Between the Bells

Global markets advanced after Credit Suisse announced that it’ll borrow up to nearly $54 billion from the Swiss National Bank to assure short-term liquidity. Despite concerns weighing on the banking sector, all three US indexes closed in the green, on pace to end the week higher. The Nasdaq was up the most, rallying 2.5%. 

Investors also followed the announcement of a further rate hike of 50-basis points from the European Central Bank. 

What to watch today:

• Following the rebound overnight, our local market is set to open 0.39% higher, according to the SPI futures. 
• In commodities, oil has slightly rebounded, following a heavy drop. Oil hit an over one-year low of around US$66 in the prior session. Gold is trading flat, at a strong six-week high, as the risk-off mood continues, while iron ore is on a steady rise, current at its highest level in nine months. 
• While there’s no local economic data out today, tonight we’ll be watching out for the CPI announcement in Europe. 

Trading Ideas:

• Bell Potter maintains a Buy rating on Telix Pharmaceuticals (ASX:TLX) with a price target of $9.00. At TLX’s current share price of $6.86, this implies 31.2% share price growth in a year. 
• Bell Potter have also downgraded their recommendation on Appen (ASX:APX) from a Hold to a Sell, based on valuation, as well as a lack of visibility due to the relatively low level of recurring revenue and uncertainty over customer spend. Bell Potter says the risk to their downgrade is any developments announced when the results of a strategic review are released in May, however they see no quick fix to the lack of visibility. Their price target of $2.25 is now a 13% discount to the share price of $2.60. 

The local market rallied 0.86% yesterday as investors regained confidence was restored by a rally on Wall Street on Tuesday. Information technology stocks led the local rally yesterday, while energy stocks were sold off amid a decline in commodity prices. The best performing stocks on the local index yesterday were led by Pexa Group (ASX:PXA) jumping over 6.4%, Link Administration Holdings (ASX:LNK) rallying almost 6% and Coronado Global Resources (ASX:CRN) lifting 5.44%. On the losing end of the market, Imugene (ASX:IMU) fell 4%, Evolution Mining (ASX:EVN) shed 3.2% and Lovisa (ASX:LOV) lost 3.05%.

Wall Street took a dive on Wednesday amid further turbulence in the banking sector as leading bank Credit Suisse said earlier this week that it has found “certain material weakness in our internal control over financial reporting for 2021 and 2022”. The concerns out of Credit Suisse prompted the Swiss regulator to say it would give the country’s central bank Credit Suisse liquidity if necessary. Credit Suisse shares closed the midweek session down over 24%. Stocks recovered some ground in afternoon trade but the Dow Jones ended the day down 0.87%, and the S&P500 lost 0.7% but the tech-heavy Nasdaq actually rose 0.05% on Wednesday. US retail sales data out overnight also showed retail spend dropped 0.4% in February as consumers pulled back in spending amid rising interest rates and higher cost of living pressures. Consumers spent less on restaurants and department stores and more on staples goods retail. The Credit Suisse saga is the latest in the global financial sector turmoil following two U.S. banks collapsing earlier this week.

Over in Europe, markets had their worst session since Russia initiated war with Ukraine back in February 2022, as investors responded to the concerns out of banking giant Credit Suisse. The bank dropped to the bottom of the blue-chip index after its biggest lender, the Saudi National bank said it would not be able to offer it more financial help. The STOXX600 closed over 3% lower, Germany’s DAX fell 3.27%, the French CAC lost 3.58%, and in the UK, the FTSE100 tumbled 3.83%.

