Between the Bells

Description:

Well earnings season has now wrapped up, and Aussie shares are expected to start the month of September lower, amid a further sell-off in the US as investors prepare for even higher interest rates.

All three US benchmarks closed lower for the fourth straight session, and for the month of August, the Dow Jones, S&P500 and Nasdaq all finished about 4% lower.  

Across the sea in Europe, markets also closed lower as investors continue to fear higher interest rates and a looming economic downturn.

What to watch today:

• The ASX200 is expected to open 1% lower if you go by the SPI futures.  
• In commodities:
  
  
  • Oil prices continue to slide so energy shares like Woodside Energy (ASX:WDS) and Santos (ASX:STO) could have another tough day ahead. Recession fears continue to weigh on sentiment. 
  • The gold price traded lower, meaning gold has recorded its fifth monthly decline in a row. Keep an eye on stocks like Gold Road Resources (ASX:GOR), Newcrest Mining (ASX:NCM) and Northern Star Resources (ASX:NST).
  • The spot iron ore price trades nearly 4% lower so keep watch of ASX iron ore players like Fortescue Metals (ASX:FMG), BHP and Rio Tinto (ASX:RIO).  
• Stocks going ex-dividend today include AGL Energy (ASX:AGL), BHP Group (ASX:BHP), Credit Corp Group (ASX:CCP), Jumbo Interactive (ASX:JIN), Platinum Asset Management (ASX:PTM) and Whitehaven Coal (ASX:WHC).  
• If you hold Dicker Data (ASX:DDR) you will receive your dividend payment today.  
• A new company debuting on the ASX today is Aeramentum Resources, an Australian mineral exploration company. It will be trading under the ticker code AEN. 

Trading Ideas:

• Bell Potter have maintained its Buy rating on Nickel Industries (ASX:NIC), with a price target of $1.83. Bell Potter believe NIC has a strong growth outlook and undemanding valuation multiples. At its current share price of $0.99, Bell Potter’s price target of $1.83 implies about 85% share price growth in a year. 
• Trading Central has a bullish signal on Computershare (ASX:CPU) indicating that the stock price may rise from its close of $24.70 to the range of $26.50 - $26.90 in the next 6 days according to standard principals of technical analysis.  

The Australian market’s rally over the past few days was very short lived, as the local market closed 0.16% lower today, weighed down by a sharp sell-off in energy stocks. Despite today’s losses, the local market posted a 0.6% gain.

The markets may have also been sold off after Australia’s second quarter construction work done data was released showing a decline of 3.8%, the largest quarterly decline in almost 5-years as the country’s building industry was heavily impacted by strong inflationary pressures and capacity constraints on the building front.

Private sector credit data for Australia was also released today showing an increase of just 0.7%, which was in-line with market consensus with all components of credit increasing in July including owner-occupier housing, investor housing, other personal and business.

Clinuvel Pharmaceuticals (ASX:CUV) was the top performing stock on the ASX200 today surging more than 17% a day, after releasing FY22 results including the company’s sixth straight annual profit driven by strong revenue growth. Zip Co (ASX:ZIP) also had investors piling in today, despite no price sensitive news released by the buy now, pay later provider today.

On the losing front, Pointsbet Holdings (ASX:PBH) took the biggest hit today, tumbling more than 13% after releasing FY22 results that disappointed investors. The online sports betting company reported its net loss increased by 43% to $267.7 million and EBITDA fell to a $243.6 million loss, but revenue increased 52% to $296.5 million. Mineral Resources (ASX:MIN) shares were also sold off again today, as investors continue to sell out following the release of the mining company’s FY22 results on Monday.

The most traded stocks by Bell Direct clients today were BHP Group (ASX:BHP), Core Lithium (ASX:CXO) and the BetaShares Australian Strong Bear Hedge Fund (ASX:BBOZ).

As for what to watch overnight, further employment insights will be released in the US through ADP Employment Change data for August which will give a further idea of just how tight the US labour market is at present.

