THE MARCUS TODAY MORNING MEETING - Thursday 28th April

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

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Transcript

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

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

Ben O'Leary  00:13

Are you ever on Thursday the 28th of April Christopher, could you please give us the overnight rundown?

Chris Conway  00:18

I'd be happy to begin the Dow closed up 62 points. It was a wobbly session and it did fade into the close. At one stage it was up 457 points but only close up 62 As I said, So evade their spy futures were up 52 points premarket, I just had a look in the index is up 65 points has been up as much as 70. So doing better than what futures were suggesting this morning. Basically things settled down in the US overnight there was a mixed batch of earnings report but we saw a meta report that's the old Facebook report after the bell and shares are up 18 plus percent Mind you the stock is still down 50% within the last year the other moving parts he called for China to step up infrastructure construction and also told officials in Beijing to ensure that China's growth outpaces the US this year. So throwing down the gauntlet that has lit a fire under our commodities heavy market this morning names like bhp Fortescue has minerals up more than 3% So that's what's really driving our gains. But we are getting a bit of a relief rally after the last three sessions the three howlers that saw the market fall more than 350 points and 4.5% So nice to see it's bouncing back and getting some of those losses back.

Ben O'Leary  01:25

Very nice thank you, Chris. Tom what's happening locally? 

Tom Wegner  01:27

Well, as Chris alluded to our market having a good day having a bit of a bounce after two days of selling miners and energy stocks outperforming on the back of those tailwinds out of China a lot of production numbers filtering in Pilbara minerals pls and Sandfire SFR are having some good reactions Paladin EDM and St. Barbara SPM are slipping on their updates defensive names in the consumer staples and gold sectors are easing Kohl's also down on its quarterly sales numbers. They were talking about inflation and having to lift prices Virtus health is in a trading halt pinning a trading update and the conclusion of an independent report into the cap fest offer if you remember they said it might not be in the best interest of shareholders to go ahead with that on the economic front first quarter export import prices are due the US has its advanced economic growth data tonight annualised growth of 1% in the March quarter is expected and that follows a 6.9% expansion in the December quarter. So it'll be interesting to see what comes out of that number tonight reading rather.

Ben O'Leary  02:35

Very good. Thank you, Tom. And do you want to roll stone strategy? While you're there?

Tom Wegner  02:38

I will talking about the bit of a bounce for the market today, the ASX 200 and s&p 500 offering some small technical encouragement heading into the May 4 FOMC. Meeting talking about how it may not be the risk off event it is touted to be we also have iron ore holding up above us $150 a tonne that's ahead of the Chinese meeting, which is adding weight to the idea that it's not a precipitous moment for resources and that's been evidenced today by moves in BHP and Rio both are comfortably there and you can check out the strategy for all of those juicy details.

Ben O'Leary  03:14

Thank you Tom. Layton anything from Brooklyn this morning? 

Layton Membrey  03:17

Thanks Ben. I'll keep it nice and short. flayer Morgan's this morning is coming out with a bit of a cautious approach on the banks is with rate rises looking imminent, they've downgraded and Zed and Westpac both to a whole to target price for a and Zed comes down to $26 from $30. It's 4% below the current share price and the target price for Westpac comes down to $24.20 $9.50. That's just about in line with us Northern Star resources. That's NST was down five and a half percent yesterday but surprisingly upgraded to overweight this morning at JP Morgan the target price of $11 implying a 14% upside and Iluka resources. I'll tell you then upgraded to outperform at Credit Suisse. They're up 1.2% Yesterday on their production update. I don't have any target prices yet this morning. But all right that went up or in the newsletter for that one. Thanks. 

Ben O'Leary  04:09

Good stuff. Thank you. Layton. Henry, how you travelling today?

