Between the Bells

Looking at global markets, the energy sector is underperforming: it’s been the worst performing sector month-to-date in all regions. Weakness in energy equities has coincided with that of energy commodities: all members of the petroleum complex, are down year-to-date, as well as Natural Gas down 41% so far in 2023. Information technology on the other hand, has outperformed everywhere, in particular, the sector’s lead the most pronounced in Canada, where information tech has outperformed their S&P TSX Composite by more than 5% so far this month. 

Overnight, all three US benchmarks closed lower. The Dow closed down 0.1%, making up some ground after losing more than 240 points earlier in the session. The S&P500 down 0.6% and the Nasdaq down 1%. US Treasury yields rose on bets the Federal Reserve has more room to lift rates. The yield on the US 10-year note surged 10 basis points to 3.63%. 

Markets in Europe also fell. The STOXX 600 closed 0.8% lower with all sectors but healthcare and utilities trading in the red. 

What to watch today:

• The SPI futures are suggesting that our local market will open 0.11% lower this morning, after US stocks extended losses. 
• Investors are awaiting the policy decision by the Reserve Bank. It is widely expected that the RBA will lift the cash rate a further 25 basis points and that announcement is scheduled for 2:30pm AEDT today. Also, in economic news, Australia’s Balance of Trade data for December will be out at 11:30am. The last announcement was in November, when Australia saw its largest trade surplus since June.  
• Company earnings to watch out for today: Cettire (ASX:CTT) and Transurban Group (ASX:TCL) will release their half-year results, while Macquarie (ASX:MQG) is set to release their quarterly report. 
• In commodities: 
  • Oil prices are trading 1.6% higher at US$74.55 per barrel. And China’s economy may be looking at a stronger-than-anticipated rebound that will boost demand for crude. 
  • Gold is steady, hovering near its lowest level in a month, amid a general US dollar strength, as stronger-than-expected US jobs data suggested the Fed has more room to hike interest rates. 
  • Iron ore is up 1% at US$126.50 per tonne. 

Trading Ideas:

• Bell Potter maintain a Buy rating on Adrad Holdings (ASX:AHL) and it’s well worth a look at the current share price. The company is profitable, it just reiterated guidance, they have a strong cash position and FY23 PE ratio of less than 10 times. The downside however is that the CEO has announced intention to resign, the earnings outlook this year is flat and liquidity is low. However, Bell Potter haven’t changed to their forecasts. They forecast FY23 revenue and EBITDA of $137.9 million and $16.6 million, consistent with the guidance. They have lowered their price target by 6% to $1.60 and at AHL’s current share price of $1.05, this implies 51.7% share price growth in a year. 
• And lastly, Trading Central have identified a bearish signal in Northern Star Resources (ASX:NST) indicating that the stock price may fall from the close of $12.58 to the range of $11.65 to $11.85 over 24 days according to the standard principles of technical analysis. 

The local market started the week in negative territory, closing the day down 0.25%, ahead of the RBA’s rate hike decision for February out tomorrow, which is the first interest rate decision for 2023. Real estate stocks were the hardest hit today as investors anticipate the impact another rate hike will have on RIET stock balance sheets, with the sector closing Monday’s session down more than 1.6%. 

Furniture retailer Nick Scali (ASX:NCK) tumbled more than 13% today after posting first half results including a 12.1% decline in written sales orders for January 2023, revenue growth of 57.4% and NPAT up 70.2% on the prior corresponding period. Investors may be selling out of the furniture retailer’s shares today after the company failed to provide guidance beyond January, citing it ‘2H FY23 results will depend upon trading during February to April and at this point it is difficult to provide further guidance’, which didn’t impress investors, sparking fears of tougher times to come as interest rates continue rising and consumer spending declines.

Beach Energy (ASX:BPT) shares lifted today after the gas producer released an update on its Waitsia Stage 2 project. The oil and natural gas explorer and producer today said it has reached an agreement with Webuild for the completion of the Waitsia stage 2 project with the Waitsia joint venture and Webuild now targeting first gas by the end of 2023, 6-months later than the original target date, at an increased CAPEX estimate of $400-$450m, up from the original $350-$400. Webuild’s acquisition of Clough, who was originally contracted to complete the Waitsia project, will see a seamless transition for the Webuild team to complete the Waitsia project.

