Morning Bell 23 July

Jessica Amir
July 23, 2020

The Aussie share market is eyeing a 0.1% lift at the open, bracing for the Government’s mid-year Economic and Fiscal update with estimates suggesting debt swelled to 9% of GDP. Investors are also weighing up a positive finish on Wall Street, while Europe closed lower with oil stocks leading the decline.

In the U.S., the Government agreed to pay Pfizer and BioNTech $1.95 billion to produce 100 million COVID-19 vaccines if their candidate is safe and effective. Washington is considering extending the COVID-19 unemployment benefit from September to December, and dropping it to $400 a week.

On the commodities front, Oil fell slightly to US$41.90, maintaining its March high. The Gold price gained 1.3% to US$1,865, its highest level since September 2011 and Silver hit a near 7-year high.

What to watch today:

  • The Aussie dollar holds its 15-month high with the USD.
  • Quarterly results are due out today for Evolution Mining (ASX:EVN), Galaxy Resources (ASX:GXY), Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST), Santos (ASX:STO), Syrah Resources (ASX:SYR) and Megaport (ASX:MP1).
  • Face masks are compulsory in Victoria as of midnight last night.

Local trading ideas:

  • After Lynas (ASX:LYC) handed down its quarterly report, UBS reiterated Lynas as a buy, increasing its target to $2.70. Yesterday LYC closed 2.4% lower at $2.08, but they are still tracking 92% up from their COVID-19 bottom. UBS cut EPS estimates for FY21 due to weaker demand in the automotive industry.
  • OZ Minerals (ASX:OZL) handed down its quarterly results yesterday and UBS reiterated OZ Minerals as a buy, increasing its price target to $15.00. Yesterday OZL shares gained 4.2% to $4.24 and have gained 28% so far this year. UBS thinks there is more upside following yesterday’s better than expected results.
Read Transcript

A very good morning to you this Thursday the 23rd of July.

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

Well after a choppy week, the Aussie share market is now sitting up about 0.8%.

However, today the futures are suggesting a slight nudge ahead of 0.1%.

However, we are bracing for the Government’s mid-year Economic and Fiscal update with estimates suggesting debt swelled to 9% of GDP, so keep your eyes and ears on that.

Investors are also weighing up a positive finish on Wall Street, while European stocks close lower with Oil stocks leading the decline.

Now in the U.S., the Government agreed to pay Pfizer and BioNTech $1.95 billion to produce  $100 million COVID-19 vaccines if their candidate is safe and effective.

And Washington is considering extending the COVID-19 unemployment benefit from September end right through to December, dropping the payment to $400 a week.

On the company side of things, Snap shares fell 6% after its daily users fell.

While afterhours, Microsoft announced better than expected earnings and revenue,  with a 13% jump in quarterly revenue, thanks to a 17% surge in cloud  business revenue up year on year.

But Azure  saw revenue growth slow, and that’s perhands why Microsoft shares ended 3%  lower afterhours.

Tesla shares on the other hand rose 6% afterhours after reporting their first full year of profits, meaning they can now be considered to be included into the S&P500.

So with these mixed signals, the Nasdaq futures are eyeing a fall of 0.4% at the open this evening following the overnight 0.2% gain.

Meanwhile, the S&P500 and the Dow both ended 0.6% higher overnight.

On the commodity front, the Oil price fell ever so slightly to US$41.90 a barrel maintaining its March high.

The gold price gained 1.3% to US$1,865, its highest level since September 2011 and Silver hit a 7-year high.

So what to watch today, there’s plenty.

The Aussie dollar is holding 15-month high territory with the U.S. dollar holding weaker.

Quarterly results are due out today for Evolution Mining (ASX:EVN), Galaxy Resources (ASX:GXY), Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST), Santos (ASX:STO), Syrah Resources (ASX:SYR) as well as the cloud business Megaport (ASX:MP1).

Don’t forget face masks are compulsory in Victoria as of midnight last night.

Now to two trading ideas, well after Lynas (ASX:LYC) handed down their quarterly report yesterday, UBS reiterated Lynas as a buy increasing its target to $2.70.

Yesterday LYC closed 2.4% lower to $2.08, but they’re tracking 92% up from their COVID-19 bottom.

Now the company was impacted by COVID-19 Government mandated shutdowns for 44 days in the quarter, but they did win a new contract.

However, UBS cut their EPS estimates for FY21 due to weaker demand in the automotive industry.

So that’s LYC, a UBS buy.

Secondly OZ Minerals (ASX:OZL) handed down their quarterly results as well yesterday and UBS also reiterated OZL as a buy increasing its target to $15.00.

Yesterday we saw OZ Minerals shares up 4.2% to $4.24 and they’ve gained 28% so far this year, quite a good year.

UBS thinks there is more upside following yesterday’s better than expected results.

From a company perspective, its Prominent Hill copper-gold shaft study is due in the fourth  quarter and UBS thinks that project will be worth over $1 per share to the company.

Externally, the backdrop is becoming more  favorable for OZL, copper supply is to become a real problem in 2020 with record year outages this year, particularly in Chile.

On top of that gold accounts for 30% of their revenue and this is looking pretty good for OZL.

So OZL is a UBS buy.

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

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