What to watch today:

• On the commodities front crude oil has tumbled over 4% overnight to trade at US$68.43/barrel amid the turmoil across the global banking sector. Gold is trading 0.81% higher at US$1917/ounce and iron ore is up 0.4% at US$133.50/tonne.
• The Aussie dollar is buying US$0.66, 88.20 Japanese yen, 55.03 British pence and NZ$1.07.
• Ahead of the local trading session the SPI futures are anticipating the ASX to open 1.68% lower on the back of the global turbulence overnight.
• Stocks going ex-dividend today include IGO (ASX:IGO), Data#3 Limited (ASX:DTL), Regis Healthcare (ASX:REG), and Embelton (ASX:EMB). 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 DGL Group (ASX:DGL) following the formation of a pattern over a period of 10-days which is roughly the same amount of time the share price may rise from the close of $1.83 to the range of $2.12 to $2.18 according to standard principles of technical analysis.
• Trading Central has identified a bearish signal on SRG Global (ASX:SRG) following the formation of a pattern over a period of 30-days which is roughly the same amount of time the share price may fall from the close of $0.71 to the range of $0.64 to $0.66 according to standard principles of technical analysis.

The local index dipped 1.41% amid the fallout from the SVB and Signature collapses in the US sending shockwaves throughout global markets. Investors fear the collapses are sign of what’s to come in the financial sector, which has caused a sell-off in financial stocks and sparked investors to pile into safe-haven assets like gold. The winning stocks yesterday on the ASX were unsurprisingly led by gold miners including Ramelius Resources (ASX:RMS) adding 5.8%, Perseus Mining (ASX:PRU) jumping 4.43% and Silver Lake Resources (ASX:SLR) adding 3.77%. On the losing end of the market, the stocks that weighed the key index down were led by Lake Resources (ASX:LKE) tumbling 8.5%, Novonix (ASX:NVX) falling 8.46% and BrainChip Holdings (ASX:BRN) losing 8%.

Investors repositioned out of tech stocks and into defensive stocks yesterday, which can be taken as a sign of fears around what’s to come as interest rates continue rising and the cost of funding growth for companies in the technology sector becomes increasingly unaffordable. Investors are also fearful that the collapse of the banks will not play part in the Fed’s interest rate decision next week, with many anticipating a 25-basis point rate hike, while some analysts are even expecting a 50-basis point rate hike to be announced. Consumer and business confidence for March and February respectively were released yesterday, with confidence sliding for both consumers and businesses in the respective months as interest rates continue rising and place increased financial pressure on consumers and businesses alike. Regulators find themselves in a difficult position in the U.S. They need to raise interest rates to curb inflation however, raising interest rates exacerbates the issue facing U.S. banks. US annual inflation data was released overnight for the month of February and came in at 6%, the lowest level since September 2021 and down from 6.4% in January, in a sign the Federal Reserve’s aggressive rate hike stance is taking effect.

Wall Street responded positively to the data with the market breaking the recent red streak to close in the green. The Dow Jones rose 1.06%, the S&P500 added 1.68% and the Nasdaq rose 2.14%.

Over in Europe, markets also closed higher in response to the release of US inflation data. Investors in the region also bought back into the banking sector following days of selling out in response to the SVB collapse. Germany’s DAX rose 1.83, the French CAC added 1.86% and, in the UK, the FTSE100 rose 1.17%.

What to watch today:

• On the commodities front, oil is trading 3.11% lower at US$72.48/barrel, gold is down 0.33% at US$1907/ounce and iron ore is up almost 2% at US$133/tonne.
• The Aussie Dollar is buying US$0.67, 89.58 Japanese Yen, 54.84 British Pence and NZ$1.07.
• Ahead of the local session here in Australia the SPI futures are anticipating the ASX to open almost 1% higher on the back of the global rally overnight.

Trading Ideas:

• Bell Potter has increased the rating on Neuren Pharmaceuticals (ASX:NEU) from a Hold to a speculative BUY and has sharply increased the price target from $8.60 to $13.67 following the US FDA approving Neuren’s US Partner, Acadia Pharmaceuticals drug Trofinetide for the treatment of Rett syndrome in adult and paediatrics two year of age and older.
• Bell Potter has maintained its hold rating on Infomedia (ASX:IFM) but has increased its price target from $1.35 to $1.45 amid improving outlook for the leading software solutions provider in the automotive industry. The increase in price target is driven by an expected return to double digit cash EBITDA growth in FY24 and FY25 as well as cost control and margin expansion improving the company’s financial performance.

