Marcus Today Free Podcast

THE MARCUS TODAY MORNING MEETING – Monday 23rd May

May 23, 2022 Marcus Today
Marcus Today Free Podcast
THE MARCUS TODAY MORNING MEETING – Monday 23rd May
Show Notes Transcript

Anyone who has been in broking will tell you that the Morning Meeting is how all brokers start the day.  The format is to have a quick look at the overnight markets, consider what's coming up in the day ahead, hear from the analysts, share ideas and get set up for the day's stock market activity

Why not sign up for a free trial? Get access to expert insights and independent research and become a better investor.

DISCLAIMER:

Marcus Today offers information that is only general in nature. It does not take into account your personal financial situation, needs or objectives. Nor does it take into account the financial needs of any specific person. You should consider your own personal financial situation and needs or seek financial advice before making any decisions based on this information. For more information please see our Financial Services Guide.

*PLEASE NOTE: Transcripts are autogenerated and may contain errors, especially Stock Codes and Names.

SPEAKERS

Henry Jennings, Tom Wegner, Chris Conway, TEAM, Layton Membrey, Marcus Padley, Ben O'Leary

 

Ben O'Leary  00:00

Good morning everyone Monday the 23rd of May back for another big week. Henry, what do we miss over the weekend? 

 

Henry Jennings  00:21

Well, hi, Ben. What we missed over the weekend I guess on the Facebook was not a lot when you look at the scores on the doors, but underneath as usual, a little ducky was paddling away quite furiously. The Dow Jones closed up nine points, but at one stage it was down 617 points which put it back into an official bear market for a late rally save some blushes. The NASDAQ was down only 34 Similar situation then there's s&p 500. Post up one so pretty much unchanged. But we did see some moves in commodities Brent crude was up point eight gold up a smidge as well at point two of a percent base metals not doing very much apart from lead, but iron ore prices are better. And there is a focus today on iron ore stocks and markets. We'll talk more about those as China cut its rates on Friday. But generally, I guess the topic of conversation was the federal election on Saturday. And markets have taken that very much in their stride this morning with a slight positive bias, I guess because nothing really was put to the electorate in terms of financial matters unlike last year, so a slight positive bias to the markets but cautious I think remains the watchword. 

 

Ben O'Leary  01:25

Very good. Thank you, Henry. Tom, how is that all flowing in today?

 

Tom Wegner  01:29

Thank you, Ben. Well, the SX 200 is off to a better start ahead of what the futures had indicated. And that was before the election results. There's been a bit of chatter in the news wires about the influence that's having on the market. But as we talked about last week, it's all about the clarity and certainty that that's provided. And there's one little fact that I saw this morning but all odds has risen in the 15 trading days following every federal election since 1998. So whether that's due to clarity or history and everyone feeling the same thing the miners and property stocks the most improved tech and healthcare slipping into negative territory elders is up 7.5% as half your profit beat consensus, chemicals and fertiliser business Intertek pivot, IPL is jumping 4% on use of the restructure and record half year results and baarle is up a touch on speculation. It's going to cut hundreds of jobs before June 30. Thank you Ben.

 

Ben O'Leary  02:27

Very good, thank you, Tom. Layton, anything interesting coming out of the brokers this morning.

 

Layton Membrey  02:30

Thank you, Ben. I'm having a look at igvault this morning UBS has upgraded them to a buyer following the recent share price retreat and an announcement of consistent first production of battery grade lithium hydroxide. UBS says that this is a key de risking event for the TL e a joint venture and the target price is $12.15 generally implies about a 4% upside there and also looking at BW X management provided an update for long term earnings margin guidance, which was 22% ahead of consensus estimates and the brokers are all bullish there. We've got buyer recommendations from Citi and UBS and an outperform recommendation from a quarry. Average target price is $2.57, which implies a 90% upside. Thank you Ben.

 

Ben O'Leary  03:15

Thank you, Layton. Christopher. What are you doing in trading this morning? 

 

Chris Conway  03:19

Thank you Benjamin's First up, we'll just talk about Tom's already covered up quite nicely elder's and IPL. Both of those stocks are part of my agriculture theme trade. And we'll see headlines over the weekend world has 10 weeks of wheat supplies left in storage. So it's still a pertinent and hot theme at the moment. There's been headlines in the past about fertiliser shortages, obviously rising transport costs, all feeding into good results for elders and IPL today. And as I say they're both part of my agriculture thing trade so nice to see them both doing pretty well. Out of the day this morning is brain chip. It is quite an interesting chart though. And I think the chart tells a story and an often charts tell the story of these type of stocks that are at the more speculative end of the market. It was very much a market darling there for a while it rallied hard into two bucks. And then since about the start of the year traded back and along sort of downtrend, a long downtrend back to sub $1. But just in the last couple of weeks, it's starting to come to life again, it's trading around $1.17. Or at least it was as of the close on Friday. It's sort of a rounding base pattern. And it just looks as though after a long consolidation period it's about to really take off and that's because we've seen the price action turn higher and the volumes more importantly as well very important when you're looking at these speculative stocks more and more people interested in when the volume is going up and that's what we see now. So we see a rising price and rising volume and the end of this rounding base time if we can just break that 123 neckline dollar 23 And then this one could be off to the races. So nice little chart set up there.

