Between the Bells

Wall Street closed mostly lower on Tuesday as investors shift focus to the week ahead, filled with key economic data and Fed Chair Jerome Powell’s speech on Wednesday where he is expected to talk about the fiscal and monetary policy. Investors also struggled to recover from sharp losses faced in Monday’s session. The Dow Jones fell just 1 point, the Nasdaq shed 0.6% and the S&P500 closed the day down 0.2%. Investors are anxiously awaiting the release of important jobs and indicative GDP data for Q3 which is out later this week and will play an important role in the Fed’s next interest rate decision at the next FOMC meeting on December 14.

Over in Europe markets closed lower across the board as investors continue to monitor news from China on the COVID-restrictions front. The Stoxx 600 closed down 0.1%, Germany’s DAX fell 0.2% and the French CAC lost 0.06%. Over in the UK, the FTSE100 declined 0.51%.

What to watch today:

• On the commodities front, crude oil is trading up 1.13% at US$78.16 per barrel, gold is trading up 0.6% at US$1,751 an ounce, and iron ore is trading down almost 1% at US$100.50 a tonne.
• Looking at economic data out today, it’s a big data day for Australia’s building industry with construction work done for Q3 out at 11am eastern daylight time, and building permits preliminary data for October is out at 11:30am eastern daylight time. Overseas investors will be awaiting the release of US GDP growth rate data 2nd estimate for Q3 with markets expecting an increase of 2.6% for the quarter. JOLTs Job Openings data for October is also out tomorrow which will give an insight into America’s workforce in the tight labour environment.
• Ahead of the local trading session, the SPI futures are anticipating the ASX to open flat following the lacklustre session on Wall Street overnight.
• The Aussie dollar is buying 66.88 US cents, 92.62 Japanese Yen, 55.75 British Pence and NZ$1.08.

Trading Ideas:

• Bell Potter has downgraded its price target on Bubs Australia (ASX:BUB) following the recent shortfall in Q1 of FY23 infant milk formula revenues compared to Bell Potter expectations, and negative year-on-year growth implied in the second quarter expected revenue guidance warrants a more cautious approach to near term revenue growth, earnings growth and valuation.
• Trading Central has a bullish signal on Coronado Global Resources (ASX:CRN) 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 $2.02 to the range of $2.37-$2.45 according to standard principles of technical analysis.

Our local market gained just 0.3% today. While the ASX200 was trading quite flat today, Qantas shares were outperforming the XJO, as well as other travel stocks, amid news that Qantas Frequent Flyer has launched thousands of points planes to coastal cities over the summer. More than 3,000 flights will be turned into what’s referred to as “points planes” where every seat can be booked under a classic flight reward. Late last week, brokers retained their Buy recommendations on QAN. UBS and Ord Minnett retained a Buy, Credit Suisse and Macquarie both Outperform and Morgan Stanley Overweight.

A boost in iron ore futures prices saw mining stocks advance today. The materials sector performed best, gaining 1.7%, followed by healthcare and technology, while real estate declined the most.

The best performing stocks on the ASX200 today were Fisher and Paykel (ASX:FPH), Nanosonics (ASX:NAN) and Rio Tinto (ASX:RIO), while the worst performers were Collins Foods (ASX:CKF), ASX (ASX:ASX) and Virgin Money UK (ASX:VUK).

The most traded stocks by Bell Direct clients today were Core Lithium (ASX:CXO), APA Group (ASX:APA), BHP Group (ASX:BHP) and Commonwealth Bank (ASX:CBA).

The Australian dollar is buying US$0.67, 92.85 Japanese Yen, 55.85 British Pence and NZ$1.08.

Global markets closed in the red overnight, after protests in China raised worries around supply chains. Stocks fell as social unrest from China’s prolonged COVID restrictions weighed on markets around the world. Chinese governments tightened some COVID controls as case numbers rose, even though earlier this month Beijing adjusted some policies that otherwise suggested the country’s reopening.

This saw oil futures hovering around brand-new lows for this year, earlier in the trading day, due to concerns around demand.