US stocks extended their losing streak to a third day on Tuesday as interest rate pressures continue to weigh heavily on the market. The Nasdaq again led losses, closing the session down 1.12%, which extended the Nasdaq’s year to date loss to 24.05%. US home price index data for June was released yesterday showing slowed growth for the month as higher mortgage rates make home ownership less affordable. US job openings data was also released yesterday which showed job openings rose to a seasonally adjusted 11.2 million in July as employers took on more workers in a tight labour market.

 Over in Europe, the FTSE100 fell 0.9%, the CAC lost 0.2% but the DAX gained 0.5%.

 What to watch today:

• The SPI futures are anticipating the local market will open 0.85% lower today following the broad sell-off on Wall St overnight.
• In commodities: 
  • Iron ore fell 4.1% to trade below US$100 a tonne as COVID-19 outbreaks continue to cloud demand from China.
  • Oil declined 5.5% yesterday to hit US$99.28 a barrel.
  • Gold is trading down 0.7% to US$1,724 an ounce.
• Reporting season continues today with Atlas Arteria (ASX:ALX) and St Barbara (ASX:SBM) releasing first half and FY22 results respectively.
• On the economic front today, we can expect to gain an insight into the state of Australia’s building crisis with construction work data for the second quarter due out today with markets expecting growth of just under 1%. Private sector credit data for July is also out today, with analysts’ expecting a decline from June to 8.2% for July.

Trading Ideas:

• Trading Central has identified a bullish signal on Cobram Estate Olives (ASX:CBO) based on a pattern that formed over a 53-day period, indicating the stock price may rise over this same amount of time from the close of $1.67 to a range between $1.74-$1.78, according to standard principles of technical analysis.
• Citi has downgraded its rating from Buy to Neutral on Healius (ASX:HLS) and reduces its price target from $4.30 to $4.00 following the release of the company’s FY22 results noting that HLS’ results were significantly assisted by high levels of COVID-19 testing but the company failed to issue any guidance for FY23. 

The Australian share market regained some ground on Tuesday, closing the session 0.5% higher, as investors piled back into technology stocks, giving long-term tech shareholders a brief sigh of relief. Energy stocks also rallied again during today’s session.

Mineral Resources (ASX:MIN) led the gains on the ASX today as investors bought into the mining company following CEO Chris Ellison sharing the company’s vision to build a battery manufacturing plant in Western Australia over the next couple of years. MIN also announced it is pushing ahead with the $3b Onslow Iron Ore project with the backing of China’s biggest steel maker. The a2 Milk Company (ASX:A2M) also jumped more than 6% today after releasing strong FY22 results yesterday.

On the losing front, Sandfire Resources (ASX:SFR) shares came under fire today as investors digested the copper miner’s FY22 results today. Despite reporting record sales revenue of $922.7 million, investors were more focused on the company’s scrapping of its final dividend this financial year which led to the sell-off in SFR stocks. Ramelius Resources (ASX:RMS) stocks were also sold off today, closing the session down more than 5%.

The most traded stocks by Bell Direct clients today were BHP Group (ASX:BHP), Core Lithium (ASX:CXO) and PolyNovo (ASX:PNV).

On the economic data front today, Australian building permits data for July was released showing a decline of 17.2% which significantly exceeded the markets’ expectations of a 2% decline, indicating the country’s building industry remains in crisis mode. Private house approvals data for July was also released today also showing a decline from June to 0.7% which beat market expectations of a 0.5% rise.

As for what to watch overnight, US house price index data for June will be released as well as JOLTs Job Openings data for July in the US.

Well, the sell-off continued overnight. US equities declined further with all three major benchmarks closing in the red, amid increasing concerns over rising rates and tighter US monetary policy. The Dow ended the session down 0.6%, the S&P500 down 0.7%, while the Nasdaq dropped just over 1% at the close. Tech was also the worst performing S&P500 sector, while energy and utilities outperformed. 