Henry Jennings  04:12

Morning Ben forgive my croaky voice still very much COVID effective at the moment just writing up this morning quarterly reporting season time So although the big companies it's February and August for small caps, technology and resources, it's all about production reports and quarterly reports which are coming thick and fast. We saw Pilbara out this morning which has given them a little bit of a bounce which is good to see and the lithium stocks generally doing well at the small cap portfolio doing okay remarkably yesterday it held up pretty well which was good should be doing pretty well today written up I had an email from someone I saw actually a Facebook thing as well about EML payments, which had a massive all while I was away funnily enough before I went away there was rumours that private equity. Bain Capital was interested in the stock last year but walked away and given the complication and the moving parts of this stock. It's no one and looking at the last presentation, it certainly was a pretty complicated presentation. The stock is hard just looking at that one as a potential buy. It may have been a little overdone. It's still complicated, but for someone willing to get in there and focus the business and sorted out and trim some of the fat I think it does offer some good opportunities, but also talking about the big Ozzie bhp struck 12 and a bit percent so that is a big ball. It's up three and a bit today, but when you consider it's on a 10% yield, admittedly that's historical, but it is a very generous payer of dividends and is exposed to all the good stuff like iron ore, nickel and copper. And of course, the Aussie dollar has helped as well down below 72. So I quite like bhp here and 3% all up today is a sign of things to come. I think I think that one could recover very much a proxy for the market being 10 or 11% of the ASX 200. But that's about it for me today.

Ben O'Leary  05:48

Good stuff. As always, thank you, Henry and keep resting up need to get back on your feet. Chris, what have you got for us in your trading section today?

Chris Conway  05:55

Somethingslightly different. This morning, I had a look at Whitehaven coal, and there was a quite specific and very aggressive set up there just leveraging a three bar reversal pattern. Anyone who's been following my stuff for a while would know that I liked this particular candlestick pattern. Basically it's a down day a blow off bottom and then recovery the next day and the trigger price this morning I wrote it in the newsletter was at 469. At last check that was to buy it if it went through that price at last check it was at 475. So anyone who's forcibly six as I refresh my screen for anyone who took that on board, hopefully it kicks the target is up towards $5. But it was just a nice short, sharp little aggressive opportunity that I put in the newsletter and hopefully it pays off. And in terms of theme Thursday, there'll be no new themes today. We're just basically looking to manage the themes that we have open at the moment which are interest rates sensitives materials and the agriculture theme trade that we have open as well which is actually held up really well in the current environment and quite defensive of course so that's going okay, the money stuff not so much wins and losses, wins or losses. That's it swings and roundabouts. That's it. 

Ben O'Leary  06:57

Thank you, Chris. Alright, question of the day to finish in light of Facebook's results. Are you on Facebook? And what do you think of its future? Tom?

Tom Wegner  07:06

I I am on the Facebook as it was previously. I only use it for events and for people in our generation or demographic. That's I think the main thing I don't post or read anything or spend any time more than I need to into the into the metaverse it's diving on. I haven't looked into that too much. And that might be a very significant future for it that you know, is not I'm not too excited about getting a house in the metaverse although I might be able to afford property there more than I am in reality...

Ben O'Leary  07:37

Might be the only chance.

Tom Wegner  07:38

Yeah.

Layton Membrey  07:39

Yeah, I'm on Facebook as well. But just like Tom, I don't really use it for that much. I sort of check sporting updates and stuff. I follow a lot of pages on there. So covers that. But I think a fair few people are actually becoming millionaires from selling properties in the metaverse already, so we might be out of luck there. We might not be able to...

Tom Wegner  07:57

Bitcoin millionaires or real?

Ben O'Leary  07:59

Henry?

Layton Membrey  07:59

Yeah it is Bitcoin.

Henry Jennings  08:00

Yes I am on Facebook, I use it a lot. Obviously, as part of Marcus day, we have the Facebook group, which I look after. So it does drag me on to it. As Tom says, it's really good for events and being of a generation that likes to keep in touch with friends around the world is a fantastic thing. For me, I do use it quite a lot. And things like Instagram, which my wife uses a complete rubbish as far as I can work out, they just try and sell you stuff that looks nothing like what happens when it actually arrives at your doorstep. So for me, Facebook still is my go to social media platform. I must admit.