In US equities, the Dow Jones dropped more than 500 points or 1.5%. The S&P500 and the Nasdaq each dropped 1.7%.

China is the world’s second-biggest economy, so almost all markets are affected in some way. We also saw Bloomberg report that it could mean 6 million fewer iPhone units for the year, as the factories in China are shutdown, and this saw Apple shares drop 2.8%.

European equities were down also. The STOXX 600 down 2.9%, Germany’s DAX down 1%, France’s CAC down 0.7% and in the UK the FTSE 100 down 0.2%.

What to watch today:

• The SPI futures are suggesting the Australian market will open flat this morning.
• In commodities:
  • Currently oil prices have rebounded, now trading 1% higher at US$77 per barrel, after having hit an 11-month low of US$73.50 earlier in the session. As well as the protests in China, there are also rumours of an OPEC production cut. Keep your eye on energy producers today such as Santos (ASX:STO) and Beach Energy (ASX:BPT).
  • Meanwhile the price of gold is reading 0.85% lower, pressured by a recovery in the US dollar.
  • The iron ore price has jumped 2.5% at US101.50 per tonne and is set to close the month nearly 25% higher at levels last seen in mid-September. In iron ore markets, expansionary measures from China to sustain slowing economic growth, outweighed the concerns about the protests. So keep watch of Rio Tinto (ASX:RIO), Fortescue Metals (ASX:FMG), Champion Iron (ASX:CIA) and BHP Group (ASX:BHP).

Trading Ideas:

• Bell Potter maintain a Buy rating on IPD Group (ASX:IPG), which is a leading Australian distributor of electrical equipment and industrial digital technologies operating nine distribution centres and services over 4,200 customers nationally. Bell Potter maintained their recommendation after the company’s AGM yesterday, where they released H1 2023 estimated guidance well-ahead of Bell Potter’s estimated forecasts. Bell Potter say that the company provides investors with leverage to a new life cycle of demand, which in Europe has seen a more than 15% market growth per annum over the last two years. Bell Potter have increased their price target from $2.25 to $3.35, and at its current share price of $3.05, this implies 9.8% share price growth in a year.
• Trading Central have identified a bullish signal in NEXTDC (ASX:NXT) indicating that the stock price may rise from the close of $9.82 to the range of $11 to $11.30 over 51 days according to the standard principles of technical analysis.

The local market started the week in negative territory, closing the session down 0.42% as a sharp sell-off in energy stocks weighed on the key index driven by commodity prices plunging. Oil retreated to its lowest level since 2021 today, amid unrest in China as large crowds gathered in Shanghai, Beijing and Wuhan to protest over the harsh COVID-19 restrictions in the region. Sentiment in the oil market has remained a key focus in recent times amid concerns over demand in China, the world’s largest importer of crude oil. The price of oil has also been impacted in recent days as the EU continues to negotiate over a price cap on Russian oil. Across the other commodities, gold is trading 0.31% lower at US$1750 per ounce, while iron ore is up 2.53% at US$101.50 per tonne.

RBA governor Philip Lowe has this morning apologised to Australians who took out mortgages expecting interest rates to stay unchanged through 2024. Mr Lowe said the RBA had failed by not making it clear that its commentary about steady interest rates was heavily conditional on the state of the economy.

Investors continued selling out of lithium stocks today on concerns demand for electric vehicles in China is weakening after EV registrations in China plummeted by more than a fifth in October from September.

The winning stocks today were led by New Hope Corporation (ASX:NHC) adding 5.4%, Whitehaven Coal (ASX:WHC) rallying almost 4% and Brickworks (ASX:BKW) ending the day up 3.2%. And on the losing end, Healius (ASX:HLS) took the biggest hit today, falling just over 10%, while Liontown Resources (ASX:LTR) and Ramelius Resources (ASX:RMS) each fell 7.5% and 6.5% respectively.

The most traded stocks by Bell Direct clients today were Bendigo & Adelaide Bank (ASX:BEN), Bank of Queensland (ASX:BOQ) and Telstra (ASX:TLS).

