Between the Bells

US inflation came in hotter than expected this week, with consumer prices rising 8.3% year-over-year in August. However, what was even more concerning than the headline figure was the core inflation measure excluding volatile food and energy prices, which accelerated from 5.9% in July to 6.3% in August. Now, the interest rate futures responded to the inflation readings by pricing out any probability of a 0.5% hike at next week’s Fed meeting, and pricing in a 32% likelihood of a full percentage point hike, up from 0% probability one week prior.

US equities overnight closed higher. The Dow Jones slightly higher, up just 0.1%, the S&P500 up 0.3% and the Nasdaq up 0.7%.

What to watch today:

• Locally, the Australian market is set to open flat this morning, with the SPI futures suggesting a rise of just 0.09%. Investors are hoping for a more positive outlook today, after yesterday’s heavy sell-off.
• In commodities,
  • Oil is trading just under 2% higher, as investors continue to assess the outlook for global demand. Oil stocks to watch include Santos (ASX:STO) and Woodside Energy (ASX:WDS).
  • Gold is in the red, weighed down by a sharp US dollar, as the higher-than-expected US inflation figures fuelled expectations that the Fed will continue to raise rates. So gold miners to keep your eye on are Evolution Mining (ASX:EVN) and Regis Resources (ASX:REG).
  • And iron ore is trading at its highest level in almost three weeks, amid prospects of increased Chinese demand. China, a top steel producer and iron ore consumer, has announced more stimulus measures to support its COVID-hit economy, which includes new infrastructure projects. So keep watch of miners that may benefit from rising iron ore prices, such as Rio Tinto (ASX:RIO), Fortescue Metals (ASX:FMG), BHP (ASX:BHP), and Champion Iron (ASX:CIA).
• Stocks set to go ex-dividend today, which often sees share prices fall include Best & Lee (ASX:BST), Earlypay (ASX:EPY), IGO (ASX:IGO), Regis Healthcare (ASX:REG), Ramelius Resources (ASX:RMS) and South32 (ASX:S32).

Trading Ideas:

• Bell Potter maintain a Speculative Buy rating on Avita Medical (ASX:AVH) with a valuation of $3.00. At its current share price of $1.95, this implies 53.8% share price growth in a year.
• Trading Central have identified a bearish signal in Bendigo and Adelaide Bank (ASX:BEN), indicating that the stock price may fall from the close of $8.43 to the range of $7.90 to $8.00, over 5 days, according to the standard principles of technical analysis.

There was no good, just bad and ugly in today’s session on the ASX as investors responded to the Wall St sell-off sparked by US inflation data hitting 8.3% for August.

The ASX ended the midweek session down 181.10 points or 2.58%, weighed down by a heavy sell-off in real estate stocks, although no sector was safe from the market sell-off today with all 11 sectors ending the session in negative territory, with real estate stocks again taking the biggest hit. More than $58 billion was wiped off the ASX in the opening hour of trade today, as the local market tumbled more than 2.6%. Japanese financial firm Nomura has raised its expectations of the Fed to hand down a full 1% interest rate hike at the FOMC meeting next week, while also expecting the RBA to increase Australia’s cash rate hike by 0.5% in October instead of the previously forecasted 0.25%. Westpac also says Australia is facing a similar problem to the US with consumption remaining strong, meaning demand is continuing to drive inflation.

Finding a winning stock today was like finding a diamond in the rough, but one standout was Clover Corporation (ASX:CLV), which surged more than 11% during the session after releasing full year results in line with the top end of guidance. The strong results were boosted by the second half of the year with international borders opening and key infant milk manufacturers lifting orders. Mesoblast (ASX:MSB) ended the session as the leading stock, gaining 2.2% despite no price sensitive news released by the regenerative medicine company today.

On the losing front, Lake Resources (ASX:LKE) continued its run in the firing line of investors with the stock plunging more than 15% today after the company revealed a dispute with Lilac Solutions regarding the Kachi Pilot Plant as to the date by which certain milestones must have been achieved. Under the agreement, Lilac will earn up to a 25% stake in the Kachi Project based on meeting certain milestones, which Lake considered must be achieved by September 30, while Lilac believes it has until 30 November to do so. Investors also sharply sold-off Megaport (ASX:MP1) and Clinuvel Pharmaceuticals (ASX:CUV) shares today.

