Morning Bell 22 October

Jessica Amir
October 22, 2020

The futures are suggesting the ASX200 will fall 1.1% following Wall Street’s close in the red and comes despite NSW restrictions being eased from tomorrow, with restaurants, cafes, pubs and clubs able to take group bookings of up to 30 people per group.

U.S. investors lost patience that a fresh U.S. stimulus package would eventuate before the election in almost 11 days. But it’s important to note, regardless of who wins the presidential race, more stimulus will come from either party to bring their economy back to life. Netflix reported less subscribers than expected, which saw its shares lose about 7%. Meanwhile, Snap shares soared 28% to an all-time high on a smashing quarterly report.

On the Commodity front: Oil fell 4% US$40.01 with Libya ramping up production, while U.S. inventory figures showed gas demand weakened. So that could hurt oil stocks today. While Gold made its first notable move in days, rising 1% to US$1,927.

What to watch today:

  • Quarterly results from AMP (ASX:AMP), Qantas (ASX:QAN), Mirvac (ASX:MGR) and OZ Minerals (ASX:OZL).
  • AGMs today: Suncorp (ASX:SUN), Webjet (ASX:WEB), Magellan (ASX:MFG) and Crown (ASX:CWN).
  • RBA’s Deputy Governor, Guy Debelle will take part in a Fireside Chat – on the Future of the FX Global Code – at FX Week Australia 2020

Trading ideas:

  • Bell Potter upgraded Praemium’s (ASX:PPS) Buy rating, increasing its price target to $0.85, implying 41% upside. Praemium’s quarterly results were much stronger than expected supported by its Powerwrap acquisition.
  • Bell Potter also upgraded MyState’s (ASX:MYS) Buy rating, increasing its price target to $4.50 implying 15% upside on MYS’ net interest margin. Bell Potter expects cash and NPAT growth to continue in FY22 and beyond.
  • UBS upgraded Megaport (ASX:MP1) from a neutral to a Buy with a new $16.45 price target. UBS sees more strength in the second half of this financial year, with growth from North American after its customers rose 63%.
  • Red 5 (ASX:RED), Bigtincan Holdings (ASX:BTH) and Galaxy Resources (ASX:GXY) are all showing bullish charting signals – according to Trading Central.
Read Transcript

Good morning to you and thanks for your company, the 22nd of October. I’m Jessica Amir, a market analyst with Bell Direct.

Well U.S. equities had a choppy night, going in and out of positive territory, before ending in the red with investors seeming to lose patience that a fresh U.S. stimulus package will eventuate before the election in almost 11 days. But it is important to note regardless of course who wins a presidential race, we are expecting more stimulus from either party to get the economy back on track.

What investors also honed in on last night were earnings results. Netflix reported less subscribers than expected and their shares lost 7%. Snap shares going the other way they rose 28% to an all-time high on a smashing report card and we saw Facebook and Twitter shares follow higher. What was also of note was Etsy announced that they’ll offer Klana’s buy now pay later service to their users and Etsy shares sank about 7% but they are notably up 300% from their COVID-19 low.

All in all, a negative session for U.S. equities, the S&P500 lost 0.2% overnight but it’s holding a year-to-date gain of over 5%. The Nasdaq lost 0.3% but trades 26% up this year to date.

As for commodities, on the Oil front, the Oil price WTI fell 4% to US$40.01 with Libya ramping up production at a time when U.S. inventory figures are showing that gas demand is weakening so that could hurt Oil stocks on the ASX today. Gold made a first notable move in days up 1% percent to US$1,927 an ounce.

As for local trade, the futures are suggesting the market will pull back 1.1% following Wall Street lower, even though of course NSW restrictions, the most populated state of them all, restrictions are expected to ease from tomorrow with restaurants, cafes and pubs set to take group bookings of up to 30 people per booking. Welcome news for food and beverage companies.

What else to watch today, more quarterly results are out including for AMP, Qantas, Mirvac, and OZ Minerals. AGM season continues as well, there’s a big laundry list of AGM companies today: Suncorp, Webjet and Magellan, as well as Crown hold their AGM among many more. And the RBA’s Deputy Governor Guy Debelle will take part in a Fireside Chat on the future of FX, so look out for that speech that’s happening just before 10am.

As for local trading ideas that could be worth a look, there’s quite a lot. Bell Potter upgraded Praemium, PPS is their ticker code, their Buy rating increasing their target to 85 cents and that implies 41% upside. Praemium’s quarterly results much stronger than expected, supported by their Powerwrap acquisition and Bell Potter also upgraded MyState, MYS, their buy rating, increasing their target to $4.50 and that implies 15% upside on MYS’ net interest margin increasing. Bell Potter expects cash and net profit after tax to continue to grow at least for the next couple of years. And UBS upgraded Megaport (ASX:MP1) from a neutral to a buy with a new $16.45 target. UBS sees more strength in the second half of this financial year with growth in particular from the North American region as their customers are up 63%. UBS forecasts growth over the next five years, while the biggest headwind for Megaport will come from Europe. All in all though, UBS indeed likes Megaport, which is why it upgrade it to a Buy and lastly keep an eye on Red 5, Bigtincan Holdings and Galaxy Resources, all three of those stocks are showing bullish charting signals according to Trading Central. I’m Jessica Amir with Bell Direct. Stay safe, happy trading.

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