Ben O'Leary  08:33

Chris?

Chris Conway  08:34

I'm much the same as Henry, as I said the other day, I don't understand why Facebook, it has comments and pictures has been broken out into Twitter, which has comments and Instagram, which is pictures, I don't understand why everyone needs 15 Goddamn platforms these days to do the same thing that Facebook does all along what I am saying to like a little bit more Facebook marketplace. So I spent a bit of time trolling that every now and again, it's that little bit dangerous. You can go down a rabbit hole, you could waste a lot of time looking at the place. So yeah, I'm trying to use my social media less and less. You know, I'm sort of like Marcus, I don't I don't write it. I on there a bit.

Ben O'Leary  09:07

Fair enough. And I am the same as someone Layton. And it's mostly events. Messaging is really good, obviously. But the traditional use of Facebook words in photos I think to counter your point, Chris, Instagram does a much better format and platform for images and Twitter does a much better platform for news or commentary. So Facebook is just recording on a quality according to you take my word of yours. I'm sure you would. I think it would need to have a substantial future or need to probably do something real funky with that manifest stuff. Otherwise, I think there's just better spirit will be better solutions for all of the other functions that it does. Okay, but we shall see. Thanks, guys. Thanks, guys.

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

Tom Wegner  00:12

Are you ever on Wednesday? April the 27th another bit of a nasty night in the states overnight. Marcus, what's the blame?

Marcus Padley  00:19

Good morning, Benjamin Henry back today from the Monday Monday festival where he won the talent contest. There is a video going around....

Tom Wegner  00:26

How many people were in it? 

Tom Wegner  00:28

There was, two...

TEAM  00:30

Laughter

Marcus Padley  00:31

Him and Mad Max him personally. No, that was him actually. Anyway, overnight, Wall Street had a big dive down 809 on the Dow Jones and the NASDAQ was the main problem down 3.95% for rubber specific to the NASDAQ reasons. In other words, results alphabet was down 3% Down 6%. After hours on results, UPS was down 3.6% on results. GE was down 10% on results. But the main one was Tesla where the fears are after if you haven't seen that Elon Musk TED talk you probably should watch it and Tesla was down 12% on fears that Elon Musk might sell Tesla shares in order to finance his Twitter purchase. So the NASDAQ down our futures this morning were down 107. But our market worst has been down 85 currently down 60. We did 455 yesterday. So we probably took a bit of pain on the nose but a NASDAQ fall 3.9% That's 22% Off the top is down 14.7% in a month, that's a more than 3% fall and any old members, not old Members, any members who have been around for a while will know the Collins class rule. If the market falls 3% You're supposed to sell half if it falls another 3% You sell the other half anyway, maybe you should sell half we'll come to that in a minute. I've put a lot of charts in the strategy piece today, it does look like January was the big top rather than just a top for the US markets in particular that now does look like a big pivot point when the Fed started worrying about inflation and getting aggressive but for our market not so bad. We have been outperforming largely thanks to banks and resources all their resources for two terrible days sector down 5% Yesterday, kicking off the falls in the market overnight. Probably the main issue was the Gazprom or Russian energy giant Gazprom telling Poland and Bulgaria that they're going to cut off their gas pipeline on Wednesday, Henry wrote a couple of weeks ago about the the dangers of backing a bear into a corner. And of all the issues most of them are not precipitous, their run of the mill interest rates, inflation growth and the main issue spots Russia could blow up and people are running scared of the other thing, of course, is we've got an FOMC meeting on May the fourth is the crucial start of an aggressive period of interest rates going up and most of the buyers in the market will have just backed out so we've we've got no natural buying support at the moment. So the negatives are being exaggerated. And that looks like what happened overnight. Other interesting things overnight is that bond yields actually fell or are falling. So it doesn't seem to be an inflation problem. It's morphing into a growth problem. There was Barclays downgrading their Chinese GDP numbers yesterday well below consensus, others will follow they've apparently had well of course they've had a terrible first quarter but they're going to have a much worse second quarter thanks to COVID the IMF downgraded global GDP numbers recently and that seems to be the trend that we're going to see more strategist doing that we've got the RBA. On Tuesday, one strategist has broken ranks and suggested that they will raise interest rates 15 basis points which will mean the RBA target cash rate goes from point 1% to point two 5% on Tuesday if true, but the main point is maybe the RBA just going to dam the politics and raise rates when they want I don't think it's too market sensitive. Everyone knows rates going up. It's just a question of when and whether the RBA is polite with the politics or just moves ahead despite them FOMC next Wednesday banks results next week. That's it from me.