Hot takeover target Warrego Energy (ASX:WGO) rose 3% today after Gina Rinehart’s Hancock Prospecting confirmed it has increased its takeover bid for the company to 36 cents per share from 28 cents per share, to end the bidding war over Warrego with Hancock Prospecting now having a 50.54% stake in the company. The increase in Hancock’s holding was made possible by Hancock partner Mineral Resources selling its shares in Warrego to Hancock for 36 cents per share.

The winning stocks from today’s session were Newcrest Mining (ASX:NCM) adding 9.3% after receiving a takeover offer, Beach Energy (ASX:BPT) rallied 3.7% on the Waitsia update and Incitec Pivot (ASX:IPL) added 3.22%. And on the losing end, Lake Resources (ASX:LKE) led the losses today closing down 6.21% while Sayona Mining (ASX:SYA) fell 5.77% and Core Lithium (ASX:CXO) dropped 5.75% today.

The most traded stocks by Bell Direct clients today were Rio Tinto (ASX:RIO), Newcrest Mining (ASX:NCM) and Macquarie Group (ASX:MQG).

Taking a look at commodities crude oil has recovered this afternoon to trade 0.18% higher at US$73.51/barrel as the International Energy Agency sees China’s economy could be poised for a stronger-than-expected rebound which will boost demand for crude. Coal is down 3.67% at US$236/tonne, gold is up 0.66% at US$1877/ounce and iron ore is up 0.8% at US$126.50/tonne.

The Aussie dollar is buying US$0.69, 91.51 Japanese Yen, 57.26 British Pence and NZ$1.10.

The local market ended the week 0.86% higher following a 0.62% rally on Friday led by a surge in healthcare and real estate stocks, while investors sold out of utilities and materials stocks on Friday.

The winning stocks from Friday’s session were Pinnacle Investment Management (ASX:PNI) adding 9.58%, BrainChip Holdings (ASX:BRN) rallying 5.56%, and HMC Capital (ASX:HMC) adding almost 5%. On the losing end of the market on Friday, investors sold out of Ramelius Resources (ASX:RMS), Paladin Energy (ASX:PDN) and Regis Resources (ASX:RRL), with each losing over 6.5%.

The most traded stocks by Bell Direct clients on Friday were CSL Limited (ASX:CSL), Whitehaven Coal (ASX:WHC) and Pilbara Minerals (ASX:PLS).

Over in the US on Friday, markets turned lower after surprisingly strong jobs data sparked concerns over the Fed’s aggressive interest rate stance moving forward, and investors digested a mixed bag of earnings reports. US jobs growth accelerated sharply in January with nonfarm payrolls surging to 517,000 jobs for the month, well above the expectation of 185,000 jobs added in the month. The US unemployment rate hit a more than 53 year low of 3.4% in another sign the US labour market remains tight despite the Fed’s best efforts to cool inflation and ease the tight labour conditions. Apple shares rose 2.4% on Friday after the tech giant forecast that revenue would fall for a second straight quarter but that iPhone sales would likely improve as production in China returns to normal. The Dow Jones closed Friday’s session 0.38% lower, the S&P500 lost 1.04% and the Nasdaq fell 1.59%.

Over in Europe, markets closed mostly higher on Friday as investors digested key central bank interest rate decisions, economic data and corporate earnings reports. The UK’s FTSE100 hit a record high on Friday partly driven by the pound dropping against the USD. The markets also rallied despite the Bank of England raising interest rates to their highest level since 2008 on Thursday.

Germany’s DAX fell 0.21% on Friday, while the French CAC rallied almost 1% and, in the UK, the FTSE100 rose 1.04%.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open Monday’s session 0.16% higher.
• On the commodities front oil is trading sharply lower, down 3.28% at US$73.39/barrel, iron ore is up 0.8% at US$126.50/tonne and gold is down 2.48% at US$1864.91/ounce.
• The Aussie dollar is buying US$0.69, 91.37 Japanese Yen, 57.43 British Pence, and NZ$1.09.
• On the economic data front investors will be awaiting the RBA’s latest interest rate decision out tomorrow alongside Australia’s trade balance data for December also out tomorrow.