What to watch today:

• Despite the broad selling in New York, the SPI futures are suggesting the Australian market will open 0.26% higher at the open this morning. 
• In commodities,
   
  • The oil price has jumped, current trading over 4% higher, as supply-side concerns have outweighed fears that a prolonged economic slowdown will affect fuel demand. Also last week, Saudi Arabia flagged possible OPEC production cuts to stabilise volatile markets. So keep watch of oil producers today such as Santos (ASX:STO), Woodside Energy (ASX:WDS) and Beach Energy (ASX:BPT). 
  • The gold price has dropped, tracking the downturn in the US dollar. 
  • Iron ore continues to gain, bouncing back after hitting its lowest level in more than a month. 
• Companies reporting their earnings results today include Dicker Data (ASX:DDR), Healius (ASX:HLS), IGO (ASX:IGO), Link Administration (ASX:LNK), Woodside Energy (ASX:WDS) and WISR (ASX:WZR). 
• Companies set to go ex-dividend today, which often sees their share prices fall, include Accent Group (ASX:AX1), Bega Cheese (ASX:BGA), Blackmores (ASX:BKL), Endeavour Group (ASX:EDV), OZ Minerals (ASX:OZL), Treasury Wine Estates (ASX:TWE), Wesfarmers (ASX:WES) and Woolworths (ASX:WOW). 

Trading Ideas:

• Bell Potter have upgraded their rating on The a2 Milk Company (ASX:A2M) from a Hold to a Buy. A2M yesterday reported FY22 underlying NPAT ahead of Bell Potter’s expectations of NZ$122.6 million. Revenue and EBITDA also increased and the company’s FY23 outlook is promising. Bell Potter increased their price target form AU$4.75 to AU$6.35. And at A2M’s current share price of AU$5.40, this implies 17.6% share price growth in a year. 
• Trading Central have identified a bullish signal in Galileo Mining (ASX:GAL) indicating that the stock price may rise from the close of $1.25 to the range of $1.46 to $1.50 over 28 days, according to the standard principles of technical analysis. 

The Australian market performed exactly as expected today following the sharp sell-off on Wall Street on Friday as investor fears of prolonged interest rate hikes were strengthened on the back of comments made by Fed Chair Jerome Powell at the Jackson Hole Symposium. The ASX200 closed Monday’s session 1.95% lower, with all sectors closing the day in negative territory led by technology stocks tumbling more than 4%.

 Technology stocks were the hardest hit in today’s sell-off as investors flee growth stocks that have the potential to be heavily impacted by interest rate hikes. The gold sector also fell more than 4% amid weakness in the price of the commodity.

 The best performing stocks today were Tyro Payments (ASX:TYR) after the payments solution provider released FY22 results including merchant numbers up 10%, transaction value up 34% and revenue up 37%, and the a2 Milk Company (ASX:A2M) also soared after releasing strong FY22 results and providing solid growth outlook for FY23.

 On the losing front, PolyNovo (ASX:PNV) nosedived more than 17% during the session today after the medical device company released disappointing results last week. Chalice Mining (ASX:CHN) also dropped more than 9% today.

 Looking at economic data, preliminary Australian retail sales data for July released today came in at 1.3% for the month which well exceeded the market expectations of an increase of just 0.3%. The retail sales in July may have beat expectations but is still very low compared to a rise of 16.5% last July.

 The most traded stocks by Bell Direct clients today were Commonwealth Bank (ASX:CBA), BHP Group (ASX:BHP) and National Australia Bank (ASX:NAB). 

 As for what to watch overnight, investors will be keeping a close eye on Wall Street to see whether the broad market sell-off from Friday will continue this week as investor optimism was dampened by the idea that interest rates will continue to rise for the foreseeable future.

The local market closed 0.79% higher on Friday but was virtually unchanged for the week as a broad market sell-off early in the week offset the rally that ended the week. The big banks rallied on Friday along with the materials and energy sectors.

