Morning Bell 23 September

Jessica Amir
September 23, 2020

Australia will start to reopen its boarders in a bid to get the economy back on track, while the UK enters tougher restrictions for potentially the next six months. In the U.S., existing home sales soared 2.4% in August, to the highest reading in 14 years, supported by record low interest rates.

Strong earnings, economic news and stimulus hopes supported sentiment and saw U.S. equities attempt to rebound after four days of selling. The S&P500 lifted 1.1%, the Nasdaq was up 1.7%, while the blue chip gained 0.5%.

Commodities:

  • Oil nudged slightly higher to US$39.60
  • Gold continued to drop and trades at US$1,905 as investors continue to invest in the safe haven U.S. dollar.
  • With that the Aussie dollar fell 0.8% to 71.67 US – this has continued to pressure the Iron Ore price, which lost 0.9%.

What to watch today?

  • The Aussie futures are suggesting a rise of 1%.
  • Services and manufacturing numbers will be in focus today with a preview of what to expect in September, before the official readings are out next month.

Trading ideas:

  • Harvey Norman (ASX:HVN) was maintained as a Buy by Citi with a $5.20 target price. HVN’s outlook remains upbeat with year on year July and August re-tax profit nearly tripling.
  • Saracen Mineral (ASX:SAR) and Northern Star Resources (ASX:NST) were upgraded by Macquarie with a $6.10 and $16.40 price target respectively.
  • Keep an eye on Elders (ASX:ELD), Wesfarmers (ASX:WES) and Base Resources (ASX:BSE) – all three are giving off bullish charting signals according to Trading Central.
Read Transcript

Good Morning, Thanks for your company this Wednesday the 23rd of September.

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

Well, Australia will start to reopen its borders in a bid to get the economy back on track with New South Wales operating border bubbles with Victoria and Queensland and South Australia will reopen to New South Wales.

All at a time when the UK is entering tougher restrictions for potentially the next six months.

Over in the U.S. good news their existing home sales up 2.4% in August rising to the highest reading in 14 years and that’s supported by record low interest rates.

And now speaking of record low interest rates the Federal Reserve came out overnight saying that would continue to do all it can to support the economy for as long as it takes, keeping in mind they’re not looking at touching interest rates for three years.

A similar story to Australia where yesterday we learned that the RBA is looking at keeping rates on hold for three years.

On top of that in the U.S. better than expected earnings came through overnight from Nike and KB home with Nike sales up 82% and that sent Nike shares up 6% after hours.

Elon Musk also announced Tesla deliveries are expected to grow 30 to 40% this year and that revved up the car makers shares after hours as well.

So strong earnings economic news and stimulus hopes all supported sentiment and saw U.S. equities attempt to rebound after four days of selling, the S&P500 up 1.1%, the Nasdaq up the most 1.7% and the blue-chip Dow Jones just up 0.5%.

As for commodities, the Oil price nudged slightly ever ever ahead it’s now at US%39.60, the Gold price continuing to fall and it’s trading at US$1,905 as investors continue to rotate out of Gold and invest into the safe haven USD.

Now with that the AUD has dropped about 0.8%, it’s now at US$71.67.

Now this continued pressure is of course pressuring the Iron Ore price which has lost almost 1% overnight and fallen from its 14 September, five and a half year high so keep an eye on Iron Ore majors today as they continue to move lower and made the commodity pull back.

What else to watch, while the Aussie futures are suggesting a 1% lift today and keep an eye on services and manufacturing numbers and the economic side of things that will be in full focus in terms of a preview of what to expect for September numbers before the official reading is out next month.

As for trading ideas that may be worth a look, Harvey Norman (ASX:HVN) maintained as a Citi buy with a $5.20 target.

HVN’s outlook remains upbeat, if you look at July and August year-on-year sales in terms of pre-tax profit it’s nearly tripled and Citi sees upbeat sales continuing through the first half of 2021 right until February 2021 next year with the business continuing to see strong demand from bushfire impacted sales.

So the Citi HVN is its preferred stock pick in the discretionary retail sector, HVN a Citi buy.

And JP Morgan remains bullish for Gold expecting the Gold price to average around US$2,000 over the next six months.

And this comes at a time when Macquarie heavily upgraded Saracen (ASX:SAR) to an outperform from an underperform with its $6.10 target, so that’s Saracen.

Macquarie also gave a similar massive upgrade to Northern Star (ASX:NST) upgrading the stock from an underperformed to an outperform with a $16.40 target.

Elsewhere keep an eye on Elders (ASX:ELD) Wesfarmers (ASX:WES) and Base Resources (ASX:BSE) all three of those stocks giving off strong bullish charting signals and that’s according to Trading Central.

I’m Jessica Amir with Bell Direct.

Stay safe, happy trading.

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