformed. 

European markets were lower as the Bank of England joined the Fed in hiking rates. The UK central bank announced another 25-basis point rise and the Stoxx 600 closed down 0.2%. The banking sector led losses throughout the session. Construction and oil and gas stocks also declined, while tech stocks rallied in Europe as well. 

What to watch today:

• The broad tech rally made way to renewed selling in regional banking stocks, which sees the SPI futures suggesting the Australian market will drop 0.55% at the open this morning. 
• Technology stocks may follow the Nasdaq’s rally, with investors reducing their bets on the Fed’s next hike, and as US Treasury yields decline. Tech stocks are sensitive to interest rates, so this saw tech hit the hardest as the Fed consecutively raised rates. Therefore, the turn lower in rates this month is causing investors to rotate back into tech stocks. And this may have a positive impact on ASX-listed tech shares today. 
• In commodities: 
  • Oil has dropped once again, weighed down by weak global sentiment. 
  • The price of gold is trading over 1.2% higher and has reached its highest level in one year, at US$1,993.90 per ounce, as investors continued to digest the Fed’s March meeting and risks to the global banking system. 
  • Iron ore has tumbled, currently trading 2.8% lower at US$123.50 per tonne, the lowest level in over a month. The iron ore price has been pressured by weaker demand from steel producers and increased control of speculatory prices. There have also been reports indicating that China will cut its domestic steel output by 2.5% this year. That would mark the third consecutive annual decline and of course China is one of the top producers. 

Trading Ideas: 

• Bell Potter have upgraded their recommendation on Eagers Automotive (ASX:APE) from a Hold to a Buy, with a price target of $15.25, where the total expected return is over 15%. A potential catalyst to support the upgrade on the leading automotive retailer, are increased sales of BYD vehicles over the coming months, following the joint venture of Eagers Automotive and BYD, which is an electric car dealership.  
• And Trading Central have identified a bullish signal on PWR Holdings (ASX:PWH) indicating that the stock price by rise from the close of $9.65 to the range of $12.20 to $12.70 over 27 days, according to the standard principles of technical analysis. 

The Federal Reserve has announced a further 25 basis point rate hike, and although this was widely expected, the US stock market declined with all three major benchmarks closing around 1.6% lower. The Fed also acknowledged turmoil in the banking sector could slow the already fragile economy, which share US bank shares slide. 

What to watch today:

• The SPI futures are suggesting that our local market will drop 0.74% at the open this morning, following Wall Street’s lead. 
• In commodities: 
  • The oil price continues to regain last week’s losses, after data out from the US Energy Information Administration showed a surprise build in US crude stocks and large draws in other fuels like gasoline. Also, the US oil benchmark is 5% higher this week, as the Treasury Secretary Janet Yellen said the government would be willing to take further action to protect deposits. Watch ASX energy shares today. 
  • The price of gold over 1.5% higher and is heading toward a one-year high, as investors weighed on the Fed’s dovish tone in its policy decision. This may see gold miners rise, such as Regis Resources (ASX:RRL), Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST) or Evolution Mining (ASX:EVN). 
  • Iron ore has dropped more than 1%, extending the retreat from the nine-month high hit last week, amid increased control of speculatory prices and curbs for major steel producers.  
•  Watch the share price movements of Brickworks (ASX:BKW) which is set to release an earnings report today. 

Trading Ideas:

• Bell Potter maintains a Buy rating on EROAD (ASX:ERD) with modest downgrades to their forecasts post the company’s guidance u[date provided late last month and their investor day held this week. Bell Potter have decreased their price target, down 32% to $1.50, after updating each valuation used in the determination of their price target for the forecast changes, as well as market movements and time creep. The $1.50 target is still an over 100% premium to the current share price of $0.64. 
• Trading Central have identified a bullish signal in AGL Energy (ASX:AGL), indicating that the stock price may rise from the close of $7.07 to the range of $7.30 to $7.36 over 22 days, according to the standard principles of technical analysis. 

Wall St rallied again on Tuesday as investor optimism about the banking crisis recovering lifted stocks in the US, with shares of banks leading the charge on the second trading session this week. Investors also responded to the efforts of the US and Europe to stabilise the global banking system. The Dow Jones rose just under 1%, the S&P500 added 1.3% and the tech-heavy Nasdaq rose 1.6% on Tuesday.

