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Morning Bell 21 July

Paulina Peters
July 21, 2022

Yesterday, our local market advanced 1.7%, its best gain in around three weeks, again supported by a strong session in the US on Tuesday, after profit results from some well-known companies came in better than expected.

We also heard from RBA Governor Phillip Lowe, who said he expected the RBA to lift the cash rate to 2.5%, but whether that eventuates, as well as how quickly that may happen “will be determined by the inflation outlook”, with the next inflation update due out next Wednesday.

Sectors wise, all eleven industry sectors were in the green. The best performing sector was tech, followed by materials and real estate.

Megaport (ASX:MP1) was the biggest gainer, up 23% yesterday, following it delivering EBITDA profit in the fourth quarter, a first for the company. Paladin Energy (ASX:PDN) lifted 10.5%, after its management decided to restart one of its mines due to strong uranium market fundamentals. On the flip side, the biggest decliners yesterday were NIB Holdings (ASX:NIB), Pendal Group (ASX:PDL) and Perseus Mining (ASX:PRU).

The most traded stocks by Bell Direct clients yesterday included Sims (ASX:SGM), the BetaShares Australian Strong Bear Hedge Fund (ASX:BBOZ) and BHP Group (ASX:BHP).

Moving to the US, all three benchmarks closed higher, boosted by a tech rally. Streaming giant Netflix surged after it reported it had lost 970,000 subscribers in the second quarter, which was less than the 2 million it had previously projected. Investors had been awaiting this earnings season for an indication on how companies are coping with the worst inflation in more than 40 years. So far, 12% of S&P500 companies have reported earnings, with 68% beating analyst expectations.

What to watch today:

  • The Australian share market is expected to fall 0.46% at the open if you go by the SPI futures, despite another solid session on Wall Street.
  • Watch ANZ (ASX:ANZ) today as it is expected to return from its trading halt after its recent announcement to acquire Suncorp’s (ASX:SUN) banking division for $4.9 billion.
  • Companies reporting today include Evolution Mining (ASX:EVN), Newcrest Mining (ASX:NCM), Santos (ASX:STO), Syrah Resources (ASX:SYR), Woodside Energy (ASX:WDS) and BNPL stock Zip (ASX:ZIP).
  • Moving to commodities, softening US gasoline demand weighed on prices. The WTI Crude oil price declined about 2% to $US102 a barrel and the Brent price fell to US$106 a barrel. The gold price also came under pressure, following improving risk sentiment and a strong US dollar putting pressure on the safe haven asset, and the spot iron ore price trades flat at US$101 a tonne.
  • If you hold Magellan Global Fund (ASX:MGF) or GrainCorp (ASX:GNC), you will receive your dividend payment today.

Trading Ideas:

  • Bell Potter have maintained its Buy rating on Beach Energy (ASX:BPT) with an increased price target from $2 to $2.40. BPT reported better than expected quarterly revenue of $504m, materially exceeding Bell Potter’s expectation of $430m. Bell Potter believe the business has a strong, fully funded energy production growth outlook and highlighted that BPT is trading at lower earnings multiples compared with its ASX-listed peers. At its current share price of $1.82, this implies about 32% share price growth in a year.

Trading Central has a bullish signal on BrainChip (ASX:BRN) indicating that the stock price may rise from the close of $1.13 to the range of $1.24 – $1.28 in the next 30 days according to standard principals of technical analysis.

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