Morning Bell 5 August

Geoff Beeston
August 5, 2020

The Aussie share market is eyeing a fall of 0.6% at the open, as traders bid up stocks in global markets on the hope of a second Federal Reserve stimulus package.

The major exchanges in the U.S. all pushed higher overnight with the S&P500 up 0.36%, it is now less than 3% off its pre-pandemic record highs in February this year.

Companies reporting today:

  • ALE Property Group (ASX:LEP) reports its full year results today.

Local trading ideas:

  • The Funeral Services Provider Invocare (ASX:IVC) is rated by Bell Potter as a buy. As a market leader in the sector, Invocare has faced significant headwinds from COVID-19 related gathering restrictions. IVC reports its H1 2020 results on the 19th of August. Its major competitor, Propel Funeral Partners (ASX:PFP) provided the market with a trading update back in May, which showed an increase in their average revenue of 8%. Invocare has been sold off heavily since stage 4 COVID-19 restrictions have come into place in Victoria and is now trading at a near 7 year low.
  • Life360 (ASX:360) is a mobile app in the U.S. and is available internationally. The midcap is rated as a buy by Bell Potter. Like Afterpay (ASX:APT), 360 has strong network effect characteristics, which is why Bell Potter expects the next catalyst for the stock will be when Life360 reports on August 20.
Read Transcript

Good morning this Wednesday 5th of August.

I’m Geoff Beeston, a market analyst with Bell Direct.

More evidence overnight of the effect of co-ordinated government and central bank stimulus programs on global markets, as traders bid up stocks on the hope of a second Fed Reserve stimulus package announcement.

The U.S. 10-year bond rate is now hovering near record lows of 0.51%.

The major exchanges in the U.S. all pushed higher overnight, with the S&P500 up 0.36%.

The S&P500 is now less than 3% off the pre-pandemic record highs in February this year.

The U.S. dollar continues to weaken against the Aussie and our local market SPI futures are pointing to a 0.6% decline when our market opens this morning.

The U.S. market appears fully priced and unemployment figures due to be released tomorrow night will put hard economic data back in the frame.

In the U.S., Insurer American International Group shares fell heavily down 7.53% after posting a US$7.9 billion loss.

The result was driven by higher catastrophe losses and lower private equity returns.

This result will shine a light on trading in the insurance sector today on the ASX.

Key stocks to watch being ASX20 heavyweight Insurance Australia Group (ASX:IAG) and ASX50 global insurer, QBE Insurance (ASX:QBE).

In London, the multinational beverage company, Diageo, fell nearly 5% after the closure of pubs and bars reduced top line sales and revenue.

Turning to commodities, with the exception of Copper, base metals held gains supported by a weaker U.S. dollar with Aluminium and Nickel up around 1%.

Precious metals continue to push record highs with December Gold Futures firmly above US$2,000 per ounce.

Silver futures also continue to track gold closely at records highs.

Oil prices were higher with Brent futures up around 0.5% to US$44.36 a barrel despite initial confusion following a huge explosion at a port in Beirut which appears to be a storage facility for ammonium nitrate.

The Iron ore spot remained rock solid at US$117.88 a tonne.

What to watch, trading ideas from Bell Potter.

One stock worth some consideration is Funeral Services Provider, Invocare (ASX:IVC).

As a market leader in the sector, Invocare has faced significant headwinds from Covid related gathering restrictions.

This stock reports on Wednesday 19th August.

Its major competitor, Propel Funeral Partners (ASX:PFP) provided the market with a trading update back in May which showed an increase in their average revenue of 8%.

Invocare has been sold off heavily since stage 4 restrictions have come into place in Victoria and is now trading near 7 year lows.

IVC is rated by Bell Potter “Buy”.

Turning next to a midcap which should be on radar, Life 360 (ASX:360).

Life 360 is a mobile app in the United States and is available internationally.

It provides family and groups with communication, location sharing information and driving safety.

A week ago, Life 360 delivered its maiden positive quarterly cash flow update.

This means that the company now has scale and is breakeven. Like Afterpay (ASX:APT), Life 360 has strong network effect characteristics, is researched by the same Bell Potter analyst as Afterpay and Bell Potter expects the next catalysts for the stock will be when the company reports on August 20.

Bell Potter rate Life 360 as “Buy”.

Thank you.

Close Transcript

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