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Morning Bell 5 September

Grady Wulff
September 5, 2023

The US market was closed on Monday for the labour day holiday.

Over in Europe, markets closed lower in the region on Monday with the STOXX600 closing flat, while Germany’s DAX fell 0.1%, the French CAC lost 0.24% and in the UK the FTSE100 lost 0.16%. European Central Bank President Christine Lagarde said it will be critical for central banks to pin their inflation targets at a period where fluctuations in the likes of energy prices and geopolitical activity are factored in, according to Reuters.

Germany’s trade data released on Monday showed a 0.9% month-on-month decline in exports in July while imports rose 1.4%, leading to a decline in Germany’s trade surplus to 15.9 billion euros from 18.7bn euros in June and well below the consensus forecast of a slight dip to 18 billion euros.

Locally, the ASX started the week in positive territory with the key index closing the first trading session of the week up 0.56%, continuing the momentum from last week’s 2.29% rise.

Yesterday, the key index rally was fuelled by materials stocks rising almost 2% amid optimism of further stimulus out of China increasing demand outlook for iron ore. Energy stocks also lifted to start the week in the green as the price of oil trades 6.57% higher over the last week amid fears of possible production cuts from Moscow.

The story of the local session yesterday was lithium miner Liontown Resources receiving an upgraded takeover bid from US chemicals giant, Albermarle, valuing Liontown at $6.6bn. The initial takeover offer of $2.50/share was rejected on the grounds of value however the Liontown board is reportedly considering the revised $3/share offer and has granted Albermarle a ‘limited period of exclusive due diligence’. Following the offer news, Liontown shares traded 9.5% higher around $2.87/share.

On the other end of the market, Sky City tumbled 15% yesterday after the casino and entertainment company revealed its operating licence may be suspended in New Zealand for 10 days by New Zealand’s Department of Internal Affairs for failure to comply with the responsible gaming program.

The all-important RBA interest rate decision for September is announced today with the market expecting Australia’s central bank to maintain the current cash rate of 4.1% for the month ahead.

As we near the end of reporting season, 385 companies have reported with 28.8% beating estimates, 43% meeting estimates and 27.8% missing estimates. 50 companies have been upgraded by brokers including Accent Group, IDP Education and Lovisa while 44 have been downgraded including Reece, Seek and Coles Group.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are expecting the local index to open 0.26% lower on Tuesday.
  • On the commodities front this morning, oil is trading 0.44% higher at US$85.93/barrel, gold is flat at US$1938.56/ounce and iron ore is down 0.43% at US$117/tonne.
  • Stocks trading ex-dividend today include Pilbara Minerals (ASX:PLS), Yancoal (ASX:YAL), Northern Star Resources (ASX:NST), Codan Limited (ASX:CDA), Corporate Travel Management (ASX:CTD), Clinuvel Pharmaceuticals Limited (ASX:CUV)and Origin Energy (ASX:ORG). If you’ve been thinking about these stocks it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.
  • AU$1.00 is buying 65 US cents, 94.63 Japanese Yen, 51.24 British Pence and NZ$1.09.

Trading Ideas:

  • Bell Potter has downgraded Liontown Resources (ASX:LTR) to a hold from a buy and maintain a 12-month price target of $3.85 on the lithium miner following the receipt of an upgraded takeover bid from Albermarle of $3/share. Albermarle has declared this is its best and final offer unless a superior proposal is received. The Liontown board has granted Albermarle a limited period of exclusive due diligence and according to Bell Potter, intends to unanimously recommend the proposal in the absence of a superior offer and subject to an independent expert opinion.
  • And Trading Central has identified a bullish signal on Coronado Global Resources (ASX:CRN) following the formation of a pattern over a period of 15-days which is roughly the same amount of time the share price may rise from the close of $1.66 to the range of $1.76-$1.78 according to standard principles of technical analysis.

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