The risks and aftermath of the collapse of Silicon Valley Bank really echoed through markets, with shares ending mostly lower globally. Despite governments taking action to maintain confidence in the banking system, we saw global markets under pressure overnight. The news has also provoked question of whether the Federal Reserve will deliver a larger rate hike of 50-basis points this month.  

On Wall Street, financials lagged, as stocks in several regional US banks declined. The Dow dropped for the fifth straight day, the S&P500 was also lower, while the Nasdaq gained. And Treasury yields tumbled, helping to lend some support to equities. 

What to watch today:

• Extending these losses, the Australian market is set to drop 1.86% at the open this morning, and that’s according to the SPI futures. 
• In this current market, where are the opportunities? Investors are seeking safety in gold amid the turmoil in the banking sector. The gold price saw a sharp rebound, after hitting its lowest level in over a month, jumping 2.4% higher and it continues to be on the rise. We also know that gold is sensitive to the rates outlook – and the collapse of Silicon Valley Bank has not only divided markets on what the Fed will do with its rate-rising cycle but we’re also awaiting US inflation data out this week. So, keep in mind that higher interest rates lift the opportunity cost of holding non-yielding bullion and vice versa. Bell Potter is bullish on gold at the moment, with buy ratings on Capricorn Metals (ASX:CMM), Regis Resources (ASX:RRL) and Gold Road Resources (ASX:GOR). 
• Looking at other commodities, the oil price has fallen 2.6% amid the broad risk-off day across markets. And iron ore is in the green, approaching an eight month high as investors continue to assess the outlook for Chinese commodities this year. 
• Watch out for Lake Resources (ASX:LKE) today, as the company is set to release its earnings report. 
• News Corporation (ASX:NWS) and Coronado Global Resources (ASX:CRN) are set to go ex-dividend, which may see their share prices fall, as investors take their profits. 

Trading Ideas: 

• Bell Potter have a speculative buy rating on Cluey (ASX:CLU), following the educational technology company’s H1 result and $10.6 million capital raise. Their 12-month valuation has been lowered to $0.50, and at CLU’s current share price of $0.17, this implies 191.5% share price growth in a year. 
• Trading Central have identified a bearish signal in Suncorp (ASX:SUN) indicating that the stock price may fall from the close of $12.36 to the range of $11.90 to $12 over 25 days, according to the standard principles of technical analysis. 

The local market tumbled over 2% on Friday as investors were spooked by comments made and reiterated over a few days by Federal Reserve Chair Jerome Powell that interest rates will need to stay higher for longer, prompting further fears of a global recession. The utilities sector was the only sector to escape the broad market sell-off on Friday. The winning stocks were led by Origin Energy (ASX:ORG) adding 2.45%, while TPG Telecom (ASX:TPG) and Silver Lake Resources (ASX:SLR) each also added over 2%. On the losing end of the market it was a lithium sell-off led by Allkem (ASX:AKE) tumbling 8.6%, while Sayona Mining (ASX:SYA) and Liontown Resources (ASX:LTR) each fell 8%.

Wall Street closed sharply lower on Friday as the collapse of tech-focused lender Silicon Valley Bank sent shockwaves through the banking sector. The collapse resulted from losses in the bank’s bond portfolio and is the biggest bank failure since the global financial crisis. The Dow Jones fell 1.07%, the S&P500 lost 1.45% and the tech-heavy Nasdaq fell 1.76% on Friday. It was the worst week since June 2022 for the Dow Jones on Wall St last week, with the major indices capped off the week with losses. The Dow fell 4.44%, the S&P dropped 4.55%, and the Nasdaq lost 4.71%.

Over in Europe, markets closed lower on Friday, also led by a sell-off in the banking sector after early news of a capital raise at Silicon Valley Bank leading to the stock collapsing 60%, wiping out over $80bn in value from the bank’s shares.

Germany’s DAX fell 1.31%, the French CAC lost 1.3% and, in the UK, the FTSE100 shed 1.67%.