Bega Cheese (ASX:BGA) was the winning stock on Friday after the food company released full year results. Despite Bega’s NPAT falling 69% to $24.2 million, investors were impressed with the company’s revenue of more than $3 billion, which was up 45% year-on-year and the issuing of guidance for FY23 expecting EBITDA to be in the range of $160 million to $190 million for FY23 amid increased consumer prices across all channels.

Investors also bought into Viva Energy (AX:VEA) on Friday while selling off City Chic Collective (ASX:CCX) again after the retailer released disappointing results on Thursday, and Zip Co (ASX:ZIP) fell more than 5% on Friday. The common theme continues throughout reporting season, being that investors are selling out of stocks that fail to provide quantitative guidance for FY23, which for last week included Humm Group (ASX:HUM), Coles (ASX:COL) and Ramsay Health Care (ASX:RHC).

The most traded stocks by Bell Direct clients last week were IDP Education (ASX:IEL), Boral (ASX:BLD) and Alumina (ASX:AWC). 

In the US and all three key indices closed lower on Friday after the commencement of the Jackson Hole where investor optimism was dampened by Fed Chair Jerome Powell saying the central bank must continue to raise interest rates to stop high inflation becoming a permanent aspect of society.

What to watch today:

• The ASX is expected to open almost 1.5% lower following the sell-off on Wall Street on Friday.
• As we head into the tail end of earnings season, we have over 60 companies set to report this week, kicking off with Fortescue Metals (ASX:FMG) this morning.
• On the commodities front, crude oil is trading almost half a percent higher and up 35% year-on-year, brent is up almost 1.5%, natural gas is down slightly but remains up 112% year-on-year, iron ore is also up just under 2%, but gold is trading 1.2% lower.
• Investors will be awaiting for the preliminary retail sales data to be released for July out today with the market expecting a rise of 0.3%. Australian building Permits for July is also out on Tuesday which will give an insight into the state of the country’s building crisis.

Trading Ideas:

• Trading Central has identified a bullish signal on Charter Hall Group (ASX:CHC) due to a pattern forming over a 79-day period, indicating the stock price may rise from the close of $13.36 per share to the range of $15.70 to $16.20 per share over the same period of 79 days according to standard principles of technical analysis.
• Citi maintains a buy rating on Perpetual (ASX:PPT) but have lowered its price target on the stock to $30 per share following the release of FY22 results last week and more importantly, the company’s acquisition of competitor Pendal (ASX:PDL), which was announced on the same day the results were released. The downgrade of the price target is on the back of Citi acknowledging both equity market risk and the apparently negative sentiment towards the transaction which could prevent the stock making near term headway.

The Aussie share market declined 0.9% this week (Mon-Thu) as investor sentiment continues to ride on recession fears. 
 
 In this week's wrap, Grady covers:

• (0:12) Why it may be time to reposition your portfolio
• (1:04) Three sectors to watch in an inflationary market environment 
• (2:50) An update on reporting season 
• (3:23) Energy stocks surging following renewed focus on nuclear
• (4:33) The most traded stocks & ETFs by Bell Direct clients
• (4:57) Five economic news items to watch out for

The highly anticipated 3-day Jackson Hole Economic Symposium kicked off overnight. It’s an annual event that focuses on an important economic issue that faces world economies each year. This year they’re discussing “reassessing constraints on the economy and policy” and over 100 global central bankers, academics, finance ministers and journalists from around the world attend. It’s closely followed by market participants because any unexpected remarks emanating from the heavyweights at the symposium have the potential to affect global stock markets. Mostly, investors are looking for clues on whether policymakers will cut rates when the current hiking cycle is over.

Also, the GDP growth rate for the US was released. With an upward revision to consumer spending and inventories. The US economy contracted an annualised 0.6% in Q2, which was less than forecasts.

US equities closed higher. The Dow up 1%, the S&P500 up 1.4% and the Nasdaq up 1.7%.

