Morning Bell 28 August

Jessica Amir
August 28, 2020

The Aussie share market is eyeing a 0.2% fall at the open today.

It was a monumental day in the U.S. on Thursday as the Federal Reserve unveiled a new framework to let inflation run above its 2% goal, while it would keep interest rates lower for longer. This will encourage wage growth and encourage people back into the work force, while also helping businesses keep credit costs low. This news sent treasury yields higher, which lifted financial stocks like JP Morgan and American Express.

Oil lost about US$0.40 to US$43.04 as one of the strongest hurricanes in years made landfall in the heart of the Gulf of Mexico’s oil and gas production.

Companies reporting today:

  • Australian Finance Group (ASX:AFG), Boral (ASX:BLD), Costa Group Holdings (ASX:CGC) and Harvey Norman (ASX:HVN).

What to watch today:

  • Keep an eye on BHP (ASX:BHP) and Rio Tinto (ASX:RIO), as both of their UK and U.S. listed entities closed lower overnight.

Local trading ideas:

  • Accent Group (ASX:AX1) was reiterated as a Bell Potter buy overnight, increasing AX1’s price target to $1.85. That implies 21% share price growth in a year, from yesterday’s close.
  • City Chic Collective (ASX:CCX) was reiterated as a Bell Potter buy, increasing CCX’s price target to $3.95. That implies 19% share price growth in a year, from yesterday’s close. Bell Potter sees significant upside in its expansion into the U.S. and thinks it will benefit from the online shift.
  • UBS reiterated data centre and cloud business NEXTDC (ASX:NXT) as a buy with a 12-month price target of $14.15. UBS expects returns to increase and has modelled earnings will continue to grow for the next five years, while its debt to equity will decrease.
Read Transcript

Good morning, thanks for your company this Friday the 28th of August.

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

Well it was a monumental day in the U.S. on Thursday. The U.S. Federal Reserve unveiled a new framework to let inflation run above its 2% goal for the first time, while it would keep interest rates lower for longer.

Now the reason for this is it’ll encourage wage growth and encourage people back into the workforce, while also helping businesses keep their credit costs low.

This news saw treasury yields rise higher and that lifted financial stocks like JP Morgan and American Express and that pushed the Dow Jones higher, seeing the blue chip index briefly turn positive for the first time since COVID-19, while the S&P500 rose 0.2% to yet another record high and the Nasdaq slipped 0.3%, falling from its record high after stocks like Facebook, Amazon and Apple slipped as investors took profits off the table.

From there on the commodities front, the Gold price has fallen by about 2% to US$1,932 after the Federal Reserve comments came through, while the oil price lost about US$0.40 falling to US$43.04 after one of the strongest hurricanes in years made landfall in the heart of the Gulf of Mexico’s oil and gas production fields.

The iron ore price fell ever so slightly but is holding on to its year high price.

Taking everything into the equation, if you looked at the futures earlier they were suggesting a fall today of about 0.2%, but so far Monday to Thursday the market is up just 0.3%, so it’ll take a big puff from positive reporting season results today to push the market higher for the week.

Reporting season what to watch, we’ll hear from Australian Finance Group (ASX:AFG), Boral (ASX:BLD), Costa Group Holdings (ASX:CGC) as well as Harvey Norman (ASX:HVN).

Tune into our weekly wrap later for a snapshot of all the reporting season results so far that’ll be out later today.

What else to watch, well keep in eye out on BHP (ASX:BHP) and Rio Tinto (ASX:RIO) as their UK and U.S. listed entities all closed in the red overnight.

As for quick trading ideas, well Accent Group (ASX:AX1) was reiterated as a Bell Potter buy overnight while the broker increased AX1’s price target for the footwear company to $1.85.

That implies 21% share price growth in a year from yesterday’s close.

Accent’s results showed stronger earnings stepping up thanks to digital sales rising over 140% in the fourth quarter of the year.

Its got a strong balance sheet and is set to continue to benefit to the shift to shopping online according to Bell Potter.

So that’s AX1 a Bell Potter buy.

City Chic Collective (ASX:CCX) was reiterated as a Bell Potter buy, overnight with Bell Potter increasing CCX price target for the plus women clothing company to $3.95.

That implies 19% share price growth in a year from yesterday’s close.

Now City Chic results, they showed a soft but resilient business model despite COVID-19.

Bell Potter sees significant upside in its expansion into the U.S. and thinks it will also benefit from the shift to online and the fact that the plus size market is under service.

So that’s CCX, a Bell Potter buy.

Thirdly, UBS reiterated the data and cloud business company NEXTDC(ASX:NXT) as a buy with a 12 month target of $14.15.

NEXTDC’s results showed earnings came in at the top line of expectations as billing increased which was good news for the business.

UBS expects returns to also increase and that they’ve modeled for earnings to continue strongly for the next five years while their debt to equity  will decrease.

And that’s what you want right?

So that’s NXT a UBS buy.

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

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