What to watch today:

• Ahead of the local trading session, the SPI futures are anticipating the ASX to open down 0.55% following the global sell-off that ended last week on a sour note.
• On the commodities front this morning, crude oil is up 1.27% at US$76.68/barrel, gold is up just under 2% at US$1867/ounce and iron ore is up 1.16% at US$130.50/tonne.
• The Aussie dollar is buying US$0.66, 88.93 Japanese yen, 54.58 British pence and NZ$1.08.
• Stocks trading ex-dividend today include Dusk Group (ASX:DSK), Chorus (ASX:CNU), and Joyce Corporation (ASX:JYC). 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 upgraded its rating on Platinum Asset Management (ASX:PTM) from a Sell to a Hold but has decreased its price target from $1.68 to $1.66 after the Bell Potter team met with the company and also following the release of the company’s funds under management figures for February showing $18.5bn in FUM, being $153m lower than January, indicating outflows of 0.7%. The increase in Rating to a hold follows management being upbeat about the prospects for the company including strong distribution and position in the market, and higher costs in recent reports being attributed to high bonus payments to staff.
• Bell Potter has downgraded its price target on Lumos Diagnostics (ASX:LDX) from 10 cps to 6cps but maintain a speculative buy rating on the company following the signing of three service agreements with the potential to provide up to $2.5m in revenue. The price target downgrade is on the back of a reduction in Bell Potter expectations for revenue forecasts for products sold as the new CEO Doug Ward increases focus on the services arm of the company.

The Aussie share market advanced 0.38% (Mon-Thu), shaking off some of the negative offshore macro-economic events. Meanwhile, investors fled energy and materials stocks, as these sectors fell with commodity prices, partly due to a weaker than usual demand out of China.

In this week’s wrap, Grady covers:

• (1:08) Global macro themes impacting investments 
• (2:34) The Fed’s monetary tightening impact on commodities
• (3:24) Why investors are fleeing small & mid-cap resources stocks
• (4:21) The best performing stocks in the ASX200
• (5:18) The most traded stocks & ETFs by Bell Direct clients
• (5:51) Four economic news items to watch out for

The ASX rose just 0.05% yesterday as a rally for technology stocks offset sharp losses for healthcare, materials and real estate stocks. The winning stocks yesterday were led by Xero (ASX:XRO) charging 10.66% after the cloud-based software company announced it is cutting up to 800 of its staff to manage costs. New Hope Corporation (ASX:NHC) and Whitehaven Coal (ASX:WHC) each added over 5.5% amid the rising price of coal. On the losing end, Imugene (ASX:IMU), and Breville Group (ASX:BRG) each fell over 3% and BrainChip Holdings (ASX:BRN) lost almost 3%.

Wall Street has just closed for Thursday’s session with the market responding negatively to Federal Reserve chair Jerome Powell reiterated his comments about the need for the U.S. central bank to keep interest rates higher for longer, on the second day of his testimony to congress. The Federal Reserve chair said that signs of a hotter economy from the start of the year warrant faster rate hikes, prompting investors to believe a 50-basis point rate hike could be lock in for the next month. Next week’s US CPI print remains in focus for investors to gauge if the 50-basis point rate hike could become a reality. The Dow Jones fell 1.66%, the S&P500 fell 1.8% and the Nasdaq lost 2.05%. Powell also say he hasn’t made up his mind about what the central bank will do with regards to rates when it meets later in March.

In Europe, markets closed mostly lower after Federal Reserve chair Jerome Powell reiterated his comments. Germany’s DAX closed just 0.1% higher while the French CAC fell 0.12% and, in the UK, the FTSE100 fell 0.63%.

What to watch today: 

• Ahead of the local trading session the SPI futures are anticipating the ASX to open 1.11% lower on the back of the Wall St sell-off overnight.
• Taking a look commodities oil is trading 1.27% lower at US$75.69/barrel, gold is up 0.88% at US$1829.50/ounce and iron ore is down again by 0.4% at US$128.50/tonne.
• The Aussie dollar is buying US$0.66, 89.68 Japanese Yen, 55.55 British Pence and NZ$1.08.
• Stocks trading ex-dividend today include Downer EDI (ASX:DOW), WiseTech Global (ASX:WTC), Base Resources (ASX:BSE), and Grange Resources (ASX:GRR). 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 Novonix (ASX:NVX) following the formation of a pattern over a period of 20-days which is roughly the same amount of time the share price may rise from the close of $1.60 to the range of $1.74 to $1.78 according to standard principles of technical analysis.
• Trading Central has identified a bearish signal on Hotel Property Investments (ASX:HPI) following the formation of a pattern over a period of 47-days which is roughly the same amount of time the share price may fall from the close of $3.46 to the range of $3.27 to $3.31 according to standard principles of technical analysis.

