21st February 2024

Morning Bell - Grady Wulff

Over in the US today on this holiday shortened trading week, stocks closed Tuesday’s session lower across the board led by the tech-heavy Nasdaq declining 0.92% on investor fears of overvaluation of the tech juggernaut stocks including Amazon, Microsoft and Nvidia which is set to report after the closing bell. The Dow Jones fell 0.17% on Tuesday while the S&P500 ended the day down 0.6%.

It was a big day for M&A activity in the US on Tuesday as Capital One Financial agreed to purchase Discover Financial Services in an all-stock deal worth $35.3bn, while Walmart announced it will acquire TV maker Vizio for $2.3bn.

In Europe overnight, markets closed mostly lower across the region as investor sentiment fell on fears of a prolonged period before rate cuts both in Europe and over in the US. The STOXX600 fell 0.1%, ending a four-day winning streak, Germany’s DAX lost 0.14%, the French CAC rose 0.34% and, in the UK, the FTSE100 ended the day down 0.12%.

The ASX200 has had a pretty muted week this week with the key index closing Tuesday’s session down 0.08% as a selloff in materials and energy stocks offset the communications services sector rallying 1.5%.

It’s week three and we are in the heart of reporting season locally this February, with 95 companies having reported of which, 36 beat expectations, 33 met expectations and 26 missed expectations.

Australian mining giant BHP also weighed on the local bourse this week after reporting its lowest half-year profit in eight years, with the company blaming its struggling Aussie nickel and some overseas iron ore assets weighed on the first half performance.

Also weighing on local iron ore miners yesterday was mounting concerns over the demand outlook in China as it continues to struggle making material growth progress post pandemic, especially on its struggling property sector front.

On the banking front, Australia’s competition regulator overturned an initial ruling against a merger between ANZ and Suncorp banks yesterday to approve the merger after ANZ and Suncorp successfully appealed the original ruling. The ACCC found the deal would not hurt competition in the home, business or agribusiness lending in Australia, especially as Macquarie continues to go from strength to strength alone in the home lending market, now accounting for 5.3% of the home lending market at the end of 2023. Shares in ANZ fell 2.7% on the news while Suncorp shares rose 5.34% on Tuesday.

And further turbulence hit Star Entertainment shares yesterday with the price plunging 26% on news that Star had delayed the release of its financial results amid the surprise announcement that the Independent Casino Commission is set to appoint Adam Bell SC to run the second inquiry into the casino and gaming group, following his findings in the first inquiry that Star was not fit to hold a casino licence at its NSW casino.

What to watch today:

  • Ahead of the midweek trading session here in Australia, the SPI futures are expecting the ASX to open down 0.28% following the red run on Wall St overnight.
  • On the commodities front this morning, oil has dropped 1.43% to trade at US$77.32/barrel, gold is up half a percent at US$2027/ounce and iron ore is up 1.17% at US$129.50/tonne.
  • AU$1.00 is buying US$0.66, 98.22 Japanese Yen, 51.89 British Pence and NZ$1.06.

Trading Ideas:

  • Bell Potter has downgraded the rating on Solvar (ASX:SVR) from a buy to a hold and slightly reduced the 12-month price target on the Australian consumer finance company following the release of first half results showing lower profit, the extent of weakness in New Zealand and higher bad debts.
  • Trading Central has identified a bullish signal on Eagers Automotive (ASX:APE) following the formation of a pattern over a period of 112-days which is roughly the same amount of time the share price may rise from the close of $14.84 to the range of $16.90 to $17.40 according to standard principles of technical analysis.