Morning Bell 31 July

Jessica Amir
July 31, 2020

The Aussie share market is eyeing a fall of 0.5% at the open, following a mixed session on overnight markets with the Dow falling 0.9%, the S&P500 down 0.4%, while the Nasdaq pumped up 0.4%. But what’s noteworthy is the Nasdaq futures are suggesting a 1% gain on Friday. So in afterhours trade, the ETF tracking the Nasdaq 100 (QQQ) rose 1% and the ETF tracking the S&P500 (SPY) rose 0.9%. So keep an eye on their Aussie counterparts today, the ETF on the ASX that tracks the Nasdaq 100 is (ASX:NDQ).

Overnight, the U.S. officially entered a recession with second quarter GDP falling 32.9%, following the 5% drop in Q1. The fall was not as bad as the expected 34.1% drop however, it was the worst fall in history. This saw people reshuffle their portfolios, chasing companies upgrading their earnings.

What else to watch today:

  • On the economic side, private sector borrowing known as private sector credit is out today.

Local trading ideas:

  • Bell Potter reiterated CBA (ASX:CBA) as a buy with a price target of $78.00, implying 7% share price growth from yesterday’s close price of $73.01.
  • Janus Henderson (ASX:JHG) delivered a solid June quarter update, Bell Potter reiterated JHG’s buy rating and increased its target to $42.50. That implies 36% growth from yesterday’s close of $31.21. Bell Potter also upgraded its earnings per share estimates by 2-3% with June quarter profit hitting US$104.1 million, smashing through expectations.
  • Following IOOF Holdings’ (ASX:IFL) disappointing quarterly report that raised a number of issues that were not properly addressed in the update, Bell Potter reiterated IOOF as a sell, dropping its target price to $4.20.
Read Transcript

Good morning, thanks for your company this Friday the 31st of July.

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

Well following a mixed session on Wall Street overnight, with the Dow falling 0.9%, the S&P500 losing 0.4% and the Nasdaq going the other way up 0.4%, the Aussie futures were earlier suggesting the market would fall 0.5%.

But what is noteworthy is the Nasdaq futures are now suggesting a 1% gain on Friday.

Now this explains why in after hours trade we saw the ETF that tracks the Nasdaq 100 (QQQ) in the U.S. rise 1% and the ETF that tracks the S&P500 in the U.S. the SPY rise 0.9%, so closely watch their Aussie counterparts today including the ETF that tracks the Nasdaq 100 ETF on the ASX available under (ASX:NDQ).

Overnight the U.S. did officially enter recession territory after the second quarter GDP reading came out with a fall of 32.9% following the 5% drop in Q1.

The drop was not as bad as economists expected though, but still it was the biggest drop in history so this saw people reshuffle their portfolios chasing companies upgrading their earnings like big tech giants.

Facebook shares rose 7% after the market close after reporting a 11% jump in revenue and also giving stronger than expected sales guidance for this quarter.

Apple overall sales rose 11% and Amazon also announced skyrocketing sales as well.

On the commodity front a different story, the gold price fell 0.3% to US$1,947 an ounce easing from its record high.

The oil price sank 3% to US$40.33 after traders came to grips with the weaker economic data, while the iron ore price lifted ever so slightly to US$107.90.

So what to watch today, on the economic side of things, local private sector borrowing known as private sector credit data is out today.

The last reading showed that borrowing actually rose 3.2% in June on a yearly basis.

And the estimates are, given the stimulus here, that credit will rise again.

Now to three trading ideas, well firstly Bell Potter reiterated CBA’s (ASX:CBA) buy rating and target to $78, implying 7% share price growth from yesterday’s close of $73.01.

Now CBA assess the full range of its custer remediation of the issues and increase their allowance for remediation payments taking the total aligned advice remediation cost to $834 million.

Now this amounts to 3% of the company’s net profit, but Bell Potter already allowed for some of this, so only expects net profit after tax to be adjusted down by 2% which means expect FY20 NPAT to come in at $9.45 billion and expect a final dividend of $0.20.

Now CBA’s results are due out on Wednesday the 12th of August, so that’s CBA a Bell Potter buy.

Secondly, Janus Henderson (ASX:JHG) delivered a strong June quater update.

Bell Potter reiterated JHG’s buy rating, it increased its target to $42.50 implying 36% share price growth from yesterday’s close of $31.21.

Now Bell Potter also upgraded its earnings per share estimates by 2-3%, given June quarterly profit rose more than expected to US$104.1 million, well and truly  smashing through expectations.

And thirdly, a sell following IOOF Holdings (ASX:IFL) delivering disappointing quarterly results that raised a number of issues in their report that were not properly addressed, Bell Potter reiterated IFL as a sell, dropping its target to $4.20.

I’m Jessica Amir, thanks for your company, happy trading, stay safe.

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