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Morning report

What Matters Today: China’s upbeat industrial output offers a glimmer of hope to Beijing

The big news yesterday was China’s industrial production, which came in stronger than expected, rising 7% year on year in February, beating the anticipated 5% and making it the fastest pace of growth in two years. Notably, the markets are very negative towards China; hence, any ongoing signs of improvement are likely to see a dramatic move in some related areas of the market. Even retail sales came in better than expected yesterday, printing 5.5%, above economists’ forecasts of 5.2%, with online sales up an impressive +14.4% to start the year. With fixed asset investment up 4.2%, more than the expected 3.2%, it was a rare good day for the Chinese economic outlook.
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what matters today Market Matters
Morning report

Macro Monday: Dr Copper surges higher. Can Iron Ore mirror the move?

Copper was the shining light in an otherwise tough week for local stocks, with the industrial metal surging almost 6%, testing 12-month highs in the process. Ironically, the advance coincided with iron ore making fresh 7-month lows, with the divergence between two of Australia’s most important exports certainly garnering plenty of attention. Iron ore has slipped over 30% since early January as Beijing fails to lift hopes around the health of their construction industry, leading to loss-making steel mills buying less ore and creating stockpiles at Chinese ports.
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what matters today Market Matters
Morning report

What Matters Today: Do we like Macquarie’s sell call on the banks?

Yesterday, Macquarie came out with a rare call that it’s time to sell the “Big Four Banks,” and they’ve also advised clients to be underweight in everything! The crux of their view is that the current high valuation of the Australian banks isn’t justified by the fundamentals. They even doubled down on Westpac (WBC), moving from outperform to underperform; by definition, they must think their own shares are a sell. Last week, the banks hit multi-year highs, led by Commonwealth Bank (CBA), which posted all-time highs; hence, it's not hard to comprehend some kneejerk profit-taking.
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what matters today Market Matters
Morning report

What Matters Today: Can the Telcos find some love in 2024 with Optus on the chopping block?

Overnight, the AFR led with the story that Singtel was in advanced discussions to sell Optus, Australia’s second-largest telecommunications group, to Toronto-headquartered private equity giant Brookfield, a major deal worth around $16-18 billion. Singtel have denied the rumours, but often where this is smoke there is a fire. After over two decades of ownership, Singtel will pass the reins over to private equity, which will have to deal with regulators for Australia’s second-largest telco. It will be interesting to see how Brookfield plans to turn around Optus after its recent outage and cyber-attack issues.
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what matters today Market Matters
Morning report

Portfolio Positioning: Chinese stocks look constructive; will miners follow suit?

For most local investors, the million-dollar question is what impact the ongoing Chinese stimulus will have on local stocks, particularly the Resources Sector. Our opinion is not a great deal if they fail to lift economic growth, but financial markets should enjoy a period of optimism at least once in 2024, which is likely to lift resources with a number having struggled through 2024, e.g. BHP Group (BHP) -15.1%, RIO Tinto -14.8%, Fortescue (FMG) -13.7%, and South32 (S32) -12.3%. Iron ore is the standout theme across the underperforming heavyweights, with the bulk commodity trading around a five-month low as steel mills cut production as construction continues to struggle.
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what matters today Market Matters
Morning report

What Matters Today: Should we be worried as stocks get the “wobbles”?

From conversations we had yesterday, it was clear that one large down day was enough for investors to question the valuation of the local market around the 7700 level. Our answer has been consistent since the market spiked under 7000 in late 2023 – “don’t look at the index; focus on individual stocks and sectors” because overall selling across the market often provides excellent opportunities to accumulate quality stocks. We believe the macro backdrop will support equities through 2024 as we frequently hear and see, not all boats will float as one.
Read more
what matters today Market Matters
Morning report

Macro Monday: Golds trying to upstage equities

Gold advanced again on Friday, taking it up +5.6% year-to-date and posting fresh all-time highs in the process. Increasing optimism that the Fed will start cutting rates in 2024 has been the backbone for advancing precious metals, but the early foundations were laid in China. The gold market turned higher three weeks ago, with the $US2,200 level now only one good day away. The move has danced to the same tune as most risk assets, from equities to crypto, with algorithmic momentum traders set to become increasingly interested as gold rallies on the upside. However, it’s been a tough journey for investors in gold stocks, who have largely struggled over the last year while the precious metal rotated around the $US2,000 area.
Read more
what matters today Market Matters
Morning report

What Matters Today: Is it too late to chase Discretionary Retailers?

