Viewpoint: Bullish
US indices experienced a choppy session overnight as the S&P500 tests the psychological 4000 area, we feel a meaningful break above here is likely to see a sharp rally towards the next resistance area around 4150. The catalyst overnight for the gains was another weak inflation print from the producer price growth i.e. PPI. which measures wholesale prices. Ongoing signs of cooling by inflation are slowly starting to ignite the tech stocks which we believe is likely to be ongoing.
CBA +1.31%: Out with a quarterly trading update today that seemed strong on the data provided, noting that not a huge amount of detail is given quarterly. Margins looked to be sector leading and while they don’t give a specific Net Interest Margin (NIM) result for the 3 months, UBS noted their expectations that NIM expanded by >25bps QoQ, stronger…
Mineral sands operator and future rare earth business ILU has bounced extremely well over recent weeks more than recovering the losses post its result following concerns around global growth i.e. China has released this pressure valve to a degree.
IGO has been a standout performer through 2022 having rallied +44% year to date, this is a great company but it has arguably run too hard this year. IGO is another candidate where MM can see itself trimming its 5% holding as the stock feels far closer to its destination, plus it no longer scans as cheap in our opinion.
Excuse the pun but what a difference a week makes, SFR has surged ~30% from its recent low accelerating higher on the weak $US and positive noises from China. We can see further upside from this high beta copper play, especially with BHP still looking to take over OZ Minerals (OZL), but we are likely to lighten our holding into further strength assuming it unfolds into 2023.
Fortescue has struggled through 2022 as Covid lockdowns in China have helped weigh on the price of iron ore and hence FMG although in an even more impressive fashion than BHP, it has been churning out fully franked dividends over recent years. FMG delivered a solid operational update at the end of October despite some obvious cost pressures, and with China now appearing more ‘pro-growth’ we have become interested in direct iron ore exposure having avoided it this year.
BHP has been trading in the same significant $17 trading range for around 2-years although there have been 3 major swings over that period. We are fans of the “Big Australian” but like all stocks, there are levels where we would rather be on the sell side of the equation, especially for cyclical companies.
US stocks fell away late this morning led by the tech-based NASDAQ which dropped by -1%, while the Dow after spending most of the day in positive territory closed down -211 points. Considering our target for 2022 is only 6% away we expect plenty of more choppy sessions before the turkeys hit the Christmas table.
The ASX200 slipped -0.2% on Monday after testing our much-flagged 7200 target level in the morning, the simple problem was the broad market was soft with only 30% on the main index managing to close in positive territory. On the sector front, only the Energy & Materials Sectors closed higher while the tech stocks in particular disappointed…
The Aussie rallied last week supported by a weak $US and surging commodity prices, we need a clear break of 70c to get very bullish but for now, the path of least resistance feels like it’s on the upside.