Tom Wegner  04:03

Okay, thank you, Marcus. Tom. How's that all flowing into our local market?

Tom Wegner  04:07

Well, we actually had a better start than expected spy futures were pointing to more than 100% 100 point 100% under hole at the open we're down in the range of 50 points, utilities and tech stocks the worst performance energy the only sector in positive territory with the oil price up more than 3% on the corporate front a lot of production numbers filtering in you can see the announcements table for the reactions their city shake is up on some solid sales numbers sera resources also doing well on production numbers live 360 And five Finch both down on quarterly trading updates. Five Finch was that stock that short sell Ajay capital actually went long on we do have inflation data out at 1130. No big X dividends today and the US has home sales data, retail and wholesale inventories and the goods of trade balance tonight. Thank you, Ben. 

Tom Wegner  04:59

Very good. Thanks. Do Tom Layton anything of note coming out of the brokers today?

Layton Membrey  05:02

Thanks, Ben. I'll keep it nice and short. I've got united malt group that's UMG. They got an upgrade at Credit Suisse. And they've lifted that target price there to 462 cents which implies a 15 and a half percent upside, and the average target price here is 18.7%. Above the current share price, Cr 32. That's s 32 reported better than expected production numbers and Credit Suisse has a target price of $6. They're implying a 34.5% Upside UBS also with a target price of $6 and the buyer recommendation average target price there is 37.3% above the current share price and the last one Woodside petroleum their first quarter sales revenue missed forecasts, but UBS has retained its neutral recommendation and lowered its target price slightly, but it still implies a 5.2% upside and the average target price is just about in line with the current share price. Thanks, Ben.

Tom Wegner  05:58

Great stuff. Thank you. Leighton. Interestingly, CFD too they know reported better than expected production guidance, but it still fell 8% On the back of it so shows that there's no hiding when the market turns against materials. Chris is busy doing TV prep, but he has a nice write up on aristocrat leisure as his chart of the day to day and he's about to be on USB is the call in the midday session chatting on 10 stocks there. Henry, welcome back. What have you got for us?

Henry Jennings  06:25

Good morning. Thanks, Ben. Good to be back on deck. I must admit, I have brought back COVID with me so tested positive on Monday. So feeling a little bit under the weather. So I'll keep it brief this morning. Having been out in the wild west of Broken Hill and not having any internet or phone connections. The market certainly has been pretty nasty while I've been away and it's interesting to come back and see the Aussie dollar at 7160. We're also seeing the ASX 200, having more than two or 300 points from when I went away. Not such good news. I will be taking things cautiously I guess in this market, not trying to time the bounce pretty happy to be relatively cashed up before I went away 40% cash and some bbose ed which has helped and I must admit when I turned on the computer this morning when my COVID vog and I looked at the volcat portfolio I expect far worse than it actually is. So that's not too bad only down two or 3%. So it could have been a lot worse considering the market reaction week or so in tech stocks and resource stocks was certainly not a nice time at the moment. But it's now more a question of looking at how to deploy that cash at some stage and of course, shaking off the COVID and getting back into the groove which will take a few days. But apart from that back over to you guys.