Trading Ideas:

• Trading Central has identified a bullish signal on Lendlease Group (ASX:LLC) following the formation of a pattern over a period of 81-days which is roughly the same amount of time the share price may rise from the close of $8.97 to the range of $10.60-$10.90 according to standard principles of technical analysis.
• Trading Central has identified a bullish signal on Chorus (ASX:CNU) 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 $7.89 to the range of $8.31-$8.41 according to standard principles of technical analysis.

The Aussie share market added 0.24% this week (Mon-Thu), as investors awaited the highly anticipated rate decision out of the Federal Reserve in the US. Information technology stocks had the biggest boost this week, coat tailing on the tech-heavy Nasdaq as investors regain appetite for growth stocks.
 
 In this week's wrap, Grady covers:

• (0:28) Where inflation is hitting hardest in the current environment
• (2:07) What the current inflation rate & RBA rate hike means for markets
• (3:36) The best performing stocks in the ASX200
• (5:06) The most traded stocks & ETFs by Bell Direct clients
• (5:36) Three economic news items to watch out for

US stocks eased in afternoon trade, with earnings pending after the closing bell from Apple, Alphabet and Amazon. The Nasdaq was up more than 2% when the final hour of the session began, after rising 3.5% earlier in the day. The Nasdaq’s rally was boosted by Meta Platforms, which was 22% higher by 3pm after the company announced its plans to buy US$40 billion worth of its own shares. The Nasdaq then rebounded, closing the session 3.25% higher, while the S&P500 closed 1.47% higher and the Dow Jones ended 0.11% in the red.

European markets rallied overnight, with all major benchmarks closing higher, after the Bank of England and the European Central Bank announced they’d would hike interest rates by 50 basis points, as widely expected.

What to watch today:

• The SPI futures are this morning indicating that our local market will open 0.13% higher this morning.
•  In commodities, oil prices edged lower overnight. The gold price is set to end the week in the red, currently trading 1.9% lower. While iron ore has also dropped, after rallying in the previous session, as global economic growth concerns appear to weigh on prices.
• Economic data to watch out for: tonight the unemployment rate for January in the US will be announced, and the Producer Price Index for December for the Eurozone will be announced as well.
• CSL Limited (ASX:CSL) share price will be on watch today, after competitor GSK received FDA approval for a competing drug. CSL is also set to release its half-year earnings on February 14th. Ahead of the announcement, Morgan Stanley reiterated their Overweight rating on CSL, with a target of $354.
• And the Australian dollar is currently buying US$0.71, 57.01 British Pence, 91.75 Japanese Yen and NZ$1.09.

Trading Ideas:

• Bell Potter maintain a Buy rating on DGL Group (ASX:DGL). They’ve made no net changes to the drivers of the company’s underlying business but have upgraded their EPS forecasts 2-7% across FY23-25 expectations. That’s for the recent all cash Nightingale Transport acquisition for $18.2 million, which is an attractive deal in Bell Potter’s view. There is no change to the BUY rating, however Bell Potter’s price target is reduced from $2.25 to $2. At DGL’s current share price of $1.49, this implies 34.2% share price growth in a year.
• And Trading Central have identified a bullish signal in IDP Education (ASX:IEL), indicating that the stock price may rise from the close of $31.80 to the range of $36.25 to $37.25 over 26 days, according to the standard principles of technical analysis.

The ASX followed in Wall Street’s footsteps on Thursday after the Fed eased its rate hike pace for February. The local market rallied 0.13% on Thursday driven by a surge in technology stocks after the Nasdaq rose more than 2% in the US overnight.

CBA economist Gareth Aird today said there’s a risk the Reserve Bank raises interest rates by 40-basis points next Tuesday coupled with a statement of an intention to pause. The prediction comes as wider markets expect a 20-basis point rate hike from the RBA on Tuesday.

