Morning Bell 6 July

Jessica Amir
July 6, 2020

The ASX200 is expected to fall 0.6% at the open, keeping in mind the Aussie market gained 2.6% last week.

With Wall Street being closed on Friday for the 4th of July U.S. holiday, Aussie investors will be scouring around for news and leads. In this case, attention has been turned to Europe, where their stocks closed in negative territory on Friday. German car sales crumbled 40% lower in June to a 30 year low.

What to watch today:

  • The Aussie Government announced $190 million in funding to boost our local recycling industry. The investment will go to new infrastructure to sort, process and re-manufacture materials such as mixed plastic, paper, tyres and glass. Some companies to keep an eye on are Sims Metal Management (ASX:SGM), Tox Free Solutions (ASX:TOX), Cleanaway Waste Management (ASX:CWY) and Bingo Industries (ASX:BIN).
  • ANZ job ads are out today for June and are expected to show a 0.8% rise in June following a 0.5% lift in May. So if the gain is better than expected, keep an eye on consumer discretionary stocks like JB Hi-Fi (ASX:JBH), Afterpay (ASX:APT), Zip (ASX:Z1P), Harvey Norman (ASX:HVN) and Kogan (ASX:KGN).

Local Trading ideas

  • Bell Potter initiated coverage of Macquarie Telecom (ASX:MAQ) saying the stock is a buy, with a $51.25 price target following its close on Friday at $45.30.
  • UBS released a research report showing Afterpay (ASX:APT) is producing better than expected growth numbers in the U.S. and UK, hitting 1 million customers in England. UBS maintained its sell sceptic rating, Bell Potter has Afterpay as a buy and Goldman Sachs has it as a hold.
  • On the smaller side of the market Bell Potter initiated coverage of Kazia Therapeutics (ASX:KZA), a company that’s aiming to treat Glioblastoma, a cancerous brain/spine tumour. Bell Potter has Kazia Therapeutics as speculative as it’s not producing earnings and is making a loss.
Read Transcript

Good morning, I’m Jessica Amir with Bell Direct, hope you had a good weekend.

Well with Wall Street being closed on Friday for the 4th of July holiday, Aussie investors will be scouring around for news and leads.

Now in this case, attention has been turned to Europe where their stocks closed in negativeterritory on Friday.

The UK’s FTSE lost the most 1.3%, while the German market the DAX fell the least 0.8%. Now on the economic front there, German car sales numbers were out crumbling 40% lower in June down to a 30-year low.

As for individual shares it was quite telling, Rolls-Royce shares fell 9% while Germany’s Delivery Hero gained 5% to a record high after Delivery Hero orders doubled in their second quarter thanks to COVID-19 lock downs.

But overall, the focus remained on the COVID-19 resurgence with negativity lingering after a top White House disease expert cautioned that the virus may have mutated and become more infectious.

On the commodity front, the oil price remained above US$40.32 despite losing around 1%.

Gold last traded at US$1,787 an ounce, the same price it was at on Friday and the iron ore price gained 1% to US$98.94 a bit of a claw back from Thursday.

Now what to watch today, three key things.

The Aussie share market is expected to fall 0.6% this Monday morning if you go by the futures, keep in mind the Aussie market did rise 2.6% last week and is now up as we can see from the chart, 33.2% from its COVID-19 bare market bottom.

Secondly, the Aussie Government announced $109 million in funding to boost our local recycling industry, with the aim that that generates recycling investment of $600 million.

The investment will go to new infrastructure in sorting remanufacturing materials such as mixed plastics, paper, tires and glass with the Commonwealth funding dependent on co-funding from industry, states and territories.

Take your pick of the companies in thissegment to watch like Sims Metals Management (ASX:SGM), Tox Free Solutions (ASX:TOX) as well as Clean Away Waste Management (ASX:CWY) and Bingo Industries (ASX:BIN).

Thirdly on the economic front, a telling sign of the job market, ANZ job ads are out today for June expecting to show a 0.8% lift in June following the 0.5% rally in May.

So if the gain is better than expected, keep an eye on consumer discretionary stocks like JB Hi-Fi (ASX:JBH), Afterpay (ASX:APT), Zip (ASX:Z1P), Harvey Norman (ASX:HVN) and Kogan (ASX:KGN).

Ending on three local trading ideas, well Bell Potter initiated coverage of Macquarie Telecom (ASX:MAQ) saying the stock is a buy with a $51.25 price target, remembering on Friday it showed it’s significantly undervalued at $45.30.

Macquarie Telecom provides traditional telco services like mobile and internet data etc to 42% of federal government departments.

Remember that Macquarie Telecom’s investment in cloud and collection services could be a huge game changer for Macquarie Telecom, which could make it become a generational growth story.

Secondly, UBS released a research report about Afterpay (ASX:APT) showing they are producing better than expected growth numbers in the U.S. and in the UK, as well hitting 1 million customers in England.

But UBS maintained its sell sceptic rating on Afterpay, Bell Potter has the stock as a buy and Goldman Sachs says it’s a hold.

Thirdly on the smaller side of the market, Bell Potter initiated coverage of Kazia Therapeutics (ASX:KZA), a company that’s aiming to treat glioblastoma (a cancerous brain and spine terminal).

Kazia Therapeutics’ drug was licensed to a San Fran based company called a Genentech in 2016 and since then Kazia Therapeutics has continued development in this space, interim data shows significant promise.

Bell Potter says the stock should grow 96% to $1 but it is a speculative buy and it’s not using earnings as it’s currently making a loss.

I’m Jessica Amir with Bill Direct, stay safe and happy trading.

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