Preliminary retail sales data for October out today shows consumer spending has declined for the first time in 2022, with sales down 0.2% on September in a sign rising interest rates are starting to have an impact on consumer spending which in-turn is part of the RBA’s goal to cool the nation’s inflation.

The Aussie dollar is buying 66.85 US cents, 55.85 British Pence, 92.61 Japanese Yen and NZ$1.08.

The local market climbed 0.25% on Friday as investors anticipated strong Black Friday sales demand would boost the beaten down consumer discretionary sector. Utilities stocks soared 5% on Friday, while materials and energy stocks were sold off.

The winning stocks on Friday were led by Nanosonics (ASX:NAN) lifting 11.06% on the back of Ord Minnett upgrading the company to a hold rating with an improved price target of $4.00. Ramelius Resources (ASX:RMS) jumped almost 7% on Friday and Virgin Money UK (ASX:VUK) rose 6.12%. On the losing end, Allkem (ASX:AKE) fell 8.61% on Friday, amid a sell-off in lithium stocks on reports that the price of lithium may have hit a price ceiling. Pilbara Minerals (ASX:PLS) and Lake Resources (ASX:LKE) also each fell 6.7% and 5.7% respectively.

The most traded stocks by Bell Direct clients on Friday were New Energy Solar (ASX:NEW), Pilbara Minerals (ASX:PLS) and Fortescue Metals Group (ASX:FMG).

Wall Street had a slightly mixed session on Friday as investors shifted focus to Black Friday online sales, which topped a record US$9 billion. Investor optimism was also boosted last week on renewed signs that the Fed’s may soon begin easing the aggressive rate hikes tackling inflation. Buy now pay later methods of purchasing goods during Black Friday sales rose 78% compared with the week prior as consumers turned to instalment payments amid rising interest rates. The Dow Jones rose 0.45% on Friday, while the Nasdaq and S&P500 each fell 0.52% and 0.03% respectively.

Over in Europe, markets closed flat with mining and financial stocks taking the biggest hit. Credit Suisse shares fell to a record low on Friday despite the company securing $4 billion from investors to fund its second strategic overhaul. The STOXX600 closed just 0.025% lower on Friday, Germany’s DAX rose 0.01%, the French CAC added 0.08% and the FTSE100 in the UK rose 0.27%.

What to watch today:

• Ahead of the local trading session the SPI futures are expecting the ASX to open 0.12% lower to start the new trading week.
• On the commodities front crude oil has dipped 2.31% to trade at US$76.28 per barrel, gold is up 0.07% at US$1756.2 per ounce, and iron ore is up 2.53% at US$101.50 per tonne.
• The Aussie dollar has strengthened to buy 67.19 US cents, 93.55 Japanese yen, 55.83 British pence and NZ$1.08.
• Taking a look at economic data out today, Australian preliminary retail sales data for October is out, giving an insight into whether consumers continued spending on retail in October as interest rates continue to rise. RBA governor Philip Lowe will also speak at 10am AEDT today giving an insight into the RBA’s interest rate stance moving forward.

Trading Ideas:

• Trading Central has identified a bullish signal on BetMakers Technology (ASX:BET) following the formation of a pattern over a period of 24-days, which is roughly the same amount of time the share price may rise from the close of $0.30 to the range of $0.35 to $0.37 according to standard principles of technical analysis.
• Bell Potter has downgraded its rating on Costa Group (ASX:CGC) from a Buy to a Hold on the grounds of continuing to see the issues of CY22 as largely seasonal rather than structural, however the recent share price recovery has seen the value equation shift back in favour of the other ASX listed horticultural exposures.

The Aussie share market lifted 3.6% this week (Mon-Thu), as investor sentiment was boosted by signs that the RBA and other central banks will ease their aggressive stance on rates. Plus we put the magnifying glass on some of 2022’s big deals. 
 