Pinnacle Investment Management shares took a dive today after the company missed earnings expectations in half year results. The company reported profits down 24% in the prior corresponding period which fell short of UBS estimates, and EPS fell 8% below Macquarie’s expectations. The hardest hit to Pinnacle was the company reporting affiliates generated performance fees which contributed only $900k to Pinnacles profits, down from $6.4m prior. UBS also downgraded Pinnacle to a sell rating from neutral prior to the results being released.

The winning stocks from today’s session were Megaport (ASX:MP1) adding 11.11%, Xero (ASX:XRO) rallied 7.5% and Wisetech Global (ASX:WTC) rose 6.77%.

And on the losing end of the market QBE (ASX:QBE) Insurance fell 4.76%, Computershare (ASX:CPU) lost 3.63% and Virgin Money UK (ASX:VUK) lost 3.6%.

The most traded stocks by Bell Direct clients were Rio Tinto (ASX:RIO), Wesfarmers (ASX:WES) and CSL (ASX:CSL).

On the commodities front, oil is up 1.21% at US$77.33/barrel, gold is up 0.13% at US$1952/ounce and iron ore is down 0.78% at US$128/tonne.

The Aussie dollar is buying 71 US cents, 91.84 Japanese Yen, 57.43 British Pence and 1 New Zealand dollar and 9 cents.

The bank of England interest rate decision is out later tonight with the market expecting a 50-basis point hike, which is likely to impact the FTSE100’s session on Thursday in the UK.

The Federal Reserve has raised the US cash rate by 25-basis points as the market expected at the conclusion of the FOMC meeting overnight. The Fed has now eased rate hikes for a second straight month for the cash rate to sit between 4.5%-4.75% but said it will need to continue raising rates in order to reach a stance of monetary policy that is sufficient to return inflation to the target 2%. Recent favourable economic data including lower consumer spending and slowing economic growth in the US were contributing factors to the Fed’s rate hike decision.

US markets rebounded in afternoon trade to close the day higher as the Fed pulled back its pace of rate hikes. The Nasdaq rose 2% boosted by gains in chipmakers on the back of strong earnings out of Advanced Micro Devices. The S&P500 reversed an earlier loss to close the session up 1.05% and the Dow rose 0.02% at the closing bell.

European markets closed mixed on Wednesday as investors awaited the Fed’s latest interest rate decision which was released after the closing bell in Europe. Germany’s DAX added 0.35%, while the French CAC fell 0.07% and in the UK the FTSE100 fell 0.14%.

Investors expected the 25-basis point rate hike announced by the Fed overnight however will continue to monitor commentary around the decision to gain any insight into what other central banks around the world might do at their respective rate hike meetings over the coming days.

What to watch today:

• On the economic calendar today the Bank of England’s latest interest rate decision will be announced later tonight with the market expecting a 50-basis point rise to 4%.
• The SPI futures are anticipating the local market to open 0.31% higher buoyed by the strong session on Wall St overnight.
• On the commodities front, oil is trading 2.41% lower at US$76.97/barrel, gold is up 1.02% at US$1947.40/ounce and iron ore is down 0.77% at US$129/tonne.
• The Aussie dollar is buying 71 US cents, 91.83 Japanese yen, 57.01 British pence and 1 New Zealand dollar and 10 cents.

Trading Ideas:

• Bell Potter has upgraded its rating and price target on Gold Road Resources (ASX:GOR) to a buy rating and a price target of $1.95 following the release of the company’s fourth quarter results including a revaluation of the company’s listed investments. The company’s 50%-owned Gruyere mine is beginning to yield increasing cash flow and earnings as production expands to greater than 350 thousand ounces per annum. Gold Road Resources also has a 19.99% stake in De Grey Mining (ASX:DEG), owner of the Mallina Gold Project, where 8.5 million ounces of gold have been delineated at the Tier-1 ‘Hemi Mining Centre’.
• Trading Central has identified a bullish signal on The Lottery Corp (ASX:TLC) following the formation of a pattern over a period of 12-days which is roughly the same amount of time the share price may rise from the close of $4.86 to the range of $5.12 to $5.20 according to standard principles of technical analysis.

