Morning Bell 7 July

Jessica Amir
July 7, 2020

The ASX200 is set to strongly march forth today, after a positive session overnight. The Aussie futures are suggesting a 0.5% rebound, keeping in mind the Aussie market gained 2.6% last week and is now up 33% from its COVID-19 bear market bottom.

If you are looking for a massive trend to follow or invest in, consider the companies benefiting from the work from home shift across the globe.

In other news, Warren Buffett announced his first significant acquisition since COVID-19 began, buying natural gas and storage assets from Dominion Energy for $10 billion. And on the economic front, the U.S. Service sector which contributes the bulk of steam to the nation’s economic growth tally, showed the sector surprisingly grew.

What to watch today:

  • The RBA meets today with interest rates to remain on hold at 0.25%, what the RBA says is it’s lower bound. But comments from the Governor will be closely watched as our economy seems to be picking up even before it’s entered a recession.
  • From midnight tonight the NSW and Victorian border will be closed, for the second time in history. Agricultural transportation is not likely to be impacted as special permit holders and exemptions will be allowed to enter and exit.

Local trading ideas:

  • Costume jewellery company Lovisa (ASX:LOV) stores are now opened. Bell Potter bumped up its buy rating and price target for Lovisa to $7.50 as its sales were 5% better than expectations with a strong balance sheet.
  • UBS reiterated its hold rating on Mayne Pharma (ASX:MYX) after the pharmaceutical company entered into a long-term supply agreement with China based manufacturer for 13 new U.S. generic oral contraceptive products, including the five brand new products not previously marketed. UBS says the five new drugs, four with FDA approval have market sales of $500 million in the U.S., having the drugs made by China’s Novast will save Mayne Pharma US$3 – $5 million per year. UBS’s price target for Mayne Pharma is $0.44 and Bell Potter has them as a buy with a $0.55 target.
  • UBS downgraded the ASX (ASX:ASX) from a hold to a sell with a $75 price target, saying although the landscape has changed and the ASX has been a beneficiary of market volatility, expect a round of second capital raising on the ASX. UBS is cautious the ASX’s other earnings streams are trending lower.
Read Transcript

Good morning, well Aussie equities are set to march strongly fourth today following global equities higher.

Now if you’re looking for massive trends to follow or flashing lights to invest in, consider companies benefiting from the work from home shift across the globe.

For example, U.S. tech darlings benefiting from COVID-19 lock downs scaled to new all-time highs overnight for example Amazon shares breaking above US$3,000 for the first time the company also entered the trillion dollar market size club.

Netflix shares also reached an all-time high, so too did Google-parent Alphabet also rising to a market size of over US$1 trillion.

In other news, mover and shaker candlestick maker Warren Buffett announced his first acquisition since COVID-19 began, buying natural gas and storage assets from Dominion energy for $10 billion.

On the economic news front, the U.S. Services sector, which contributes the bulk of steam to the nation’s economy that showed the sector surprisingly grew in the U.S..

The Nasdaq up the most 2.2%, the S&P500 following in hot pursuit, the Dow up 1.8%.

Now closer to home, we saw Chinese stocks saw China’s Shanghai Comp up 5%, the China large cap ETF finished almost 10% higher, that was its best gain since 2009.

On the commodity front, the oil price nudged ever so slightly ahead to US$40.63, gold gained US$10 to US$1,793 and the iron ore price last traded 1% higher.

What to watch today, well the Aussie futers are suggesting a bit of a bounce back following yesterday’s that negative finish but do bear in mind all eyes today will be on the RBA meeting outcome at 2:30pm.

The RBA hands down its decision with rates expected to hold at 0.25%.

The RBA says that’s its lower bound but keep in mind that the economy seems to be picking up even before it’s entered a recession so keep an eye on any recovery type of comments.

Now from midnight tonight New South Wales and Victorian border will be closed for the *second* time in history.

Agricultural transportation is not likely to be impacted, normal agricultural stocks given special permit holders can enter and exit the border.

Local trading ideas, costume jewelry company Lovisa (ASX:LOV) stores are now open.

Bell Potter bumped up its buy rating for Lovisa and target to $7.50.

Lovisa sales are also 5% better than expected although it’s having discussions about rent with landlord services, their balance sheet is strong and well placed to navigate the bumpy road ahead.

Secondly, overnight UBS reiterated its hold rating for Mayne Pharma (ASX:MYX) after the pharmaceutical company entered into a long-term supply agreement with a China based manufacturer for 13 new U.S. generic oral contraceptive products, including the five brand new products that have not previously been marketed.

UBS says the five new drugs, four with FDA approval have market sales or market sale size of US$500 million.

Now having the drugs made by China’s company Novast will save Mayne Pharma up to US$5 million a year.

UBS nevertheless has Mayne Pharma’s target at $0.44, Bell Potter more bullish, the stock is a buy for Bell Potter with a target of $0.55.

Thirdly, UBS downgraded the ASX from a hold to a sell with a $75 target, saying although the landscape has changed the ASX is benefiting from market volatility and expect another round of capital raising.

But UBS cautions the ASX as other earnings streams are trending lower.

Thanks so much for your company, I’m Jessica Amir with Bell Direct, stay safe and happy trading.

Close Transcript

Market Wraps

Get the latest market news analysis with Bell Direct's Market Wraps.

Interviews

Watch our interview series to get exclusive insights and trading ideas. Open a Bell Direct account today.

Insights

At Bell Direct, you can trade smarter with our market insights, stock tips and real broker research. Open an account today and start online trading.