 

Ben O'Leary  04:48

A interesting things to keep an eye out for as always, Chris, thank you Henry back to you for Henry's take today. What are you writing about?

 

Henry Jennings  04:54

In Henry's case, they just the normal Monday stuff in terms of the US check in just on fear and greed and the GDP now also looking today, I guess at the impact of the election, which seemed to be pretty minimal for the market, and I'm sure Marcus will talk more about those. And just some links in today about ask the analysts which was a really good session on Friday night and the recording there and doing the call today with Kashi and other 10 stocks and now ETFs, which is always lovely.

 

Ben O'Leary  05:24

Very nice, short and sweet. Thank you, Henry. Marcus back when this morning What are you up to today?

 

Marcus Padley  05:29

Yes, thanks Ben Henry, who you doing the call with? With Koshe?

 

Henry Jennings  05:33

I am doing the call with Koshe. I think it's going to be either Garraf so the or Mason One of them's dropped out with flu and but yes, someone's got the flu. So I've stepped in. So I've got 10 stops to look at in the next 20 minutes to try and work out whether I am like them or not.

 

Marcus Padley  05:49

Right. Thanks, Ben. Yes, I am. Hi, I've listed in the strategy section today uh, signs of the top things we would be watching to try and assess when the bottom is going to come which is clearly not yet there are some signs of our market bought me a little bit there was a daily RSI buy signal the other day. So that's one of the things we'd be watching is market charts. But mostly, I think the NASDAQ if you'll if you look at the strategy piece, you'll see the NASDAQ is in freefall still little bounces but absolutely no sign of a bottom there at all. The other issue, I think for Australia would be sector charts, you don't really look at the market chart in Australia because there are two very large diverse sectors, banks and resources and they do separate things. There is some signs of a bottom in resources. We'll get back to that later. The other indicates I'd be watching a sharp improvement in the VIX volatility index, which hasn't happened yet. Also the Aussie dollar which is a bit of a barometer of the currency markets views about growth prospects that is bottoming out a little bit which is slightly positive and bond yields although they are coming off the top but it used to be a great indicator for the market. When bond yields went up on inflation paranoia, the market went down. Now bond yields are going down on growth concerns and the market is going down. So bond yield indicates a little bit confused at the moment. The other thing I would watch as a bit of a laugh is clean, which has a remarkable correlation with the NASDAQ and as such acts as a crazy crazy barometer of market sentiment. I wouldn't pay too much attention but there's no sign of that resurrecting itself yet. So for now, the trend has yet to materialise. Are we in a big downtrend? Or are we seeing a great buying opportunity, I'm more inclined to think we're building towards the latter, there's no need to guess. And quite honestly, anyone's opinion including ours doesn't really matter. At this point. You don't have to guess ahead of time when the bottom will come. All you need to do is check daily for the evidence of some sort of technical bottom and run with the bounces until they end which is trading and if they don't end well, you can claim you caught the big low and turn your trades into investment. So again, reacting not predicting at this point. And there's no reason at this point to predict a market bottom with the current trends. The one thing that is rather interesting at the moment is the COVID curve on mainland China which has shown the typical profile of a breakout and they are coming down the other side now cases are diminishing quite rapidly. You can see as well the chart Tom put this in of the Chinese market it does appear to have bottomed it's seven and a half percent off the bottom. There's been a couple of technical bicycles but there is some relief in China which is good for our resources and throws up the question whether we should be buying resources other things the US strategists are downgrading GDP numbers and market forecasts. As you'll see in our pre market six us strategist slash their year end calls for the s&p 500 and the gap between the highest and lowest it's 37%. In other words, nobody knows and the big gap in guesswork means we are in a period of uncertainty as if we didn't know that the US has GDP numbers on Thursday will be interesting seeing as growth is a feature at the moment or a driver at the moment. We also have the election result not moving the stock market. We also see this morning the CBA perhaps the first economist off the rank saying that whilst there may be some changes to aged care, childcare, housing and health and a focus on climate change, these areas do not shift the dial for our economic forecast and that would probably sum up the election impact on the market. It hasn't really is unlikely to have one and hasn't really this morning had an impact at all. And lastly JP Morgan has talked about the possibility that balanced mutual funds have to buy 34 to $56 billion of equities by the end of May. In other words, we could see a good end of the month we will see if that helps the bottom in summary there would be waiting some signs that the market is technically bottom to me but haven't gotten there yet.