Investors now shift focused to the all-important FOMC meeting in the US this 
week where it is anticipated the Fed will announce a 25-basis point rate hike at the conclusion of the meeting on Thursday morning Australian time.

Overnight in Europe, markets closed higher as investor fears of a global banking crisis settled following UBS’ takeover of rival bank Credit Suisse. Germany’s DAX rose 1.75%, the French CAC added 1.42% and, in the UK, the FTSE100 added 1.8%.

On the local index yesterday, the RBA’s latest meeting minutes being released hinted that a rate pause is being considered for April which fuelled a rally on the local bourse. The ASX closed 0.82% higher on Tuesday buoyed by optimism from the release of the RBA’s minutes and on the back of the global rally that started the week on a positive note.

It has been a big week on the M&A front – Ramelius Resources (ASX:RMS) lobbed a takeover offer at Breaker Resources (ASX:BRB), and Australian Clinical Labs (ASX:ACL) launched a takeover offer at Healius (ASX:HLS), with the deal creating the nation’s largest pathology services provider, should it go ahead. And just yesterday Andrew Forrest’s Wyloo Metals made a $760m takeover offer for nickel producer Mincor Resources (ASX:MCR), sending shares in Mincor rocketing 42% during the session, as Forrest looks to expand his presence in the battery metal space.

What to watch today: 

• Ahead of the local trading session the ASX is poised to open 0.9% higher on the back of the global rally overnight.
• On the commodities front this morning crude oil has recovered some ground from its tumble over the last week to trade 2.7% higher this morning at US$69.66/barrel, gold is down almost 2% at US$1940/ounce and iron ore is down 2.65% at US$128.50/tonne.
• The Aussie dollar is buying 67 US cents, 88.26 Japanese Yen, 54.89 British Pence and 1 New Zealand dollar and 8 cents.
• Stocks trading ex-dividend today include Myer (ASX:MYR), Seek (ASX:SEK) and Supply Network (ASX:SNL). 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 DDH1 (ASX:DDH) following the formation of a pattern over a period of 90 days which is roughly the same amount of time the share price may fall from the close of $0.82 to the range of $0.65 to $0.69 according to standard principles of technical analysis.
• Trading Central has also identified a bearish signal on Metcash Limited (ASX:MTS) following the formation of a pattern over a period of 450 days which is roughly the same amount of time the share price may fall from the close of $3.79 to the range of $2.50 to $2.80 according to standard principles of technical analysis.

The ASX tumbled to a four-month low yesterday, ending the session down 1.4%, in the wake of the global banking crisis taking a new turn with global investment bank UBS agreeing to takeover troubled Swiss lender Credit Suisse. Investors are also eyeing off the all-important FOMC meeting in the US where it is expected the Federal Reserve will announce a 25-basis point rate hike at the conclusion of the meeting on Thursday morning Australian time. Locally, the energy sector was again the worst performing sector to start the week as commodity prices continue to plummet as the prospect of slower economic growth due to a banking crisis induces investor fears of a recession and weakened demand outlook for commodities. Despite the unravelling of weakness in the global banking system, Australian banks hold some of the strongest positions in capitalisation and liquidity management globally due to tight governance from the regulatory body, APRA. This tight scrutiny has proved successful in maintaining strength for Australian banks during key events including the GFC and pandemic.

A welcome relief rally started the week on a positive note for US investors as Wall St closed higher across the key indices on Monday. Investor sentiment was boosted by hopes that the global banking crisis may be easing after UBS agreed to take over troubled lender Credit Suisse. The Dow Jones closed up 1.2%, the S&P500 rose 0.9% and the Nasdaq added 0.4%. We may see sentiment shift later this week though after the Fed hands down its interest rate decision for the month ahead.

