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Morning Bell 31 August

Bell Direct
August 31, 2023

US equities advanced on Wednesday as investors digested the release of fresh economic data. Annual GDP growth in the US was downwardly revised on Wednesday from the previously forecast 2.4% to 2.1% growth. This came alongside US payrolls data showing private employers added 177,000 jobs in August which was below the Dow Jones estimate of 200,000, but adds a further sign of the U.S. economy doing it tough in the high interest rate environment.

The S&P500 advanced 0.38% in its fourth straight winning session, the Nasdaq rose 0.54% and the Dow Jones added 0.11%. Tech stocks bolstered the gains on Wednesday after chipmaker and 2023 market darling Nvidia announced an expansion of its partnership with Google.

Over in Europe, markets closed mostly marginally lower on Wednesday as investors responded to the release of economic data out of Spain and Germany. Spain reported flash inflation rate data rose 2.6% YoY in August which was in line with expectations, while Germany reported a 13.2% drop in imports in the year to July, the sharpest drop since 1987. The STOXX600 fell 0.2%, Germany’s DAX lost 0.24%, the French CAC fell 0.12%, and in the UK, the FTSE100 added 0.12%.

The local market closed 1.21% higher on Wednesday as investor sentiment was boosted by Australia’s CPI indicator data cooling to growth of 4.9% in the 12-months to July. Industrials and healthcare stocks posted the biggest gains on Wednesday, while Real Estate stocks also rose 1.31% on the hopes of fewer or no further interest rate hikes in Australia as inflation continues to cool.

Australia’s monthly Consumer Price Index indicator rose by 4.9% in the year to July from a 5.4% rise in June and below market expectations of a 5.2% rise last month. Although it is still above the RBA’s target range of 2-3%, it is showing strong signs of cooling which provides support for the RBA to ease its rate hike stance.

Plus-size fashion retailer City chic tumbled 4.4% on Wednesday after posting a 17.2% slide in sales over FY23, while Brambles rose 7.1% after the supply chain solutions specialist reported a 10% rise in revenue, a 19% increase in profit after tax and a 15% lift in the company’s dividend to 26.25UScps.

Regional Express REX released FY23 results yesterday which sent the share price down nearly 3% despite the company reporting a statutory profit after tax of $14.4m, compared to a loss of $46.1m in the PCP. The result was boosted by a $44.5m contribution from REX’s 50% acquisition of National Jet Express during the year.

The outlook seems bright for REX as it launches new routes to major urban centres including Hobart and Melbourne, which alongside the delivery of the 8 and 9th 737-800NG aircraft, will boost the company’s domestic position and market share.

Flight Centre also fell out of favour with investors yesterday despite the travel company reinstating its dividend. Across FY23, Flight Centre reported group total transaction value up 112% to $21.939bn, revenue up $2.281bn, EBITDA of $302m, PBT of $70m and a final dividend of 18cps. No guidance for FY24 was issued which may be the reason investors sold out yesterday.

What to watch today:

  • Ahead of the local trading session here in Australia the ASX is set to open Thursday’s session up 0.06%.
  • On the commodities front this morning oil is up 0.6% at US$81.63/barrel, gold is up 0.36% at US$1944/ounce, and iron ore is flat at US$115.50/tonne.
  • AU$1.00 is buying US$0.65, 94.61 Japanese Yen, 50.97 British Pence and NZ$1.09.

Trading Ideas:

  • Bell Potter has increased the rating on Paragon Care (ASX:PGC) from a hold to a buy and maintain a 26 cents per share price target on the healthcare equipment, devices and consumables provider following the release of the company’s FY23 results that included revenue up 24% to $307.6m, EBITDA margin up 12.5% driven mainly by acquisitions, and reported NPAT increased 89% to $13.6m. Revenue from the devices business increased 14% despite headwinds in reimbursements paid by the prosthesis list. Bell Potter upgraded the company to a buy as it expects further organic growth in FY24 and acceleration of growth in FY25.
  • And Trading Central has identified a bullish signal on Piedmont Lithium (ASX:PLL) following the formation of a pattern over a period of 30-days which is roughly the same amount of time the share price may rise from the close of $0.69 to the range of $0.91 to $0.97 according to standard principles of technical analysis.

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