The local market closed in the red yesterday, making the RBA-rate announcement rally very short lived as investor sentiment was dampened by Fed Chair Jerome Powell saying interest rates need to go higher for longer in order to tackle the stubbornly high inflation in the US. Energy stocks were the worst performers yesterday amid a dive in commodity prices. Nanosonics (ASX:NAN) outperformed the market yesterday, rising over 7.5% despite no price sensitive news out of the company yesterday, while Ramelius Resources (ASX:RMS) weighed on the market, tumbling almost 11% amid the declining price of gold yesterday.

In Europe markets closed mixed as investors continued digesting the remarks made by fed chair Jerome Powell. The STOXX600 closed 0.12% higher, Germany’s DAX added almost half a percent, the French CAC lost 0.2% and, in the UK, the FTSE100 rose 0.13%.

Wall Street has just closed, and it was a turbulent session in the US overnight following the release of stronger-than-expected JOLTs and ADP jobs data, in a sign the labour market remains tight in the US, adding yet another reason for the Fed to continue its monetary tightening policy for longer. The number of job openings in the US fell by 410,000 to 10.824 million in January, above market expectations of a decline to 10.5 million. The Dow Jones fell 0.18%, the S&P500 lost 0.14% but the Nasdaq rose 0.4%.

What to watch today:

• Ahead of the local session the SPI futures are anticipating the ASX to open 0.45% higher despite the turbulent session on Wall St overnight.
• Commodities have been a driver of materials stocks being sold off locally this week, but today we’ve seen a slight rebound in some key commodities. This morning, oil is still trading lower by around 1.6% at US$76.34/barrel, gold is up 0.1% at US$1815/ounce and iron ore is up almost 2% at US$129/tonne.
• The Aussie dollar is buying US$0.66, 90.50 Japanese Yen, 55.55 British Pence and NZ$1.08.
• Stocks going ex-dividend today include Mineral Resources (ASX:MIN), Monadelphous Group (ASX;MND), IDP Education (ASX:IEL), Perpetual (ASX:PPT), BHP Group (ASX:BHP), Rio Tinto (ASX:RIO) and CSL Limited (ASX:CSL). If you’ve been thinking about these stocks it might be worth considering buying in today as stocks going ex-dividend generally trade lower on the ex-dividend date.

Trading Ideas:

• Bell Potter has upgraded the price target on Avita Medical (ASX:AVH) from $4.20 to $5.60 and maintain a buy rating on the company following the company announcing a major upscaling of its US sales force and ahead of FDA label expansion approval due in June for trauma and vitiligo. Bell Potter sees the company has a strong balance sheet and a solid revenue base in the existing burns business, to fund expansion and upscaling in the US.
• Trading Central has identified a bullish signal on Nanosonics (ASX:NAN) following the formation of a pattern over a period of 34-days which is roughly the same amount of time the share price may rise from the close of $4.87 to the range of $5.70 to $5.90 according to standard principles of technical analysis.

The ASX rallied 0.5% yesterday following the rate hike announcement as investor sentiment was boosted by hopes that the RBA is approaching the end of its tightening cycle. Every sector aside from materials stocks closed in the green yesterday. The winning stock yesterday by a mile was InvoCare (ASX:IVC) rocketing over 34% after the funeral company received a takeover offer from TPG Global at the value of $12.65 cash per share. TPG snapped up a 17.8% stake in InvoCare on Monday before making the takeover offer worth $1.8 billion.

Overnight in Europe, markets closed lower as investors digested comments made by Fed chair Jerome Powell at his congressional testimony, where he warned interest rates are likely to be higher than central bank policymakers previously expected. Germany’s DAX fell 0.6%, the French CAC lost 0.46% and, in the UK, the FTSE100 closed 0.13% lower.