The ASX closed the midweek session at a nine-month high, ending the day up 0.33% as investors piled into real estate and materials stocks, while selling out of energy and technology stocks.

Head of economic analysis at the RBA Marion Kohler said inflation has peaked and will begin to ease over the course of this year. She said the RBA remains focused on returning inflation to the target range and establishing a more sustainable balance of demand and supply in the Australian economy.

Flight Centre (ASX:FLT) shares took flight today, closing the session up over 8% after successfully completing a $180m placement through the issue of 12.3 million new shares. The Placement was strongly supported by existing and new institutional investors with demand exceeding the Placement size. The proceeds from the placement will be used to fund the acquisition of a 100% interest in Luxury Travel Holdings to grow Flight Centre’s leisure presence in the US and UK luxury markets.

Credit Corp (ASX:CCP) kicked off earnings season today with a bang, as the company closed the day up almost 1% on the back of first half results including 32% growth in the consumer loan book, on track for record full year consumer lending segment earnings, and a significant step-up in US resourcing to meet the opportunity in the region. Credit Corp also reported a 30% decline in NPAT to $31.8m due to up-front loss provisioning and marketing expense from rapid loan book growth, costs arising from increased US resourcing and run-off in the core AU/NZ debt buying segment.

The winning stocks from today’s session were Flight Centre (ASX:FLT) adding over 8%, James Hardie Industries (ASX:JHX) climbing 4.3% and Imugene (ASX:IMU) rallying 3.7%.

And on the losing end Pinnacle Investment Management (ASX:PNI) fell 7.21%, Paladin Energy (ASX:PDN) lost 4.12% and Telix Pharmaceuticals (ASX:TLX) shed 3.7%.

The most traded stocks by Bell Direct clients today were CSL (ASX:CSL) , Beach Energy  (ASX:BPT) and Rio Tinto (ASX:RIO).

On the commodities front, oil has risen to trade at US$ /barrel amid easing fears that the world’s largest oil user, the US, may face a recession on rising interest rates in the region. The price of oil is on watch ahead of the US Fed’s rate decision and production guidance from OPEC and its allies. Gold is trading, flat at US$1927/ounce and Iron ore is down 0.77% at US$129/tonne.

The Aussie dollar is buying 71 US cents, 91.90 Japanese Yen, 57.26 British Pence and 1 New Zealand dollar and 10 cents.

Investors globally will be awaiting the release of the Fed’s interest rate decision overnight with markets expecting a rise of just 25-basis points.

The US market closed higher on Tuesday following the release of upbeat earnings results and encouraging economic data. General Motors shares rose over 8% on Tuesday after reporting quarterly results that surprised markets including earnings per share of $2.12 and revenue of $43.11bn which both well exceeded analysts’ expectations. The Dow Jones rose 1.1%, the S&P500 gained 1.47% to record its best January since 2019, and the Nasdaq ended the day up 1.67% for its best January since 2001.

The Fed’s FOMC meeting ends today and has investors weighing up whether the fed will continue its aggressive rate hike strategy or whether recent favourable economic data will ease the fed’s stance including personal spending in the US falling by 0.2% for the second consecutive month in December, and US CPI showing goods and services prices have dropped for the first time since May 2020 as the inflation rate fell to 6.5% for December, down from 7.1% in November. The expectation is for a 25-basis point rate hike to be announced for the month, which is the lowest since March 2022.

Over in Europe, markets closed Tuesday’s session lower despite eurozone growth figures coming in ahead of estimates with growth of 0.1% in the last quarter of 2022. Investors in the region are now focused on the European Central Bank’s interest rate decision out on Thursday. German retail sales for December showed a surprise fall which paints a mixed picture of economic conditions in the region ahead of the rate decision out tomorrow. Germany’s DAX and the French CAC each closed Tuesday’s session flat, but the FTSE100 in the UK fell 0.17%.