Tom Wegner  07:35

Thanks, Henry. And, Marcus, back to you. What have you got for us in strategy?

Marcus Padley  07:39

Well, it's worth reading the strategy piece today. It is a comprehensive peace. I'm not going to run through everything. But I've got a look at the reasons why the market might be falling over which I've covered a fair number of those this morning already. I've also got a host of charts, which again make the point that whilst our market has failed for the third time, it's 7600. The last correction which was at the beginning of this year, when the Fed got aggressive on interest rates was 11%. We were already down 5% in three or four days here so I don't think we've got a precipitous moment here. Most of the issues are slow burn unless Russia blows up but I think in the short term you have to recognise the trend is down so you don't buy into it and the markets fall fast rise slowly so there's no rush to buy if you are in doubt which Doubtless you are this morning if you are in doubt there is this rhyming cliche which is no more true just because it rhymes. If in doubt get out but if you are concerned about what to do, no one would blame you for cashing up a bit at the moment and in a falling market stocks to worry about growth stocks, smaller stocks, high beta stocks, cyclical stocks, consumer stocks don't bother with buying defensive stocks for individual investors cash is king. If you're reading articles about buying defensive stocks then those are for the fund managers who are concerned about relative performance. I've also put in a list of RSI sell signals this morning from our morning scan some interesting ones in there bhp Nabb Fortescue mineral resources, the commodities CRB commodities index ASX 20, the ASX 50 predictable stuff longer term though, for investors. These are short term sentiment swings and they will reverse interest rates will peak inflation fears will fade China will get over COVID The Russian war will end just not today. So it's ugly today. But I don't think there's a reason for investors to fear a significantly precipitous moment but having said that, in the short term, there's still time for Australian active Australian investors to do some selling in the hope of getting them down getting them back lower down resources in particular banks. I think I'd probably leave alone anyone who's chasing income the banks are pregnant with their dividends coming up in the next couple of weeks. So probably okay to hold on to them. They actually do reasonably well in the short term on a rising interest rate theme anyway, and just bear in mind at some point, this inflate Shouldn't an interest rate peak will happen maybe after the FOMC meeting people are so fearful of it that in fact it could end up being a moment of relief that clearly no one's prepared to believe that until after it's out of the way so May the fourth next week is a fairly pivotal moment for the market sentiment could change on number of issues there. So the summary is still time to sell to buy back for active investors. But not sure long term investors should really concern themselves too much. I hate saying that sounds like a motherhood financial planner Rocha comment that their job is to keep you comfortable and keep you in the market. They didn't spend ages lunching you just so they could get you in to get you out on one bad day. But that is the sort of thing a broker financial planner would say it's okay, long term, but I think it will be okay. Long term. And there you go.

Tom Wegner  10:47

Very good. Thank you, Marcus. I'll finish with that question of the day, as always, and it's simply Are you seeing the impacts of inflation in your day to day life, Tom?

Tom Wegner  10:55

Yeah, absolutely. Ben, I recently did a road trip to South Australia. And before that, the week before that fuel price was $2.20. And I thought this is going to be a very expensive trip for me. Thankfully, it dropped a little bit when we were on the road, but yeah, obvious one is fuel price and inflation is there for me.

Marcus Padley  11:13

When you're paying $200 to fill up a car, which my daughter does, because she got her old Mazda nine it's still under a buck Phyllida and she's earning What 28 bucks an hour as a barmaid. You know, inflation is having an impact on everyone. 

Layton Membrey  11:26

Yep, semis laden. Yes, my favourite little Bunmi restaurant, they've increased their prices. And even at the footy club, Thursday night dinners have gone up because of inflation.

Ben O'Leary  11:36

That hurts...

