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Morning Bell 20 February

Grady Wulff
February 20, 2024

Over in the US, Wall Street was closed on Monday due to the Presidents Day holiday, with trading to resume tomorrow.

In Europe overnight, markets closed mostly higher, carrying on the positive sentiment of last week with the STOXX600 closing the day up 0.17% driven by a rally for healthcare stocks. Germany’s DAX bucked the positive start to the week closing the session down 0.15%, while the French CAC ended the day flat and the FTSE100 in the UK rose 0.22% to start the week in the green.

In Asia, markets also closed mostly higher overnight as investors returned from the Lunar New Year holidays and upbeat travel data boosted investor sentiment. Consumer spending in China rose higher than pre-COVID levels across the Lunar New Year holiday according to data out in the region, indicating economic recovery on the consumer front is underway, which prompted China’s CSI300 index to rise 0.5% on Monday. Japan’s Nikkei and Hong Kong’s Hang Seng indices each fell to start the week lower while South Korea’s Kospi rose 1.3%.

The ASX started the week with a gain of just 0.09% on Monday as an afternoon sell off erased most of the gains from earlier in the session with real estate stocks weighing on the key index which offset gains among the miners and banks.

As we head into week three of the local reporting season calendar, so far 82 companies have reported first half results with 30 beating expectations, 31 meeting expectations and 21 missing expectations.

Lendlease was the worst performer in the real estate sector with the company plunging 16% after reporting a $136m loss for the first half and downgrading its return on equity guidance for the remainder of FY24 in results released yesterday.

The insurance providers in QBE and IAG were two key names that missed expectations and were subsequently sold off as investors responded to the weaker than expected results from the two providers.

A2 Milk on the other hand jumped 12.5% on Monday after the dairy distribution company posted stronger revenue and profits in the first half, attributing the strong results to growth in the Chinese market products.

Leading cement producer Boral also rallied 4.6% on Monday after announcing Seven Group has made an offer to buy the remaining 28.4% stake in the company that it does not already own.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are expecting the ASX to open Tuesday’s session flat ahead of a busy reporting season calendar today including results out of Ansell, BHP Group, Sonic Healthcare, Baby Bunting, Coronado Global Resources and more.
  • On the commodities front this morning, oil is up 0.5% at US$79.57/barrel, gold is up 0.21% at US$2017.35/ounce and iron ore is flat at US$128/tonne.
  • AU$1.00 dollar is buying US$0.65, 98.18 Japanese Yen, 51.83 British Pence and NZ$1.06.

Trading Ideas:

  • Bell Potter has reduced the 12-month price target on Boral (ASX:BLD) from $6.30 to $6.24 and maintain a hold rating on the leading vertically integrated supplier of construction materials in Australia following the receipt of a takeover offer from Seven Group which is already a majority investor however is proposing, under the new deal, to acquire the remaining 28.4% interest that it does not own. The offer is a combination of cash and scrip and Bell Potter believes the offer proposal appears to be fair.
  • And Trading Central has identified a bearish signal on PWR Holdings (ASX:PWH) following the formation of a pattern over a period of 25-days which is roughly the same amount of time the share price may fall from the close of $10.76 to the range of $8.80 to $9.10 according to standard principles of technical analysis.

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