The top traded stocks by Bell Direct clients today were Lake Resources (ASX:LKE), Star Entertainment Group (ASX:SGR) and Cochlear (ASX:COH).

On the economic calendar for tomorrow, Australia’s unemployment rate for August is released, which will give an insight into how tight the country’s labour market was last month.

US markets snapped the recent rally overnight following the release of key inflation data for August showing the world’s largest economy’s inflation rate hit 8.3% for the month which is a decline from July’s 8.5% but above the market expectations of 8.1%. Investors sharply sold out of stocks broadly on Wall St over concerns the Fed will take even more aggressive action to cool inflation by rising interest rates further. The Dow Jones fell 3.3%, the Nasdaq plunged 4.35% and the S&P500 fell 3.52%.

The sell-off extended over to London where the FTSE 100’s green run came to an end with the index falling 1.17% while Germany’s DAX closed the day down 1.6%, and the French CAC lost 1.4%.

Ukraine’s recent advances and counterattacks in the nation’s recaptured area to 6,000 square kilometres which has impressed the White House and other western allies. From a markets perspective, global markets just want to see de-escalation of tensions to help stabilise inflation and cool the global energy crisis.

What to watch today:

• Locally, the global energy crisis has driven demand for Australian-based energy stocks with the sector up 37.36% YTD as countries look for new supply deals with Australian providers which we have already seen through Woodside Energy (ASX:WDS) signing a supply agreement for the supply of LNG with Europe. This year, the energy sector is one of just two sectors that have posted gains in the current market environment.
• In commodities, crude oil is trading almost half a percent lower at US$87 a barrel, natural gas is up almost 1%, gold is trading more than 1.2% lower at US$1,703 an ounce, and iron ore is flat around US$104 a tonne.
• Ahead of the local trading day, ASX futures is expecting the market’s green streak to come to an end today, with the futures expecting a fall of 1.75% to start the day on the back of that sharp sell-off in the US overnight.
• On the economic data front for today, UK inflation data for August is released this afternoon with the market expecting an increase to 10.2% from 10.1% in July.

Trading Ideas:

• Bell Potter maintains a buy rating on The a2 Milk Company (ASX:A2M) and has increased its share price target from $6.35 to $6.60 following recent market updates including its New Zealand baby formula manufacturer Synlait Milk having its licence to produce baby formula for the Chinese market extended until February 2023.
• Trading Central has identified a bullish signal on Brambles (ASX:BXB) following a pattern forming over a period of 15-days which is roughly the period of time in which the price target between the range of $13.10-$13.40 may be achieved from the close of $12.08, according to standard principles of technical analysis.

The Australian market’s rally extended into a fourth straight session today with the key index ending the day up 0.65%, driven by a surge in real estate stocks today.

ANZ consumer confidence data for last week out today shows Aussie confidence fell 0.5% following the RBA’s latest interest rate hike, however Westpac Consumer Confidence data for September also out today showed an increase of 3.9%, rebounding from a 3% fall in August and rising for the first time since November 2021.

NAB business confidence data was also released today, which showed businesses were also confident in August as the index rose 2 points to 10 in August and conditions remain strong across the states and most industries indicating that demand remains strong. NAB expects that inflation and rising interest rates will eventually begin to weigh on household budgets which will in-turn lead to decreasing demand.

The best performing stocks today were Chalice Mining (ASX:CHN) which added almost 10%, NOVONIX (ASX:NVX) gained 7.5% and BrainChip (ASX:BRN) jumped 5.8%.

