Morning Bell 3 September

Jessica Amir
September 3, 2020

The Aussie share market should see a lift of 0.7% at the open, making a nice addition to yesterday 1.8% gain.

Wall Street had another smashing night with the benchmark S&P500 and tech-heavy NASDAQ hitting brand new record highs.

The AUD fell to 73.35 U.S. cents, dragged by weaker than expected Aussie GDP data yesterday.

What to watch today:

  • After learning the Aussie economy shrank 7% from April to June, more than the 6% forecast, the Tourism Minister is now pressuring states and territory to open their boarders, saying the government will lose $55 billion this year if borders remain shut.
  • On an economic front, import and export data is out for July, known as the balance of trade. The market is expecting a $5.4 billion surplus, meaning we’re expected to see more goods exported.
  • Companies to keep an eye on: Fortescue Metals (ASX:FMG), BHP (ASX:BHP), Rio Tinto (ASX:RIO) and CSL (ASX:CSL).
  • This evening in the U.S., import and export figures for July will be released.

Local trading ideas:

  • Afterpay (ASX:APT) had its buy rating upgraded by Bell Potter, giving it a price target of $99.10, implying 20% share price growth from yesterday’s close of $82.50.
  • Midway (ASX:MWY), Australia’s biggest Woodfibre processor and exporter, was given a sharp upgrade from a hold to a buy by Bell Potter with a $1.25 price target, implying 36% share price growth. Midway was upgraded following its improvement in cashflows, reduction in debt, and that pulp prices reached the bottom of their cycle.
  • Boral (ASX:BLD), Australia’s largest supplier of building and construction materials was reiterated  as a UBS buy with a $4.30 price target.
Read Transcript

Good morning, thanks for your company this Thursday the 3rd of September. I’m Jessica Amir, a market analyst with Bell Direct.

Well Wall Street had another smashing night, the benchmark S&P500 as well as the tech heavy NASDAQ, both hit brand new record highs with the NASDAQ topping 12,000 points for the first time after putting on about 1%.

The Dow meantime rose 1.6%, that was its biggest one-day gain since the 14th of July, while the S&P500 lifted 1.5%, its best one day again since the 6th of July.

What was noteworthy though was tech darlings like Apple and Tesla got a bit hot under the collar seeing investors lock in record profits which dragged their shares lower.

While stocks tied to the economic recovery and reopening rallied the most, with chemical giant DuPont rising 5% with Alaska Air following up 3%.

On the commodities front, the gold price fell 1.5%, it’s now US$1,949.

Oil dipped about 3% to US$41.58 on weekly U.S. demand data falling.

Now that hit home a little so to speak, indicating the economic recovery may be slower than expected.

The Australian dollar fell to 73.35 U.S. cents, dragged by weaker than expected Aussie GDP data that came out yesterday, while the U.S. dollar rallied as U.S. made goods orders rose more than expected in July.

Now what to watch today, the Aussie share market should see a lift of 0.7% if the futures are correct, a nice addition to yesterday’s 1.8% gain.

And after learning the Aussie economy shrank 7% from April to June, more than the 6% forecast, the Tourism Minister is now pressuring states and territories to reopen their borders saying it’ll cost the government $55 billion this year if borders remain shut.

And on the economic front today, import and export data is out for July, this is known as the balance of trade.

The market’s looking for a $5.4 billion surplus, meaning we’re expected to see more goods orders exported including from our biggest blood and vaccine maker CSL (ASX:CSL) and more iron ore exported than the machinery and cars that we import.

So watch Fortescue Metals (ASX:FMG), BHP (ASX:BHP) and Rio Tinto (ASX:RIO), as well as CSL.

Also consider BHP listed in New York fell about 0.7% overnight.

And this evening in the U.S., they’ll get their import/export figures for July as well.

As for three trading ideas, well Afterpay (ASX:APT) had its buy rating upgraded by Bell Potter, giving it a price target of $99.10, implying 20% share price growth from yesterday’s close of $82.50.

Now the analyst for Afterpay, Lafertani, has said that basically what we were thinking, the new market opportunities in Canada, Europe and Asia should provide material gross merchant value growth for the foreseeable future.

Now Bell Potter said it doesn’t see that PayPal is the most credible new entrant into the by now pay later sector and that APT’s model is unique as it generates 15 million referrals back to retailers each month.

So that’s why APT was upgraded as a Bell Potter buy.

Secondly Midway (ASX:MWY), Australia’s biggest wood fibre processor and exporter was given a sharp upgrade from a hold to a buy by Bell Potter with a $1.25 target and that implies 36% share price growth from yesterday’s close.

Now Midway was upgraded following an improvement in its cash flows and a reduction in its debt and as well that the pulp prices have reached the bottom of their cycle.

So that’s MWY a Bell Potter buy.

And thirdly, Boral (ASX:BLD), Australia’s largest supply of building and construction materials, was reiterated as a UBS buy with a $4.30 target.

Now UBS met with the CEO and CFO of Boral, noting that Boral’s markets are improving.

But UBS thinks that investors instead will back JHX and CSR instead to leverage off the economic recovery.

I’m Jessica Amir with Bell Direct, happy trading, stay safe.

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