Over in the US, local US investors also responded to Powell’s comments around rates needing to go higher for longer. The Dow Jones fell 1.72%, the S&P500 lost 1.53% and tech-heavy Nasdaq closed the day down 1.25%.

Software giant Atlassian has announced it will lay-off 500 full-time staff in a cost-cutting measure, just 6-months after co-founder Scott Farquhar went on a hiring-spree. Meta, the parent company of Facebook and Instagram, also announced a fresh round of lay-offs to come yesterday in order to meet financial targets.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open almost 1% lower on the back of the turbulent session on Wall St overnight.
• On the commodities front, oil is trading more than 3% lower at US$77.935/barrel, gold is down 1.54% at US$1818/ounce and iron ore is down almost 2% at US$126.50/tonne.
• Stocks going ex-dividend today include Costa Group (ASX:CGC), Woodside Energy Group (ASX:WDS), Brambles (ASX:BXB), Super Retail Group (ASX:SUL), and Blackmores (ASX:BKL). If you’ve been thinking about these stocks it might be worth considering buying in today as stocks going ex-dividend generally trade lower on the ex-dividend date.
• The Aussie dollar is buying US$0.66, 90.29 Japanese Yen, 56.19 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has downgraded its rating on Eagers Automotive (ASX:APE) from a Buy to a HOLD but has increased its price target to $15.25 from $15. The price target increase is driven by sales of Chinese electric vehicle company BYD being greater than anticipated, however the downgrade to a hold is based on uncertainty around what, if any, extra provisioning must be taken around Scott’s going into administration and a potential easing in demand due to higher interest rates.
• Trading Central has identified a bullish signal on Endeavour Group (ASX:EDV) following the formation of a pattern over a period of 15-days which is roughly the same amount of time the share price may rise from the close of $6.72 to the range of $7.25 to $7.40 according to standard principles of technical analysis.

In New York overnight, equities gained in the final hour of trading, as Treasury yields rose. US markets started the week on a positive note, ahead of a busy week of economic news. Important catalysts with week include congressional testimony on Tuesday and Wednesday from Federal Reserve Chair Jerome Powell, who will speak about how the central bank is thinking about inflation and rate hikes going forward. Also, the US awaits their February jobs report out this week as well. 

European markets were flat after modest early-session gains, with mining stocks down the most. 

China has announced a growth target of 5% this year. It’s viewed as a modest target, with Citi analysts announcing it is “disappointing to some investors” and falls short of their expectation. The 5% target is also below last year’s target of around 5.5%, when the country had its zero-covid policy. This saw the Aussie dollar drift lower. 

What to watch today: 

• The SPI futures are suggesting the Australian market will drop 0.26% at the open this morning. 
• The key economic announcement is watch out for today is the RBA’s interest rate decision, so this could see our dollar rise again, as its widely expected the RBA will deliver its 10th straight interest rate hike. The announcement will be at 2:30pm AEDT today, when the cash rate is expected to rise to 3.6%. 
• In commodities, 
  • Oil is rallying, extending gains for the fifth session as a weaker US dollar boosted the appeal of greenback-priced commodities, and offsetting concerns about China’s demand and economic growth targets. So, keep watch of energy producers. 
  • Gold is lower ahead of the US Fed chief testimony, and iron ore is trading flat. 

Trading Ideas:

• Bell Potter maintain a HOLD rating on PWR Holdings (ASX:PWH), a leading provider of customised cooling solutions to the global motorsports and automotive industry. Bell Potter reviewed their forecasts after the release of the company’s H1 results last month, and have made some modest changes, including increasing FY24 and FY25 revenue forecasts and reducing NPAT forecasts. They have decreased their price target by 2% to $10.75 for the earnings changes, as well as market movements and time creep. 
• Bell Potter have upgraded their recommendation on Arafura Rare Earths (ASX:ARU) from a Hold to a Speculative BUY. Their valuation remains unchanged at $0.72, which at ARU’s current share price of $0.55, implies 32% share price growth in a year.