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Morning Bell 29 August

Grady Wulff
August 29, 2022

The local market closed 0.79% higher on Friday but was virtually unchanged for the week as a broad market sell-off early in the week offset the rally that ended the week. The big banks rallied on Friday along with the materials and energy sectors.

Bega Cheese (ASX:BGA) was the winning stock on Friday after the food company released full year results. Despite Bega’s NPAT falling 69% to $24.2 million, investors were impressed with the company’s revenue of more than $3 billion, which was up 45% year-on-year and the issuing of guidance for FY23 expecting EBITDA to be in the range of $160 million to $190 million for FY23 amid increased consumer prices across all channels.

Investors also bought into Viva Energy (AX:VEA) on Friday while selling off City Chic Collective (ASX:CCX) again after the retailer released disappointing results on Thursday, and Zip Co (ASX:ZIP) fell more than 5% on Friday. The common theme continues throughout reporting season, being that investors are selling out of stocks that fail to provide quantitative guidance for FY23, which for last week included Humm Group (ASX:HUM), Coles (ASX:COL) and Ramsay Health Care (ASX:RHC).

The most traded stocks by Bell Direct clients last week were IDP Education (ASX:IEL), Boral (ASX:BLD) and Alumina (ASX:AWC).

In the US and all three key indices closed lower on Friday after the commencement of the Jackson Hole where investor optimism was dampened by Fed Chair Jerome Powell saying the central bank must continue to raise interest rates to stop high inflation becoming a permanent aspect of society.

What to watch today:

  • The ASX is expected to open almost 1.5% lower following the sell-off on Wall Street on Friday.
  • As we head into the tail end of earnings season, we have over 60 companies set to report this week, kicking off with Fortescue Metals (ASX:FMG) this morning.
  • On the commodities front, crude oil is trading almost half a percent higher and up 35% year-on-year, brent is up almost 1.5%, natural gas is down slightly but remains up 112% year-on-year, iron ore is also up just under 2%, but gold is trading 1.2% lower.
  • Investors will be awaiting for the preliminary retail sales data to be released for July out today with the market expecting a rise of 0.3%. Australian building Permits for July is also out on Tuesday which will give an insight into the state of the country’s building crisis.

Trading Ideas:

  • Trading Central has identified a bullish signal on Charter Hall Group (ASX:CHC) due to a pattern forming over a 79-day period, indicating the stock price may rise from the close of $13.36 per share to the range of $15.70 to $16.20 per share over the same period of 79 days according to standard principles of technical analysis.
  • Citi maintains a buy rating on Perpetual (ASX:PPT) but have lowered its price target on the stock to $30 per share following the release of FY22 results last week and more importantly, the company’s acquisition of competitor Pendal (ASX:PDL), which was announced on the same day the results were released. The downgrade of the price target is on the back of Citi acknowledging both equity market risk and the apparently negative sentiment towards the transaction which could prevent the stock making near term headway.

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