At MM, we missed the rally in discretionary retailers, but what about now? Arguably the only thing worse than missing a strong move is being sucked into a FOMO trap and buying just before it pulls back. Ironically, several analysts have fallen on the sword only to see some decent corrections unfold over recent weeks, but as we saw last night, rates are set to fall, and the Consumer Discretionary Sector is highly correlated to bonds, i.e. if the sector remained strong with high rates, it's not surprising to see it rally higher with markets looking for the Fed to start cutting in June. Some of the takeouts across the sector from the recent reporting season provide us with some clues as to what comes next.
Read more
what matters today Market Matters
Morning report

What Matters Today: If rates are going to fall, won’t insurance stocks follow suit?

The insurance sector discussed in an MM report last November has largely followed our expected path, albeit in a slightly more positive fashion, i.e. cautiously bullish. The performance of the major companies in the local sector has generally been strong, with three of the names up ~10% or more year-to-date. However, interest rates are only one piece of the puzzle as premiums continue to rise well ahead of inflation, e.g. in February, Suncorp (SUN) slugged consumers with a 16% price increase on car insurance in an effort to increase margins, while this week has been all about private health premiums rising by over 3%, the largest annual increase since 2019 - it's not surprising that an increasing number of Australians are experiencing financial stress.
Read more
what matters today Market Matters
Morning report

Portfolio Positioning: Is Gold set to be the next Bitcoin?

US indices fell for a second day as profit-taking washed through the “Magnificent Seven”; the NASDAQ closed down -1.8% while the Russell 2000 (small cap) index fared better, finishing down just -1%. Apple Inc (AAPL US) tumbled 2.8% after reports that iPhone Sales had plunged 24% in China, while Tesla (TSLA US) -3.9% and Microsoft (MSFT US) -3% also struggled, both actually underperforming Apple. Outside of technology, Target Corp (TGT US) popped +12% as another retailer beat earnings estimates. Even Bitcoin experienced some profit-taking overnight after posting a fresh all-time high above $US69,000. The cryptos intraday ~10% swing demonstrated it's not an asset class for the faint-hearted.
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MM remains cautiously bullish toward the ASX200 around the 7700 level
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PDN
MM is long and bullish towards PDN over the coming months
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MFG
MM remains bullish MFG short to medium-term
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GMG
MM remains long and bullish on GMG
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NDQ
MM remains cautiously bullish towards US stocks
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MM is now neutral towards crude oil
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IZZ
MM is bullish towards Chinese equities through 2024
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SFR
MM is bullish towards SFR through 2024
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IGO
MM likes IGO under $8 short-term
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S32
MM is bullish towards S32 over the coming months
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Latest Reports

Morning report

Macro Monday: Dr Copper surges higher. Can Iron Ore mirror the move?

Copper was the shining light in an otherwise tough week for local stocks, with the industrial metal surging almost 6%, testing 12-month highs in the process. Ironically, the advance coincided with iron ore making fresh 7-month lows, with the divergence between two of Australia’s most important exports certainly garnering plenty of attention. Iron ore has slipped over 30% since early January as Beijing fails to lift hopes around the health of their construction industry, leading to loss-making steel mills buying less ore and creating stockpiles at Chinese ports.

what matters today Market Matters
Morning report

What Matters Today: Do we like Macquarie’s sell call on the banks?

Yesterday, Macquarie came out with a rare call that it’s time to sell the “Big Four Banks,” and they’ve also advised clients to be underweight in everything! The crux of their view is that the current high valuation of the Australian banks isn’t justified by the fundamentals. They even doubled down on Westpac (WBC), moving from outperform to underperform; by definition, they must think their own shares are a sell. Last week, the banks hit multi-year highs, led by Commonwealth Bank (CBA), which posted all-time highs; hence, it's not hard to comprehend some kneejerk profit-taking.

what matters today Market Matters
Morning report

What Matters Today: Can the Telcos find some love in 2024 with Optus on the chopping block?