 

Ben O'Leary  09:57

Great stuff as always markets and as you mentioned you do You have an idea of the dying there as the iron ore stocks and that is our question of the day, are you buying iron ore stocks, I might throw straight back to you markets. If you've got anything more to add to that for us the rest of the team.

 

Marcus Padley  10:10

The obvious reason to say that is because of the bounce in iron ore and the Chinese economic prospects, the statements from the Chinese over the weekend or on Friday in particular, that they would cut the mortgage rates, mortgage reference rate property sectors drag China down, and they are trying to help in that department that was taken quite well. You do also have COVID cases coming off got the iron ore price having a bit of a bounce on Friday, but disappointed by the follow through today. bhp at 1% rail up point seven. So I know some of you who have an impatience and a higher bid profile, have a few excuses here to have a go at resources stock spot. I think when that buying comes in the whole market, there's no rush, there was nothing really compelling about or expecting a sharp trade to the upside in resources. So take your time for investors. I'd still be watching the market and resources not getting too optimistic, yeah.

 

Ben O'Leary  11:07

Very good. All right, rest of the team Layton?

 

Layton Membrey  11:09

Yeah, as Mark was saying the narrative over in China seems to be starting to change. So that's obviously a good sign and they are trading off the top a little bit. So I think it's not a bad time to be looking at buying. 

 

Ben O'Leary  11:22

Very good, Tom?

 

Tom Wegner  11:23

The same points as markets the same in China is looking a lot better. Iron ore has held up relatively well given all of the lock down. So what that told me is that the market is looking through that as a temporary issue and Layton was talking about they've come off the top a little bit I know is holding up stimulus out of China, a couple of good tailwinds for them. 

 

Tom Wegner  11:42

Henry?

 

Henry Jennings  11:42

Well, as you probably know, I'm a bit of resources fan have got quite a few lithium stocks in the small cap portfolio and also mount Gibson as well. The great thing about this resource boom, and let's be under no illusions, we are in the middle of a resource boom, I think in Australia still is that the Aussie dollar is 70 cents. Now last time we saw iron ore going through the roof. And I know it's not going through the roof here obviously at the moment because of China. But the last time we saw a resource boom, the Aussie dollar was $1.10. Now 70 cents is a very, very low level for a country that is based in commodities. And if you extract the Aussie dollar from that and put it into iron ore and all these other terms, it's a pretty elevated price. These guys are making off like bandits at the moment. coal prices, oil prices, iron ore prices in Aussie dollars, other commodities as well. We are doing pretty well on the resource front. So I've been long it for a while you look at lithium quarry put yet another report out today for lithium. And that was quite stunning. I've got to say putting in the spot price to Hilbre I came up with a $14 valuation. Now that's just clearly as they say in the castle dreaming but even so it just shows the leverage that some of the lithium stocks and I guess some of the iron ore stocks and some of the other resource stocks have got to these high spot prices that we're seeing. I know they've come off but certainly for me resources are still the place to be especially in an inflationary environment and the Aussie dollar at 70 cents. It should be higher than that. Let's face it, but it's not because of the strength of the US because people are flying to quality and safe havens and that's dragging money into the US dollar but yeah, as far as I know stocks go I am long mountain Gibson only a small amount I took some profits earlier...

 

Marcus Padley  13:20

It's worth mentioning as well, Henry that from the point of view in the resources boom, the reason went off like BillyOh was because if the resources sector, people get optimistic globally about resources, they come to Australia and Canada to buy shares. And what they get is a commodity currency, the Aussie dollar which goes up if commodity prices go up, and they buy the shares. So with a low Ozzie dollar, the shirt stocks like BHP and Rio and for the skew are cheap from a US point of view. And if they buy them and get it right, they get a currency kicker and they get the share price kicker and that's why our resources sector was driven in 2005. I remember going to New York and I have a friend in Brooklyn who is a Citibank banker. And when I went over there in 2005, he was talking about Fortescue Metals as if he knew it and went back again in 2000 Whatever it was 15 and he said oh no, no, no that was so that I don't know anything about now that was so 2005 And the point being is that we come on to the radar internationally when commodities rally and it's an the currency gives us a kicker as well as the share prices and at the moment we're actually gonna position overseas investors to take an interest with the low Aussie dollars so yes, Aussie dollar very important to our resources share price.

 

Ben O'Leary  14:40

Yep, I think that wraps it up pretty well. Inflation Aussie dollar on the big picture, macro level down resources remain one of the better places my opinion so don't say why not. That wraps us all up today. Thanks, guys, for your time on today. We'll see you tomorrow. Thank you. Thank you.

 

TEAM  14:54

Thank you.