Morning Bell 6 October

Jessica Amir
October 6, 2020

Well after the ASX ended 2.5% higher yesterday, its best day since June 16 ahead of the budget boost. The Aussie market is likely to lift 0.4% today.

U.S. President Donald has been released from hospital and ahead of the news, U.S. markets rallied. Adding to that positive injection, U.S. lawmakers voted in favour of a $2.2 trillion Democratic coronavirus stimulus package. It now needs to pass through the Republican-held Senate to become law.

What to watch?

  • The RBA meets – rates are tipped to remain on hold, with the RBA hinted there is no point in reducing rates as it would only accelerate Aussie’s saving more than spending, something that the pandemic has heighted.
  • The Federal Budget will be handed down this evening – we’re expecting an extension of JobKeeper and JobSeeker, phased tax cuts, and an extra $40 billion in infrastructure.
  • Keep an eye on commodity stocks as the oil price jumped 6% on stimulus hopes to US$39.
  • Gold put on 0.6% to US$1,919.

Trading ideas:

  • Mesoblast, (ASX:MSB) was maintained as a speculative Buy by Bell Potter, with a slimmer $7.00 target, implying 98% growth.
  • Santos (ASX:STO) is a buy stock for UBS, Bell Potter, Credit Suisse, Morgan Stanley. STO is also a Citi buy with a $7.15 target.
  • Wesfarmers (ASX:WES), Orbital Corp (ASX:OEC) and BetMakers Technology (ASX:BET) – are all showing bullish charting signals – according to Trading Central.

 

Read Transcript

Good morning to you, thanks for your company this Tuesday the 6th of October, I’m Jessica Amir, a market analyst with Bell Direct.

Well, the U.S. President Donald Trump has been released from hospital and ahead of that news we saw U.S. markets rally.

Adding to that positive injection last week, U.S. law makers voted in favour of a $2.2 trillion Democratic coronavirus stimulus package but it now needs to be passed through the Republican held senate before it can become law.

What happens there remains to be seen.

Also overnight better than expected economic news in way of U.S. services sector numbers that were stronger than expected and all in all the three major indices rallied the tech heavy Nasdaq up the most 2.3%, erasing the day’s prior losses, the S&P500 also erasing the day’s prior fall up 1.8% and the Dow Jones followed 1.7% high.

Locally today it’s d-day, the RBA meets – rates of course tipped to remain on hold and the reason that I say of course is because the RBA previously hinted that there’s no point in reducing rates as it would only accelerate Aussies saving more than their spending.

Now this is something the pandemic has heightened and not what the RBA wants, they want to boost spending to bolster economic growth.

So with that the federal budget is handed down this evening, we’re expecting an extension of job keeper, job seeker from March to June expecting phased tax cuts and an extension to home builder as well as an extra $40 billion in infrastructure.

So what to watch today well after the ASX ended 2.5% high yesterday that was its best gain since the 16th of June and that was all ahead of the budget boost.

We saw investors heavily rotate into cyclicals after moving out of tech last month.

Now this is something that we’re expected to see for some time as investors favour stocks that’ll benefit from the economic reopening as well as the stimulus, so a bit of a double whammy.

So today the Aussie market is likely to see a lift of 0.4%.

I’d keep an eye on commodity stocks as well, the oil price jumped 6% overnight on stimulus hopes it’s now US$39 and gold put on about 0.6% it’s now US$1,919 an ounce.

As for trading ideas that could be worth a look, stem cell therapy business Mesoblast (ASX:MSB) was maintained as a speculative buy by Bell Potter with a slimmer $7r price target implying about 98% share price growth in a year.

Now the reason for the $0.30 drop in price target by Bell Potter is that the FDA unexpectedly asked for further evidence in MSB’s candidate in treating graft versus host disease in pediatric patients who’ve hadn’t have had a bone marrow transplant.

Now this request was totally unexpected as the FDA completely, well strongly voted in favour in fact 9-1 of the products efficacy.

Previously nonetheless, MSB was maintained as a Bell Potter buy.

Also keep an eye on Santos (ASX:STO) following the all-price rally and of course following the New South Wales IPC’s approval for the Santos Narrabri gas development project.

STO is now awaiting Federal Department of Agriculture water and environmental approval within weeks and then it can start developing the gas project in about 2022.

So STO is a buy stock for UBS, Bell Potter, Credit Suisse,  Morgan Stanley as well STO is also a Citi buy with a $7.15 target.

And lastly keep an eye on Wesfarmer (ASX:WES), Orbital Corp (ASX:OEC) and BetMakers Technology (ASX:BET) all showing bullish charting signals and that’s according to Trading Central.

Now of those Wesfarmers bullish signals indicate that it could rise from yesterday’s close of $45.26 to $50-$51 over the next 22 days as that’s how long Wesfarmers took to form a technical trend that it’s just pulled out from.

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

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