Overnight, the AFR led with the story that Singtel was in advanced discussions to sell Optus, Australia’s second-largest telecommunications group, to Toronto-headquartered private equity giant Brookfield, a major deal worth around $16-18 billion. Singtel have denied the rumours, but often where this is smoke there is a fire. After over two decades of ownership, Singtel will pass the reins over to private equity, which will have to deal with regulators for Australia’s second-largest telco. It will be interesting to see how Brookfield plans to turn around Optus after its recent outage and cyber-attack issues.

what matters today Market Matters
Morning report

Portfolio Positioning: Chinese stocks look constructive; will miners follow suit?

For most local investors, the million-dollar question is what impact the ongoing Chinese stimulus will have on local stocks, particularly the Resources Sector. Our opinion is not a great deal if they fail to lift economic growth, but financial markets should enjoy a period of optimism at least once in 2024, which is likely to lift resources with a number having struggled through 2024, e.g. BHP Group (BHP) -15.1%, RIO Tinto -14.8%, Fortescue (FMG) -13.7%, and South32 (S32) -12.3%. Iron ore is the standout theme across the underperforming heavyweights, with the bulk commodity trading around a five-month low as steel mills cut production as construction continues to struggle.

what matters today Market Matters
Morning report

What Matters Today: Should we be worried as stocks get the “wobbles”?

From conversations we had yesterday, it was clear that one large down day was enough for investors to question the valuation of the local market around the 7700 level. Our answer has been consistent since the market spiked under 7000 in late 2023 – “don’t look at the index; focus on individual stocks and sectors” because overall selling across the market often provides excellent opportunities to accumulate quality stocks. We believe the macro backdrop will support equities through 2024 as we frequently hear and see, not all boats will float as one.

what matters today Market Matters
Morning report

Macro Monday: Golds trying to upstage equities

Gold advanced again on Friday, taking it up +5.6% year-to-date and posting fresh all-time highs in the process. Increasing optimism that the Fed will start cutting rates in 2024 has been the backbone for advancing precious metals, but the early foundations were laid in China. The gold market turned higher three weeks ago, with the $US2,200 level now only one good day away. The move has danced to the same tune as most risk assets, from equities to crypto, with algorithmic momentum traders set to become increasingly interested as gold rallies on the upside. However, it’s been a tough journey for investors in gold stocks, who have largely struggled over the last year while the precious metal rotated around the $US2,000 area.

what matters today Market Matters
Morning report

What Matters Today: Is it too late to chase Discretionary Retailers?

At MM, we missed the rally in discretionary retailers, but what about now? Arguably the only thing worse than missing a strong move is being sucked into a FOMO trap and buying just before it pulls back. Ironically, several analysts have fallen on the sword only to see some decent corrections unfold over recent weeks, but as we saw last night, rates are set to fall, and the Consumer Discretionary Sector is highly correlated to bonds, i.e. if the sector remained strong with high rates, it's not surprising to see it rally higher with markets looking for the Fed to start cutting in June. Some of the takeouts across the sector from the recent reporting season provide us with some clues as to what comes next.

what matters today Market Matters
Morning report

What Matters Today: If rates are going to fall, won’t insurance stocks follow suit?

The insurance sector discussed in an MM report last November has largely followed our expected path, albeit in a slightly more positive fashion, i.e. cautiously bullish. The performance of the major companies in the local sector has generally been strong, with three of the names up ~10% or more year-to-date. However, interest rates are only one piece of the puzzle as premiums continue to rise well ahead of inflation, e.g. in February, Suncorp (SUN) slugged consumers with a 16% price increase on car insurance in an effort to increase margins, while this week has been all about private health premiums rising by over 3%, the largest annual increase since 2019 - it's not surprising that an increasing number of Australians are experiencing financial stress.

what matters today Market Matters
Morning report

Portfolio Positioning: Is Gold set to be the next Bitcoin?

US indices fell for a second day as profit-taking washed through the “Magnificent Seven”; the NASDAQ closed down -1.8% while the Russell 2000 (small cap) index fared better, finishing down just -1%. Apple Inc (AAPL US) tumbled 2.8% after reports that iPhone Sales had plunged 24% in China, while Tesla (TSLA US) -3.9% and Microsoft (MSFT US) -3% also struggled, both actually underperforming Apple. Outside of technology, Target Corp (TGT US) popped +12% as another retailer beat earnings estimates. Even Bitcoin experienced some profit-taking overnight after posting a fresh all-time high above $US69,000. The cryptos intraday ~10% swing demonstrated it's not an asset class for the faint-hearted.

what matters today Market Matters
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