Over in Europe, markets rallied to start the new week, also boosted by UBS’ takeover of Credit Suisse, with UBS chairman Colm Kelleher saying the acquisition is ‘attractive’ for UBS shareholders. Germany’s DAX rose 1.12%, the French CAC added 1.27% and, in the UK, the FTSE100 rose almost 1% to start the week.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open 0.65% higher on the back of the global rally overnight.
• On the commodities front oil has rebounded this morning to trade 1.35% higher at US$67.64/barrel, gold is down 0.64% at US$1975/ounce and iron ore is flat at US$132/tonne.
• Looking at the Aussie dollar, AU$1.00 is buying US$0.67, 88.18 Japanese Yen, 54.89 British Pence, and NZ$1.08.
• Stocks trading ex-dividend today include Latitude Group (ASX:LFS), Reece (ASX:REH), Cochlear (ASX:COH), Credit Corp Group (ASX:CCP) and Brisbane Broncos (ASX:BBL). 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 bullish signal on AGL Energy (ASX:AGL) following the formation of a pattern over a period of 17-days which is roughly the same amount of time the share price may rise from the close of $7.11 to the range of $7.24 to $7.30 according to standard principles of technical analysis.
• Trading Central has identified a bearish signal on Viva Energy Group (ASX:VEA) following the formation of a pattern over a period of 28-days which is roughly the same amount of time the share price may fall from the close of $2.79 to the range of $2.48 to $2.54 according to standard principles of technical analysis.

The global banking crisis took an historical turn this morning with investment bank, UBS, agreeing to buy Credit Suisse Group in a deal worth $4.5 billion to restore investor confidence in the global banking sector. The crisis worsened on Friday after a fourth bank, the First Republic bank, received a US$30 billion lifeline from a group of big banks including Goldman Sachs and Bank of America, after customers began withdrawing their deposits from First Republic bank amid the collapse of SVB. Shares in First Republic Bank tumbled 33% on Friday to close the week down 72%. On Friday, the Dow Jones closed 1.2% lower, the S&P500 fell 1.1% and the Nasdaq closed down 0.74%. For the week though the Nasdaq rose 4.41% as investors bet on technology and growth stocks ahead of the FOMC meeting this week.

Over in Europe, markets closed lower on Friday as investors digest the fallout from Credit Suisse accepting financial help to stabilise the banking system. Germany’s DAX fell 1.33% on Friday while the French CAC lost 1.43% and in the UK the FTSE100 shed just over 1%.

In Australia, markets closed 0.42% higher on Friday but 2.1% down for the week as the local index was caught up in the global banking crisis driven sell-off. 

What to watch today:

• In commodities, oil Is trading 2.36% lower at US$66.74/barrel, gold is up almost 3.6% at US$1988.08 and iron ore is flat at US$132/tonne.
• The Aussie dollar has slightly strengthened to buy US$0.67, 88.53 Japanese Yen, 54.89 British Pence and NZ$1.07.
• Ahead of the local trading session the SPI futures are anticipating the ASX to open 1.4% lower as investor sentiment continues to ride on the unfolding global banking crisis.
• Stocks trading ex-dividend today include HUB24 (ASX:HUB), Adairs (ASX:ADH), and Duratec (ASX:DUR). 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 downgraded its price target on Synlait Milk (ASX:SM1) from $4 to $3.20 but maintain a buy rating on the company. The downgrade in price target comes after the company downwardly revised FY23 NPAT expectations relative to market expectations ahead of its 1H23 result. NPAT guidance has been downwardly projected to now be $15-$25m NZ dollars, which is much lower than Bell Potter’s expectations of a forecasted NZ$35.8m and consensus expectations of NZ$50m. Major drivers of the change in NPAT forecast from the company have been attributed to order deferrals from major IMF customers, inflationary cost pressures, lower milk production and higher working capital costs.
• Trading Central has identified a bearish signal on Ansell (ASX:ANN), following the formation of a pattern over a period of 40-days which is roughly the same amount of time the share price may fall from the close of $26.14 to the range of $20.90 to $21.80 according to standard principles of technical analysis.

The Aussie share market declined 2.5% (Mon-Thu), led by a 7.2% dive in energy stocks on the back of tumbling commodity prices. The price of oil was down nearly 12% this week, driven by turmoil in the global banking sector. On the flip side Healthcare stocks provided great opportunity for investors, adding 0.74% this week so far.

 In this week's wrap, Grady covers:

• (0:38) The Silicon Valley Bank collapse
• (1:30) The US$10 billion in deposits withdrawn from Signature Bank
• (2:22) Credit Suisse's liquidity issues
• (4:48) The best performing stocks in the ASX200
• (5:46) The most traded stocks & ETFs by Bell Direct clients
• (6:21) Two economic news items to watch out for