Morning Bell 22 September

Jessica Amir
September 22, 2020

Overnight we saw a risk off environment unfold as the UK considers another national lockdown to slow rising infection rates. That saw tourism stocks move lower with Carnival shares down 6.7% and Delta Air falling 9.2%. Elsewhere, investors sold down banks as allegations swirled that a number of international banks have been moving illicit funds over the last two decades. But there was some light – technology shares slightly rebounded – U.S. tech darlings led Wall Street to a record high but the September-blues hit, so overnight investors bit into low hanging fruit. As for the US major indices, the S&P500 lost 1.2%, the Dow fell 1.8% and the Nasdaq fell just slightly, 0.1%.

Commodities:

  • Oil lost 4% to US$39.31 after climbing 10% last week
  • Gold fell 3% – US$1,910 as investors flowed funds into the safe haven U.S. dollar.

What to watch today?

  • The Local futures are suggesting a pull back of almost 1% following Wall Street’s fall.
  • Stocks in Hydrogen, batteries, green steel, carbon capture and storage, and soil carbon may be worth a look as they’ve been flagged as the federal government’s priority in low-emission technologies to develop over the next decade.
  • The RBA Deputy Governor, Guy Debelle’s speech on the Australian Economy and Monetary Policy will be in focus. So look for hints on negative interest rates and if the RBA thinks the second half of 2020 will show solid or tepid recovery.

Trading Ideas:

  • Australian Pharmaceutical Industries (ASX:API), which owns Priceline, Soul Pattinson Chemist and Clear Skincare clinics was downgraded to a Bell Potter Sell with a $0.85 price target, implying a 17% pull back from yesterday’s close of $1.02.
  • Laybuy Group (ASX:LBY) was initiated as Bell Potter speculative Buy with a $2.40 price target, implying 41% upside from in a year, from yesterday’s close of $1.71.
  • And keep an eye on Johns Lyng Group (ASX:JLG), Shine Justice (ASX:SHJ) and Aspen Group (ASX:APZ) -all three are giving off bullish charting signals – according to Trading Central.
Read Transcript
Good Morning, thanks for your company this Tuesday the 22nd of September.

I’m Jessica Amir, a market analyst with Bell Direct.

Well, overnight a risk-off environment unfolded as the UK considers another national lockdown to slow rising infection rates.

Now, that saw tourism stocks take a hit, Carnival shares losing 6.7% and Delta Air falling 9.2%.

Elsewhere we also saw investors sell down banks on allegations swirling that a number of international banks have been moving illicit funds over the last two decades.

Now, in London that source standard chartered shares for over 5% HSBC shares sinking to a 25-year low ending about 5% lower.

In the U.S. a similar story, Deutsche Bank losing 8.5 %, JP Morgan Chase down 3% but there was some light technology shares slightly rebounded.

Of course U.S. tech darlings have led Wall Street to a record high but been hit by the September blues.

So overnight investors indeed bit into some low hanging fruit, so PayPal shares rose about 4%, Netflix, eBay and Apple all rising about 3% each.

As for the U.S. major indices they wrapped up a lower, the S&P500 down 1.2%, the Dow 1.8% and the Nasdaq only fell slightly 0.1%.

On the commodity side of things a similar story spooked by our fears that we are entering another lockdown in particular the UK, oil lost 4% it’s now under the US$40 milestone after climbing 10% last week so it’s now US%39.31.

Gold has fallen as well it’s lost 3% as investors are instead channeling their money into the most liquid of all safe havens the U.S. dollar.

In terms of what to watch today well the local futures are suggesting a pullback of almost 1% following Wall Street’s fall.

Now in terms of something to think about we know, stocks may be worth a look in hydrogen batteries, green steel carbon capture storage and soil carbon as well given the federal government has prioritized these five things in terms of driving a low emission technological safe next decade.

Now in terms of the economic side of things the RBA Deputy Governor Guy Debelle will give a speech today on the Australian economy and monetary policy so keep an eye on what is in the RBA’s goody bag, namely QE and cheap term funding for banks so look for hints on negative interest rates and if the RBA thinks there will be a second half recovery in 2020 or a tepid recovery.

As for trading ideas Australian Pharmaceutical Industries (ASX:API) was downgraded by Bell Potter to a sell with our $0.85 target implying a 17% pullback over the next year from yesterday’s close of a $1.02.

The reason for this downgrade is because pharmacy margins are quite low and their high profit businesses have been hit by lockdowns in particular 17 skin clinics in Victoria have been closed or operating on restricted hours.

This is why API Australian Pharmaceutical Industries is now a Bell Potter sell.

And LayBuy Group (ASX:LBY) was initiated as a Bell Potter speculative buy $2.40 target implying 41% upside in a year from yesterday’s close.

What’s key is it is a speccy stock as it’s making sales and it’s in a high growth area but it’s not making positive earnings.

The buy now pay later provider is one of the leading plays in New Zealand and has rapidly been growing their business in the UK which is set to become the company’s largest market and LBY has formed partnerships with companies like Mastercard and retailers like Boohoo.

So Bell Potter also likes that it’s got an established network particularly in the highly attractive UK area, all of which is why LBY is a Bell Potter speculative buy.

Also keep an eye on Johns Lyng Group (ASX:JLG) and Shine Justice (ASX:SHJ) as well as Aspen Group (ASX:APZ) all giving off bullish signals according to Trading Central’s charting.

I’m Jessica Amir with Bell Direct.
Happy trading, stay safe.

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