Morning Bell 2 July

Jessica Amir
July 2, 2020

The ASX200 is eyeing a lift of 0.7% at the open.

The Aussie manufacturing industry surprisingly returned to growth phase for the first time in 8 months, bolstered by production and new order demand.

Investors will be watching the balance of trade which is out today. Balance of trade is the difference between exports and imports. The market is pricing in that the surplus will swell to $9 billion in May, up from $8.8 billion in March. So keep an eye on Australia’s biggest exporters like BHP (ASX:BHP), Fortescue Metals (ASX:FMG), Rio Tinto (ASX:RIO) and CSL (ASX:CSL).

Local Trading ideas:

  • Lendlease (ASX:LLC) looks like its turning a corner putting the weaker than expected 2020 profit behind it, which fell heavily short of market expectations. According to UBS, Lendlease’s balance sheet is ripe for a better financial year this year, but investors might have to be patient for the acceleration of its $100 billion+ development pipeline and earnings to come to fruition. UBS ramped up Lendlease’s to a buy with a price target of $15.50.
  • Following fund manager Perpetual (ASX:PPT) snapping up Trillium, an Environment, Social & Governance (ESG) manager, catering for a growing market of investors who want to exclude investments such as fossil fuels from their portfolio, Bell Potter rose Perpetual (ASX:PPT) to a buy with a price target of $41.10.
  • After Suncorp (ASX:SUN) announced an executive shake up, Bell Potter reiterated its buy for the QLD bank. Aside from that, 3% lower cash earnings across the horizon are expected, which is why Suncorp’s price target price dropped to $10.50.
Read Transcript

Good morning, well if you’ve been waiting for another sign that things are improving maybe this could be it.

The Aussie manufacturing industry surprisingly returned to growth phase for the first time in eight months, bolstered by production and new order demand and it was somewhat a bit like synchronized swimming as we saw this in the U.S. overnight as well where their manufacturing industry surprisingly saw its highest read since April 2019 following a sharp contraction. U.S. payrolls were adjusted higher showing 2.4 million new jobs were created in May.

Pfizer and a drug maker BioNTech released a paper showing they have neutralized COVID-19.

That sent Pfizer shares 3% higher but it seems now the COVID-19 vaccine race is on because Moderna is also hoping to have their vaccine ready by the end of the year.

Now this positivity sent the Nasdaq to a brand new record all-time high up 1%, the Nasdaq gained 0.5%, while the Dow Jones fell 0.3% weighed by a U.S. COVID-19 cases growing 40% this week.

On the commodity front, the oil price rose over 1% to US$39.71 after crude inventories fell from their record highs while manufacturing activity continues to improve rising demand.

Gold retreated from its near eight-year high to US$1,779 on the stronger economic data that we saw and the copper price rose 1%, while the iron ore price fell ever so slightly down 0.1%.

Now what to watch today, taking everything into the equation the Aussie share market is eyeing a lift of 0.7% and if you look at the chart, it is suggesting if you look at the 50-day moving average that the market is trending higher which means we will hopefully extend that rally today from the bear market bottom to about 31%.

On the economic front today, look out for the balance of trade data which is the difference between exports and imports.

The market is pricing in a surplus of $9 billion for May, remembering the month prior the surplus rose to $8.8 billion.

So keep an eye on Australia’s biggest exporters like BHP (ASX:BHP), Fortescue Metals (ASX:FMG), Rio Tinto (ASX:RIO) and of course CSL (ASX:CSL).

Now to three local trading ideas, Lendlease (ASX:LLC), it looks like it’s really turning a corner despite having weaker than expected 2020 profit behind it, which fell heavily short of market expectations.

It appears now according to UBS that given their balance sheet is ripe for a strong financial year that $100 billion development pipeline and earnings pipeline looks like it could come to fruition, but investors will have to be patient.

UBS ramped up Lendlease’s price target to $15.50 and Lendlease is a UBS buy.

And secondly, following the fund manager Perpetual (ASX:PPT) snapping up Trillium, which is an Environmental, Social and Governance (ESG) manager, which caters for a growing market of investors, like me, who want to exclude investments such as fossil fuels from their portfolio.

Well Bell Potter rose Perpetual’s price target to $41.10.

Now Perpetual is a Bell Potter buy.

And thirdly, after Suncorp (ASX:SUN) announced an executive shake-up, Bell Potter reiterated Suncorp, the QLD bank as a buy.

Aside from that, 3% lower cash flows are forecast across the horizon, which is why Suncorp had their price target dropped by Bell Potter to $10.50.

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

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