What to watch today:

• Ahead of the local trading session, the SPI futures are anticipating the ASX to open the midweek session 0.43% higher on the back of the strong session on Wall St on Tuesday.
• The Aussie dollar is buying US$0.70 US cents, 91.81 Japanese Yen, 56.91 British Pence and NZ$1.09.
• On the commodities front, oil is up 1.17% at US$78.81/barrel, gold is up 0.34% at US$1929/ounce and iron ore is up 4.42% at US$130/tonne.

Trading Ideas:

• Bell Potter has increased its price target on Aroa Biosurgery (ASX:ARX) from $1.40 to $1.45 and maintain a buy rating on the healthcare company following the release of the company’s third quarter trading update. For the quarter Aroa reported maintenance of revenue within the guidance range for FY23, and normalised EBITDA is expected to breakeven for FY23. Aroa also announced it has enrolled 138 out of 300 patients for its Myriad Registry. Bell Potter sees key catalysts from the report and Myriad Registry update are expected in the coming months and have increased the price target on Aroa as a result.
• Trading Central has identified a bullish signal on Endeavour Group (ASX:EDV) 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 $6.63 to the range of $6.99 to $7.07 according to standard principles of technical analysis.

The local market recovered from the red start to the week in the early hours of trade on Tuesday before falling in afternoon trade to close 0.07% lower as investor optimism was initially boosted by weaker-than-expected retail sales before confidence was dampened by the fact that the lower retail sales will likely have low impact on the upcoming RBA interest rate decision next week. Consumer staples stocks led the market gains today while information tech stocks were sold off amid investor fears of prolonged interest rate hikes to come.

Retail sales for the month of December tumbled 3.9% to $34.47bn despite traditionally being the busiest month of the year for retailers. Department stores were the worst hit with a decline of 14.3%, while clothing, footwear and personal accessory retailing fell 13.1%. The decline in retail sales caused a sell-off in retail stocks like Myer Holdings (ASX:MYR), City Chic Collective (ASX:CCX) and Lovisa (ASX:LOV) today, however has investors now hoping the RBA will ease its rate hike stance at the next meeting next Tuesday.

Software defined networking company Megaport (ASX:MP1) tanked over 24% on Tuesday after releasing a quarterly update including cash from operations was $0.2m, down from Q1 with lower receipts from customers, total net cash flow of minus $11.9m which is a further dive from the minus $9.6m in the prior corresponding quarter, and the company burnt almost $50m in cash from the same period a year earlier to close the quarter with $57.5m in cash.

Infant formula producer Bubs Australia (ASX:BUB) crashed more than 9% yesterday after also releasing a Q2 trading update including group gross revenue down 28% on the PCP to $14.3m driven by gross revenue from the Chinese market down 66% for the quarter amid prolonged lockdowns in the region. International gross revenue for the quarter was strong, boosted by US shipments and the company recently making progress on its journey to gain permanent US regulatory approval.

The winning stocks from today’s session were led by Woolworths (ASX:WOW) jumping 3.77%, while Corporate Travel Management (ASX:CTD) added 2.7% and EVT (ASX:EVT) rose 2.55%. And on the losing end, Megaport (ASX:MP1) took the biggest hit today closing down almost 25%, Sayona Mining (ASX:SYA) fell just under 12% and Allkem (ASX:AKE) closed the day down 7.5%.

The most traded stocks by Bell Direct clients today were Winsome Resources (ASX:WR1), Whitehaven Coal (ASX:WHC) and Mineral Resources (ASX:MIN).

On the commodities front today, oil is down 0.32% at US$77.65/barrel amid rate hike decisions by central banks this week as well as Russian oil exports remaining strong. Gold is down 0.15% today at US$1919/ounce and iron ore is up 4.42% at US$130/tonne.

Further economic data released today included Chinese Manufacturing PMI for January coming in at 50.1 points which was above expectations and growth from December, indicating the Chinese economy is recovering faster than anticipated after the scrapping of the harsh COVID-19 lockdowns.

The Aussie dollar is buying US$0.70, 91.63 Japanese Yen, 57.31 British Pence, and NZ$1.09.