Morning Bell 27 July

Jessica Amir
July 27, 2020

The Aussie share market is eyeing a fall 0.5% at the open, following a red finish in the U.S. on Friday.

Gold prices hit brand new record highs of US$1,898, on the back of US-China tensions and lingering COVID-19 fears.

What to watch this week:

  • The RBA Assistant Governor is speaking via webinar at 10am. Catch that on the RBA’s website.
  • Australian inflation data will be released on Wednesday.
  • U.S. GDP data will be released on Thursday.
  • This week will be a really telling week for markets with Apple, Amazon and Facebook reporting results which will need to justify their record high valuations.

Reporting season:

  • Credit Corp (ASX:CCP) on Tuesday.
  • Rio (ASX:RIO) on Wednesday.

Trading ideas:

  • After Mineral Resources (ASX:MIN) shares rose about 47% this year, seeing minimal COVID-19 impacts and increasing its iron ore shipment by 53% in the year, Bell Potter downgraded the company from a buy to a hold, following its outperformance. However, Bell Potter also said there is uncertainty in the iron ore price, as well the increased tension with US/China that could weigh on Mineral Resources.
  • UBS increased Insurance Australia’s (ASX:IAG) buy rating and price target to $6.50 with UBS being bullish on insurance premium rates. However, UBS downgraded IAG’s earnings for FY21E by -15%.
  • Citi reiterated Aristocrat Leisure (ASX:ALL) as a buy with a $30 target.
  • Citi picked Austal (ASX:ASB) as its key buy in the small caps with a $4.23 target.
Read Transcript

Good morning, thanks for your company this Monday the 27th of July.

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

Well gold prices have hit brand new record highs US$1,898 an ounce on the back of US-China tension and lingering COVID-19 pandemic fears.

Now this means stocks like Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST), Evolution Mining (ASX:EVN) and Saracen Minerals (ASX:SAR) could claw back some of Friday’s losses, so keep an eye on that.

Meanwhile, the oil price rose 0.5% to US$41.29, which should boost sentiment for local oil players today too.

Now this week will be a very telling week for markets in fact with Apple, Amazon and Facebook reporting results which will need to justify their record high valuations.

Meanwhile, the Federal Reserve meets and GDP data will be out in the U.S. on Thursday and locally, Australian inflation data will be released on Wednesday, inflation is currently at 2.2% annually, that’s within the RBA’s target range of 2%-3%.

Now looking to markets, the Aussie share market is either 0.5% or 27.4 points, following a red finish in the U.S. with equities falling for the first time in weeks, also weighing on sentiment is the fact that U.S. futures are suggesting a negative open when trade resumes.

On Friday Intel a top 30 company fell 16% after giving disappointing guidance for the next quarter and big tech names followed, while Tesla shares dropped 6%.

Now this saw the Nasdaq, as for the main indices, fall the most.

The Nasdaq lost 0.9%, the Dow lost 0.7% and the S&P500 fell 0.6%.

So what to watch today locally, well firstly the RBA Assistant Governor is speaking at a webinar at 10am, you can catch that on the RBA’s website and reporting season really it starts to show its feathers, tomorrow Credit Corp (ASX:CCP) reports results and Rio Tinto (ASX:RIO) reports results on Wednesday.

Now to trading ideas, well after Mineral Resources (ASX:MIN), after their shares rose 47% so far this year, a cracking year, seeing minimal COVID-19 impacts and increasing their iron ore shipments by 53%, Bell Potter has downgraded MIN from a buy to a hold, following its out performance.

However, Bell Potter also said that there’s uncertainty about because of the iron ore price as well as increased tensions simmering between the U.S. and China.

Now this could weigh on MIN, downgraded to a hold.

Secondly, UBS increased Insurance Australia’s (ASX:IAG) buy rating and price target to $6.50, with UBS being bullish on Insurance premium rates.

However, UBS did downgrade IAG’s earnings for FY21 by 15%. At the same time, Bell Potter downgraded IAG from a buy to a hold, with a less bullish price target $5.85, expecting no final dividend to be declared when they hand down the results on the 7th of August.

Citi reiterated Aristocrat Leisure (ASX:ALL) as a buy with a $30 target.

Lastly, Citi’s picked Austal (ASX:ASB) as its key buy in the small cap space with a $4.23 target.

I’m Jessica Amir with Bell Direct, thanks for your company, happy trading and stay safe.

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