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Morning Bell 17 May

Sophia Mavridis
May 17, 2022

Yesterday the market was up as much as 1% in the first hour of the session, following a strong trading session over on Wall Street, and soon after that the market started to drop, following weak economic data from China. China’s April retail sales dropped 11.1% on the year, when the market was expecting a 6% drop, so it fell almost twice the forecast. Additionally, the unemployment rate in China rose to 6.1%.

Locally, the Australian market dropped but still managed to close with a 0.25% gain. Leading the ASX200 was transport and logistics company Brambles (ASX:BXB), which gained over 11% yesterday to its highest price in 8 months. This was after news of a potential takeover offer by private equity group CVC for $20 billion. Meanwhile, Imugene (ASX:IMU), City Chic Collective (ASX:CCX), and Zip (ASX:ZIP) declined the most.

Bell Direct clients were trading mostly ETFs yesterday, including VAF, VEU and EMKT.

It was a volatile session overnight in the US. The Dow Jones closed with a slight gain of 0.08%, while the S&P500 dropped 0.39%. The Nasdaq was the session’s underperformer, as tech stocks continue to fall, closing 1.2% lower.

What to watch today:

  • The SPI futures are suggesting the local market will rise 0.32% at the open this morning.
  • In economic news, today we’ll receive the RBA’s meeting minutes, at 11:30am AEST. These are the minutes from the central bank’s meeting earlier this month and it may draw some attention, as this was the meeting when the RBA lifted the cash rate.
  • In commodities, the oil price has jumped again as concerns of tighter global supplies outweighed the weakening global demand outlook. Gold and seaborne iron ore are also trading higher.
  • James Hardie Industries (ASX:JHX) is set to release its quarterly earnings.

Trading Ideas:

  • Citi has a Buy rating on Brambles (ASX:BXB) with a $12.29 price target. Citi say that compared to traditional leveraged buyout targets, BXB has little excess assets on its balance sheet, and CVC (who are the private equity group proposing the takeover bid) see the market as undervaluing the operating business and complex strategic initiatives over the medium term.
  • Trading Central have identified a bearish signal in Metcash (ASX:MTS), indicating that the stock price may fall from the close of $4.63 to the range of $4.40 to $4.44 over 19 days according to the standard principles of technical analysis.

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