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Morning Bell 27 February

Grady Wulff
February 27, 2024

The ASX started the week up 0.1% at the closing bell on Monday as investor sentiment was boosted by some strong corporate earnings results and the local index took lead from Wall Street’s record close on Friday. The energy sector weighed on yesterday’s gains following a decline in the price of oil overnight.

The consumer discretionary sector on the other hand was the top performer yesterday as Wesfarmers rose 1.5% while fashion jewellery leader Lovisa rallied a further 4.5% after releasing strong first half results late last week. Kogan.com also surged 23.7% after reinstating its dividend and returning to profitability in the first half of FY24 against challenging headwinds of slowing consumer spend.

Reporting season continued yesterday in the final weeks of earnings results being released locally. 251 companies have reported so far with 91 beating expectations, 93 meeting expectations and 67 missing expectations.

TPG Telecom shares tanked over 10% after the IT internet and communications company reported annual net profit shrunk to $49m from $513m a year earlier amid rising costs.

Endeavour Group was in a similar boat yesterday as investors also hit the sell button after the alcohol and hotels retailer reported its net profit fell 3.6% over the first half due to higher financing costs.

Over in the US today overnight, stocks reversed morning gains to close lower following record setting closes for the Dow and S&P500 on Friday and as investors await the release of key inflation data out in the region later this week. The Dow Jones fell 0.16% the S&P500 dropped 0.38% and the tech-heavy Nasdaq posted 0.13% decline on Monday. On the back of Nvidia’s blockbuster results out last week, investors are assessing whether the AI momentum can last, given economic and inflation risks continue to linger, and later this week when personal consumption expenditures data is released, we will gauge the impact on the AI thematic.

In Europe overnight, markets started the week in mostly negative territory as investors look ahead to key global inflation data out later this week to determine the rate outlook for key economies. The STOXX600 fell 0.4% following a record close last week, weighed down by the mining and utilities sectors. Germany’s DAX rose 0.02% on Monday, the French CAC fell 0.46% and, in the UK, the FTSE100 lost 0.3%.

Across the Asia markets, Japan’s Nikkei 225 extended its rally to a new all-time high on Monday while China markets snapped a 9-day winning streak to close 1.04% lower as investors await the release of key economic data in the region including China’s manufacturing purchasing managers’ index to gauge how economic recovery in the region is faring.

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 down 0.03% tracking global markets overnight.
  • On the commodities front this morning, oil has rebounded from Monday’s lows to trade 1.49% higher at US$77.63/barrel, gold is down 0.2% at US$2031.73/ounce and iron ore is up 0.82% at US$123.50/tonne.
  • AU$1.00 is buying US$0.65, 98.49 Japanese Yen, 51.70 British Pence and NZ$1.06.

Trading Ideas:

  • Bell Potter has maintained a buy rating on NextEd Group (ASX:NXD) but has decreased the 12-month price target on the education services provider following a softer-than-expected first half result including revenue up 36% however NPAT fell and the company withdrew its second half guidance due to significant macro uncertainties across the industry.
  • And Trading Central has identified a bullish signal on Capitol Health (ASX:CAJ) following the formation of a pattern over a period of 153-days which is roughly the same amount of time the share price may rise from the close of $0.27 to the range of $0.33 to $0.35 according to standard principles of technical analysis.

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