The bigger stories came out of the losing front today:

• Link Administration (ASX:LNK) nosedived more than 20% as investors fled the stock on concerns that the company’s proposed $2.5b buyout by Dye & Durham would be derailed by the UK’s Financial Conduct Authority’s regulatory approval process.
• A consortium of investors led by KKR pulled out of takeover talks with Ramsay Health Care (ASX:RHC) for a buyout worth nearly $30b which led to Ramsay Health Care shares tumbling 10%.
• Woolworths’ (ASX:WOW) acquisition of 80.2% of issued shares in MyDeal was approved by the NSW Supreme Court today. It is expected that an office copy of the Court orders will be lodged with ASIC tomorrow, at which time the Scheme will become legally effective.
• Star Entertainment Group (ASX:SGR) has been found unfit to hold a casino licence in NSW today following a lengthy inquiry into the hotel and casino giant by the NSW Independent Casino Commission. Shares in SGR rallied more than 3% today in a sign the market expected this outcome from the inquiry and in anticipation of who will come in to recover and restructure the casino giant in order to comply with regulations.

 The top traded stocks by Bell Direct clients today were Mineral Resources (ASX:MIN), BHP Group (ASX:BHP) and Macquarie Group (ASX:MQG).

In economic data, investors are eagerly awaiting the release of US inflation data for August which is out later tonight, to gain an insight into whether the cost of living in the world’s largest economy continued to decline for the month.

The US market closed higher for the fourth straight session off the back of growing confidence that inflation has peaked. Also boosting sentiment was a weaker US dollar. This saw the Dow rise more than 200 points, and both the S&P500 and Nasdaq lift more than 1%. Investors are now awaiting the release of the August consumer price index report on Tuesday morning US time. 

In Europe, markets also closed higher, with the German DAX up the most, rising 2.4%. 

What to watch today:

• The SPI futures are suggesting that the ASX200 will open 0.6% higher.
• Economic news wise, we’ll get an update on just how confident both consumers and businesses are in the current market. At 10:30am AEST, Westpac’s Consumer Confidence reading will be announced, and at 11:30am, NAB’s Business Confidence for August will be released.
• AGL Energy (ASX:AGL) will be on watch today, after the gas and electricity provider revealed after market close yesterday that the Loy Yang A Unit 2 will be out of action for longer than expected, after a defect was identified. Management however expects its strong performance during August and September to help offset the earnings impact.
• In commodities:
  • Oil prices rose off the back of supply uncertainty. 
  • The gold price also gained as the US dollar slipped. 
  • And the spot iron ore price traded nearly 3% higher to US$105 a tonne.
• Stocks going ex-dividend today include Grange Resources (ASX:GRR), TPG Telecom (ASX:TPG), IVE Group (ASX:IGL), Inghams (ASX:ING) and News Corp (ASX:NWS). 
• If you hold Domain Holdings (ASX:DHG), GUD Holdings (ASX:GUD) or APA Group (ASX:APA), you will receive your dividend payment today.  

Trading Ideas:

• Bell Potter have maintained its Buy rating on lithium miner, Allkem (ASX:AKE) and have increased its price target from $18.76 to $20.04. Bell Potter expect AKE’s cash generation to lift substantially into 2023, given the ongoing strength in lithium demand, commodity prices and production growth. At its current share price of $15.53, Bell Potter’s price target of $20.04 implies about 29% share price growth in a year. 
• Trading Central has a bearish signal on property group Aspen Group (ASX:APZ) indicating that the stock price may fall from its close of $1.66 to the range of $1.45 - $1.49, in the next 21 days according to standard principals of technical analysis.

The Australian market extended last week’s rally into this week with the key index closing the session 1.02% higher, boosted by a surge in materials and technology stocks.

The best performing stock today was Nickel Industries (ASX:NIC) soared 6.7% after announcing an upgrade to its Hengjaya Mine Resource, increasing the resource from 2.4m tonnes to 3.7m tonnes of contained nickel metal. Gold Road Resources (ASX:GOR) also lifted just over 5% today. Other stocks that investors bought into today included Mineral Resources (ASX:MIN), with shares in the mining services giant soaring to a fresh record high of $74.20 today during the session. The a2 Milk Company (ASX:A2M) also lifted today following its New Zealand-based baby formula producer for the Chinese market, Synlait Milk (ASX:SM1), being granted renewal of its State Administration for Market Regulation licence to continue manufacturing the baby formula for China until 21 February 2023.