 In this week's wrap, Grady covers:

 •    (0:13) How companies & investors navigated M&As this year
 •    (0:36) The mining deal between BHP & OZ Minerals 
 •    (1:26) Perpetual's bidding war over Pendal
 •    (3:39) The best performing stocks on the ASX200
 •    (4:40) The most traded stocks & ETFs by Bell Direct clients 
 •    (5:12) Four economic news items to watch out for

US financial markets were closed for the Thanksgiving holiday, with trading set to resume on Friday in New York. However, markets will close early at 1pm local time. 

European stocks rallied to levels last seen 3 months ago, with the STOXX 600 closing at its strongest level since August 18, led by gains in real estate stocks. 

What to watch today: 

• The SPI futures are suggesting the Australian market will rise 0.18% at the open this morning. 
• In commodities: 
  • The oil price has slightly rebounded, regaining only some of its earlier losses, after closing at a two-month low in the previous session, as the price continues to be pressured by COVID cases in China. This is causing concerns of tighter restrictions in China, which would affect energy demand. Also, the G7 proposed a price cap on Russian oil in the range of US$65-70 per barrel. However, the high cap won’t cause disruption to Russian flows and so will likely have minimal effect on markets. 
  • The gold price continues to rise for the third straight day, after the Federal Reserve’s meeting minutes were released, which showed that a substantial majority of policymakers agreed it would likely soon be appropriate to slow the pace of interest rate hikes. 
  • Iron ore is trading over 1% higher, nearing the eight-week high of US$99.50, hit on November 18. This is due to fresh liquidity injections to steel consumers from China, of course a top consumer. 
• Goldman Sachs this morning downgraded BHP group (ASX:BHP) to a neutral rating with an improved price target of $42.90, after assessing its valuation against global peers. Meanwhile, Goldman Sachs is more optimistic toward Rio Tinto (ASX:RIO), this morning reiterating its buy rating with an improved price target of $114.70, saying that the development of Rhodes Ridge has the potential to be significant for Rio’s Pilbara business.  

Trading Central:

• Bell Potter maintain a Buy rating on Volpara Health Technology (AX:VHT) and maintain their price target of $1.10. FY23 revenues are reduced by $2.1 million to $35.5 million, which is $1 million above guidance. H2 revenues are reliably higher than H1 and Bell Potter expect this trend will continue. At VHT’s current share price of $1.10, this implies 69.2% share price growth in a year. 
• Trading Central have identified a bullish signal in Reliance Worldwide (ASX:RWC) indicating that the stock price may rise from the close of $3.19 to the range of $3.32 to $3.39, over 16 days, according to the standard principles of technical analysis.

The local market jumped 0.14% to a near 6-month high today on the back of a solid session on Wall Street overnight buoyed by the latest FOMC minutes outlining that it may be appropriate soon for the Fed’s to slow down their aggressive rate hikes. Tech stocks was the best performing sector, while gold miners also led the charge today amid a rise in the price of the precious commodity.

Qantas Airways (ASX:QAN) shares came off in afternoon trade following reports that the company’s domestic flight attendants have demanded the airline lift a two-year staff wage freeze or face the threat of attendants walking off the job during the Christmas rush. Nick Scali (ASX:NCK) shares soared over 10% today as investors responded to the furniture retailer’s AGM trading update outlining the company is performing materially better than expected in H1FY23 with revenues up 74% on the same period a year earlier. The company also expects first half profit to be between 56% to 66% above that of H1 FY22.

AGL Energy (ASX:AGL) shares took a hit today as investors responded to the company’s announcement today revealing it has decided to close the power Torrens Island B Power station in South Australia on the 30th June 2026 after 50-years of operation. The AGL management team doesn’t expect the closure announcement to have a material impact on earnings in FY23 nor does it expect the closure to have long term impact.

The winning stocks for today’s session were St Barbara (ASX:SBM) up over 9%, BrainChip Holdings (ASX:BRN) adding more than 8.5% and Evolution Mining (ASX:EVN) closing the day up 6.6%. And on the losing end coal miners weighed on the key index today amid concerns over demand in China, with New Hope Corporation (ASX:NHC) tanking almost 9% today, while Whitehaven Coal (ASX:WHC) fell 6.65%.