What to watch today:

• The SPI futures are suggesting the Australian market will open flat this morning.
• The week is ending with another long list of companies set to publish their earnings results today. Some companies include uranium production company Paladin Energy (ASX:PDN), which has gained over 15% this week and over 11% in yesterday’s session alone. Blue-chip retail conglomerate Wesfarmers (ASX:WES) is also reporting today. And Ramsay Healthcare (ASX:RHC) is also set to publish results. They’re the largest operator of private hospitals in Australia and provide healthcare in 10 different countries.
• In commodities,
  • The oil price has dropped, failing to hold onto earlier gains, as investors balance signs of tightening supplies.
  • Gold is trading in the green, rising for a third straight session as the US dollar eases.
  • And iron ore is also higher, now recovering from the lowest level it hit in over a month.
• Companies set to go ex-dividend today include Alumina (ASX:AWC), GUD Holdings (ASX:GUD), Lendlease Group (ASX:LLC) and Newcrest Mining (ASX:NCM).

Trading Ideas:

• Bell Potter maintain a Buy rating on Eagers Automotive (ASX:APE), after the company reported yesterday. Revenue was up 4%, but below Bell Potter’s forecast , however its underlying profit before tax margin came in higher than the broker’s forecasts. Bell Potter have increased their price target form $14.75 to $15, and at its current share price of $13.16, this implies 14% share price growth in a year.

Trading Central have identified a bullish signal in Qube Holdings (ASX:QUB), indicating that the stock price may rise from the close of $2.94 to the range of $2.96 to $3, over 33 days, according to the standard principles of technical analysis.

The Australian market extended its gains into Thursday, adding just under 1% to close the session in positive territory led by a rally for real estate and energy stocks.

The big story of today’s session was Australian investment fund and trustee group Perpetual (ASX:PPT) announced it is acquiring its competitor, Pendal Group (ASX:PDL) in a cash and scrip deal to create a $201 billion global asset manager.

Uranium stocks soared during today’s session following reports Japan is considering the development of new nuclear reactors, indicating the country has a renewed focus on nuclear energy, years after many of the country’s plants were shut down. Uranium stocks on the ASX jumped following the reports including Paladin Energy (ASX:PDN) surging over 20% in two sessions and uranium-linked stocks like Silex Systems (ASX:SLX) up 6.8% today. Paladin Energy (ASX:PDN) was the winning stock today, up around 20% over the last two sessions following the reports out of Japan. Insignia Financial (ASX:IFL), formerly IOOF, also soared over 11% today on the back of FY22 results being released including the company swinging to a profit in the financial year.

On the losing front, Woolworths (ASX:WOW) shares were sold off today following the release of the company’s FY22 results including EBIT falling 2.7% and the company taking lower margins as customers shift away from price-inflated products like beef and fresh veggies. Fashion retailer City Chic (ASX:CCX) also fell out of favour with investors today, with the company’s share price tumbling more than 20% also on the release of FY22 results. Despite reporting revenue growth of 39% and underlying NPAT up 7.7%, investors were more shocked to see City Chic’s inventory almost tripling and the company diving into a negative cash flow position.

On the economic front today, across the ditch in New Zealand retail sales for the second quarter fell 2.3%, which was well below the market expectations of a 1.7% rise. This is the second consecutive quarterly decline in retail sales which raises the risk that the NZ economy fell into a technical recession in the first half of the year.

US Crude Oil Inventories data was also released today showing stockpiles of the commodity in the US declined by 3.3 million barrels, which added to the upward price pressure on crude oil today.

The most traded stocks by Bell Direct clients today were Djerriwarrh Investments (ASX:DJW), Whitehaven Coal (ASX:WHC) and Woodside Energy (ASX:WDS).

As for what to watch overnight, US GDP data for the second quarter will be released just before midnight tonight Australian eastern time which investors have been waiting for, to see whether the world’s largest economy is in a technical recession or not.