Investors sharply sold out of Liontown Resources (ASX:LTR) today despite the company announcing it has executed a letter of award with Zenith Energy (ASX:ZEN), one of Australia’s leading independent power producers, to supply electricity to its Kathleen Valley Lithium project in Western Australia for a 15-year period. Other losing stocks today included Sims (ASX:SIM) and Lake Resources (ASX:LKE).

The top traded stocks by Bell Direct clients today are Pilbara Minerals (ASX:PLS), Fortescue Metals Group (ASX:FMG) and Lake Resources (ASX:LKE).

On the economic calendar for tomorrow, investors will gain an insight into just how confident both consumers and businesses are with current market and economic conditions, with Westpac Consumer Confidence data for September out in the morning followed an hour later by the release of NAB’s Business Confidence data for August. US Core inflation data for August is also out later tomorrow night.

The Australian market closed 0.66% higher on Friday as investor confidence extended into the final trading session of the week, after RBA Governor Philip Lowe gave dovish signs of the way forward in terms of interest rate hikes.

The winning stock on Friday was Mineral Resources (ASX:MIN) after the leading mining services company said it regularly considers ‘strategic options’ for its lithium segment in an indication the company may be looking to spin-off its lithium division. De Grey Mining (ASX:DEG) and Sandfire Resources (ASX:SFR) also led the gains on Friday, each adding almost 12% and 8% respectively.

On the losing front, investors sharply sold-off Life360 (ASX:360) despite no price sensitive news released by the location tracking company. Imugene (ASX:IMU) also fell more than 4.2% on Friday possibly after some investors took profits from its prior session surge after the company announced it has dosed the first patient in its Phase 2 trial for its leading drug candidate HER-Vaxx.

The most traded stocks by Bell Direct clients last week were Paladin Energy (ASX:PDN), Myer Holdings (ASX:MYR) and Pilbara Minerals (ASX:PLS).

Over in the US, stocks rallied to end the week with strong gains. The Dow Jones added 1.2%, the S&P500 jumped 1.5% and the Nasdaq surged 2.11% on Friday. The tech-heavy Nasdaq was the winning index for the week, adding more than 4.1%. Investors bought back into shares following the end of the recent reporting season that showed companies are handling inflation and slowing growth well. Tesla shares rallied 3.6% on Friday after the EV giant said it is looking into constructing a lithium hydroxide refining facility that can help support its EV battery production. The rally carried over to Europe with the FTSE gaining 1.23%, the DAX adding 1.43% and the CAC lifting 1.41%.

What to watch today:

• The futures are expecting the market to open 1.15% higher to extend the gains from last week into the new trading week.
• On the commodities front:
  • Oil has rebounded from 8-month lows that ended last week to trade 3.21% higher at around US$86.22 a barrel.
  • Gold is up half a percent to US$1716 an ounce.
  • Iron ore is up just under 3%.
  • Natural gas is trading up almost 1.5%.
• Economic news wise, investors will gain an insight into consumer and business confidence, with Westpac Consumer Confidence data for September out tomorrow as well as NAB Business Confidence data for August being released tomorrow. Overseas, US inflation rate data for August is also out later on Tuesday night which will give an insight into just how expensive it was to live in the US in August.

Trading Ideas:

• Trading Central has identified a bullish signal on data software company Nuix (ASX:NXL) after identifying a pattern forming over an 87-day period, which is the same amount of time the share price is expected to rise from the close of $0.86 to the range of $1.00-$1.06 according to standard principles of technical analysis.
• Bell Potter has upgraded its price target on Aroa Biosurgery (ASX:ARX) from $1.35 to $1.40 and maintains its Speculative Buy rating on the stock, driven by upgrades in TELA Bio Revenues which is ARX’s commercial partner.

The Aussie share market gained 0.29% this week (Mon-Thu), boosted by the technology sector. The RBA also raised the cash rate to 2.35%, raising consumer concerns about the rising cost of living.