The most traded stocks by Bell Direct clients today were Australian Foundation Investment Co (ASX:AFI), Northern Star Resources (ASX:NST), and Bellevue Gold (ASX:BGL).

Commodities are trading mixed this afternoon with crude oil down 0.24% to U$77.75 per barrel, and natural gas is down 1.53%, while gold is up 0.4% at US$1,755.86 an ounce, and iron ore is also up just over 1% at US$98 a tonne.

The Aussie dollar has strengthened to buy 67.61 US cents, 93.79 Japanese Yen, 56 British Pence and NZ$1.08.

Wall Street extended its rally into Wednesday after the latest FOMC minutes showed most policy makers expect a slowdown in interest rate hikes will ‘soon be appropriate’. For the first time though, the Federal Reserve staff said that a recession is possible in the next year, with some saying the Fed’s current action could exceed what was required to tackle the country’s 40-year high inflation. Trading volumes in the US have been lighter this week amid the Thanksgiving holiday on Thursday. The Dow Jones rose 0.28%, the Nasdaq added 1% and the S&P500 rallied 0.6%.

Over in Europe, markets closed slightly higher as investors awaited the release of the Fed’s FOMC minutes in afterhours trade. The STOXX600 rose 0.6%, Germany’s DAX rose just 0.04% and the French CAC added 0.32%.

In the UK the FTSE100 closed the midweek session almost 0.2% higher.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open just 0.06% higher as the global rally continued overnight.
• On the commodities front this morning, crude oil is trading 4.48% lower at US$77.32 per barrel, gold is up 0.67% at US$1,751.95 an ounce, and iron ore is trading 0.51% lower at US$97 a tonne.
• The Aussie dollar has strengthened to buy 67.3 U.S. cents, 93.85 Japanese yen, 55.95 British pence and NZ$1.08.
• There is no local economic data out today, however eyes will be on New Zealand’s market today after the reserve bank of New Zealand delivered its highest ever rate hike yesterday of 75-bassi points taking the country’s cash rate to 4.25% in a bid to tackle inflation in the region.

Trading Ideas:

• Trading Central has identified a bullish signal on The Lottery Corporation (ASX:TLC) 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 $4.56 to the range of $4.94-$5.02 according to standard principles of technical analysis.
• Trading Central has identified a bearish signal on GR Engineering Services (ASX:GNG) following the formation of a pattern over a period of 53-days which is roughly the same amount of time the share price may fall from the close of $2.03 to the range of $1.80-$1.86 according to standard principles of technical analysis.

Australian stocks rose from a second day, following a rebound in the US and European equity markets. 

 The ASX200 gained 0.7%, boosted by utilities, industrials and energy. All sectors, except technology and real estate, were trading in positive territory.

 Today Qantas Airways (ASX:QAN) upgraded guidance amid strong travel demand, which saw its share price close 5.3% higher. Qantas lifted its profit forecast for the December half as rampant consumer demand continues to buoy the sector’s COVID-19 recovery, despite capacity restraints and inflated fuel costs. The airline is expecting to book between $1.35 billion and $1.45 billion in underlying profit before tax in the first half of its financial year. That’s up $150 million from a previous guidance given in October. Meanwhile, net debt is expected to fall more than previously predicted.

 Technology stocks were mixed today, with WiseTech Global (ASX:WTC) falling 6.7% and was the worst performing stock on the ASX200, while BrainChip Holdings (ASX:BRN) gained 7% today, and was the best performing stock of the session. 

 The most traded stocks by Bell Direct clients today were Smartgroup Corporation (ASX:SIQ), New Hope Corporation (ASX:NHC), National Australia Bank (ASX:NAB) and BPH Energy (ASX:BPH). 

 The Australian dollar is buying US$0.66, 55.95 British Pence, 93.85 Japanese Yen and NZ$1.08.