Layton Membrey  11:36

Does. 

Layton Membrey  11:38

Henry?

Henry Jennings  11:39

I think it's interesting that on in my travels out west half Broken Hill into the wild blue yonder, we saw a petrol in Broken Hill at cheaper and quite considerably cheaper than it was in Sydney on our return, it was 187 in Sydney and in Broken Hill itself was 162. We filled up with that there was the cheap stuff. Of course, diesel was a bit more expensive. But certainly Outback, there was no evidence of price gouging, especially with 4000 cars coming through Broken Hill on the way to the Monday Monday Music Festival. So there wasn't a price gouging there. But certainly in the price of food and stuff like that. We are seeing that I think, pretty much evidence in our daily lives, supermarket shopping, etc, seems to be more expensive. asset prices are creeping higher cars, boats, those sorts of things and things that are in short supply in terms of the supply chain, and then increasing demand. So there's there is some inflation certainly there at the moment. And I think we're all seeing it. It's just insidious, and slowly creeping higher, rather than the big price rises that we have seen in the past, but certainly that petrol price coming off considerably is going to help the numbers and of course, we do have the CPI data out today, which was somewhat above expectations. So certainly inflation is around and about.

Ben O'Leary  12:52

Thank you, Henry. Marcus?

Marcus Padley  12:54

I think it saved me money because car prices have got ridiculous because of the supply chain issues and not enough processes. And I hear that Toyota dealers because they are restricted on what price they can sell a Toyota Landcruiser for they're buying them off Toyota and then putting them on the market as secondhand cars. 20% more expensive. This is not a time to be buying a car. So I've lost interest in rotating my car as I might do. Mine's 11 years old now. Because this is just the wrong time. So inflation saved me money because I'm not buying a car at the moment.

Ben O'Leary  13:28

I can say that Toyota example being in financial textbooks in 10 years tell them of strange arbitrage opportunities.

Marcus Padley  13:35

The other one I did love was a Peter Lynch one where if you maybe he went to the equivalent of Bunnings and pointed out that the washer, the tap washer for this particular tap the washers there were none available at all, which meant they were selling a whole load of them and why are they selling them of course because they were defective. Replace the conundrum of selling a really crap product, but because of that you sell a load of them. But anyway, there you go.

Ben O'Leary  14:04

Very good and I've seen it personally recently with insurance premiums we got a quote for standard renewal that was 20% higher than last year's phase when I got another quote from someone else almost exactly the same price a little bit more expensive even and it looks like that's just happening across the board with insurance it's I think they're taking the inflation excuse and running with it as far as they can so.

Ben O'Leary  14:25

You see the inflation number days well known the inflation numbers a bit of a political number it's manipulated lower to make it look good. They the basic calculation changes as time goes past but everyone has their own personal inflation number to spend depending on where they spend their money and particularly retirees get very upset about the idea that there's no inflation when they're paying more for their car more for their food more for their petrol and yet inflation appears to be two to 3% It's It's rubbish depending on where you spend your money. And late breaking news here the inflation numbers out it's up five point 1% in the first quarter that compares to forecast of 4.6 and is up from 3.5%. So that's a very strong number up 2.1% on a quarterly basis forecasts were 1.7%, after 1.3%. Last and the trimmed mean or the core number up 3.7%. That's against forecasts at 3.4%. And the quarterly numbers 1.4% against forecasts and 1.2%. And up from 1.1%. Last quarter, and the Australian dollars jumped a little bit on the back of that, and there is now a 78% chance of a 40 basis point increase in rates in June. So I think the chances of rates going up next week have gone up as well. And the bond market implies a 2.3% cash rate or target cash rate by December up from the record low point one now. So that's 2.2%. So that's 123 At seven interest rate rises before the end of the year, a high inflation number.

Ben O'Leary  16:02

And good to know that we're not making up our own inflation stories. It is a real thing. Thanks, guys. See you tomorrow.