In this week's wrap, Grady covers:

• (0:29) The increase on Australian home loans
• (0:51) Whether the building boom is over
• (1:15) When Australians will feel the full brunt of the recent rate hike
• (3:52) Why energy stocks were sharply sold off
• (4:45) The most traded stocks & ETFs by Bell Direct clients
• (5:09) Four economic news items to watch out for

Well US investors took the Federal Reserve’s latest comments on taming inflation positively, as equities moved higher overnight in New York. Stocks initially fell during a Q&A session from the Fed Chairman Jerome Powell at the Cato Institute. He signalled that there wouldn’t be a pause in rate hikes or a pivot to cutting interest rates anytime soon. US equities however ended the session with gains. The Dow Jones closed up 0.6%, the S&P500 up 0.7% and the Nasdaq up 0.6%. 

European markets closed higher, after the European Central Bank announced a 75-basis point interest rate rise. The STOXX 600 closed 0.5% higher. 

What to watch today:

• The Australian market is set to open flat this morning. The SPI futures are up 5 points. 
• In commodities, 
  • Oil is trading 2% higher. The price is rebounding after tumbling almost 6%, as investors weighed on supply concerns. Also President Vladimir Putin said Russia was to immediately stop oil supply to countries that support the G7’s initiative to cap prices on oil exports or the EU’s plan to place a ceiling on Russia natural gas sales. Although the oil price is currently trading in higher, it still remains close to the 8-month low, which was reached when monetary tightening and COVID lockdowns weighed on demand. Today, keep watch of Woodside Energy (ASX:WDS), Beach Energy (ASX:BPT), Santos (ASX:STO) and other energy producers. 
  • The gold price is lower, after caution dominated sentiment ahead of the Jerome Powell’s speech and the ECB’s rate hike announcement. Watch gold miners such as St Barbara (ASX:SBM) and Newcrest Mining (ASX:NCM). 
  • Iron ore has also dropped, approaching the nine-month low it reached earlier in the month. 
• Stocks going ex-dividend today, which may see share prices fall as investors take profits, include Nine Entertainment (ASX:NEC) and WiseTech Global (ASX:WTC). 

Trading Ideas:

• Bell Potter maintain a Speculative Buy rating on De Grey Mining (ASX:DEG). Bell Potter have increased their price target from $1.80 to $1.97. At its current share price of $0.97, this implies 103% share price growth in a year. 
• Trading Central have identified a bearish signal in Metcash (ASX:MTS), indicating that the stock price may fall from the close of $4.11 to the range of $3.79 to $3.85 over 10 days, according to the standard principles of technical analysis. 

The Australian market rebounded sharply from yesterday’s sell-off to close Thursday’s session 1.77% higher, boosted by investors piling into the tech and materials sectors today.

Investor confidence was boosted by a rebound in commodity prices and RBA Governor Philip Lowe’s speech, where the RBA leader gave clarity and certainty around the slower way forward in terms of rate hikes. Mr Lowe said there are at least two more rate hikes to come in order to tame the country’s inflation to the target range between 2-3%, and that the RBA thinks the neutral cash rate is at least 2.5%. Australia’s trade balance for July released today showed the country’s trade surplus more than halved in July to $8.73 billion, which fell well short of market expectations for a $14.5 billion surplus. Exports fell 9.9% in the month due to a sharp fall in sales of metal ores and minerals.

Today’s winning stock was Tyro Payments (ASX:TYR), surging more than 28% after the fintech company rejected a takeover bid worth $658 million from a Potentia Capital-led consortium. Tyro’s board considered the indicative proposal and unanimously determined the offer significantly undervalues Tyro and as such advised it is not in the best interest of shareholders to proceed with this offer in its current form. And it was a tech sector surge today with technology stocks posting the biggest gains of the session. Life360 (ASX:360) soared over 15%, while Megaport (ASX:MP1) added more than 12%.

On the losing front, Alumina (ASX:ALU) took the biggest hit today, closing the session down over 2.4%, while Medibank Private (ASX:MPL) and Chorus (ASX:CNU) each fell over 1%.

The top traded stocks by Bell Direct clients today were the BetaShares Geared Australian Equity Hedge Fund (ASX:GEAR), CSL Limited (ASX:CSL) and Lake Resources (ASX:LKE).

In economic data, initial jobless claims in the US for the last week will be released overnight with the market expecting a jump in claims to 240,000. Investors will also keep a close eye on any further hawkish signals on the monetary policy front when Fed Chair Jerome Powell speaks at Cato Institute Conference overnight.