THE MARCUS TODAY MORNING MEETING - Tuesday 26th 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, Marcus Padley, Layton Membrey, TEAM, Ben O'Leary

Ben O'Leary  00:14

Morning everyone, Tuesday, April 26. Back after the Anzac Day long weekend playing a bit of catch up this morning, Marcus, what have we missed in the markets since the end of last week?

Marcus Padley  00:23

Well, end of last week, of course, Wall Street was down 980 points on Friday. So even though it was up 238 was a massive turn at one point it was down 488 So we did effectively lost about 1500 points in two days anyway. It bounced overnight to be up 238 But our market today clearly having a moment down 170 points or more at one point and it's all to do with resources. It's to do with China extended lock downs still pursuing zero COVID And that development is turning into a conversation about whether this is going to cause an economic slowdown Shanghai is in its fourth week of lock downs now and the Chinese stock market fell 5% Yesterday at the same time the iron ore price I think was down 10% Yesterday down another three no two and a half percent today. oil price down 3.6% Yesterday down three and a half percent overnight gold down 2% bhp down 5.9% Today, Rio 4.3% Fortescue 6% champion iron 8% The whole resources sector is coming off the top and giving us a good smacking this morning.

Ben O'Leary  01:31

And with the size of BHP now a 5% drop in bhp is half a percent off the market. 

Marcus Padley  01:36

Yeah, it is 10% of the index and the oil price is causing all the oil stocks to go down as well. But Woodside that production numbers today they're down 5% or so and we'll come to a bit more of this in the strategy developments overnight was Elon Musk taking Twitter private bond yields have also come a little bit off the top Aussie dollar is falling as the market goes risk off and the US dollar is rising US dollar sins are a safe haven currency and the Aussie dollar sin is a risk on currency. So the Aussie dollar falling now and that's down from it was 7661. At the beginning of this month, it's down to 7182. That's a huge move in a currency. So you can see there are quite seismic things happening on a macro front at the moment. And the main issue is worried about an economic slowdown. And this is before we talk about inflation interest rate rises. We've got the CPI number this Wednesday RBA meeting next week FOMC meeting next week, and it's before we even spoken about Russia and those concerns about how long sanctions are going to pressure inflation so plenty going on and the market is clearly gone half empty glass half empty. Were mulling all the negatives at the moment and resources getting in the next so the big debate in strategy days was that but top for resources and I'll come to that.

Marcus Padley  02:54

Thank you Marcus yes we'll throw back a little bit later strategy. Tom, what's happening locally today?

Tom Wegner  02:58

Thank you Ben. Well, as you probably expect, all sectors are in negative territory, mining and energy stocks deeply negative BHP and Rio taking something like 55 Points off the ASX 300 EML payments the worst performer of the percent after cutting guidance and pushpay code for that PPH up 22% After confirming there's some interest in the company production reports continue to colour the corporate calendar today and into the week as Marcus said before we had numbers from Woodside also beach energy out today they're off. That's more likely due to the fall in oil price consumer staples and health care outperforming although that doesn't mean much really in a down day us results season rolls on and that's about it. Marcus touched on the economic stuff we're looking at for this week. Also edging closer to bank reporting season eight and Zed half year results out Wednesday may fall.

Marcus Padley  03:52

And Bank of Queensland ex dividend may four that's an over 3% yield I think are also worth mentioning all the lithium stocks which are again risk on stocks, all lithium stocks coming off and rare earths coming off the top today. Mineral Resources down 8.4% alkaen, down 6.7% Pilbara down 4.9%. So everything risky is going down and we're going into a defensive mode in the short term.

Ben O'Leary  04:17

Thank you Tom. Layton, anything interesting from the brokers out today?

Layton Membrey  04:20

Thanks, Ben. I've got a couple of go through here Reliance worldwide. Morgan's considers Reliance to be the best value in the building materials sector and Morgans has an add recommendation there but they've lowered their target price 16 and a half percent $5.30. But this still implies a 35% upside and reliance has its third quarter trading update on Friday. Morgan's has said that they expect solid earnings and they flagged price increases to offset commodity input costs increases in the second half and then following on with that material sector theme oz minerals they had their results last week missed consensus production for the March What up but has received pretty mixed reviews from the brokers. I'm not sure if they're going to change suit later on and try and follow the trend but it's mostly been neutral city has a buyer recommendation with a target price 24% above the current share price and Credit Suisse has an underperform recommendation with a target price of 14 and a half percent below the current share price but the average target price here is $25.61, which implies about a 4.3% upside and mineral resources delivered higher iron ore and lowest body men production than expected but on a positive note the average realised iron ore price was 101 US dollars per tonne compared to Morgan Stanley's forecast of $88. A time and Morgan Stanley has an overweight recommendation and a target price 7.7% below the current share price. Cindy says buy with a target price of $73 implying 20% upside.

Ben O'Leary  05:49

Thank you, Layton maybe a little bit more than 23% after two day...

Marcus Padley  05:53

And you've put the BHP and Rio research into the strategy section today the bhp average target price is 14% above the current share price. And for Rio, the average target price 14% above the current share price. But as I've always said research or target prices on resources are largely irrelevant because they move every day as the underlying commodity prices move. And brokers tend to play back casting rather than forecasting when it comes to earnings numbers on resources stocks, depending on what their commodity prices price assumptions are, which are often complete guesswork.

Layton Membrey  06:26

It's probably a bit inflated this morning as well, because they're both down a fair bit this morning to.

Ben O'Leary  06:31

Very good, Chris, welcome back. What have you got for us in technical trades?

Marcus Padley  06:34

How was the rain in Inverloch?

Chris Conway  06:36

It was it was very, very wet one day. But otherwise, it actually wasn't too bad. It's beautiful down there. Of course.

Marcus Padley  06:42

What do you do with two young kids in a tent when it's raining?

Chris Conway  06:45

Stick them infront of the iPad mate let him watch eight hours. Now we there was an indoor indoor pool there. So we managed to make very good use of that. So that was fun in the tent. Before sorry, at the Big Four campsite.

Marcus Padley  07:01

I can give you a promise, I will never ever, ever, ever go to a big for ever again, in my life. 

Chris Conway  07:07

I must admit once the kids are grown out, this is not an indictment on the big four. But once the kids are growing up what I did go visit them again.

Marcus Padley  07:14

I'm surprised you didn't do your back on the bouncy...

Chris Conway  07:20

I don't think those things are load rated for me, to be perfectly honest. I don't make anyway, back to the markets. I just wanted to touch on the x j I know Mark has put this chart in the newsletter last week or might have been in the weekend edition he managed to tune in whilst I was away. And just the importance of the rejection of the 7600 level that has happened three times now in the past 12 months. And this latest rejection has been incredibly emphatic. And you know, I know a lot of people think technicals are a load of bollocks. But it's very clear that the market tried to rally tried to punch through that level that has been a significant resistance twice before and ultimately has failed. And like Marcus was just talking about it's a technical failure. But it's a failure in terms of the fundamental picture that's going on as well, in all the worries again, the markets was just talking to so you know, we will get these signals, we'll get these fundamental signals, we'll get these technical signals. And this is the market giving us a very clear signal that we that we don't collectively want to play up at that level. And I think it's quite profound. I certainly think it's worth paying attention to I better my little section. Fortunately, I don't have a lot of risk on the table at the moment the risks that I do have already taken off at lunchtime I covered a stock this morning called Aurora. It's largely irrelevant now because the market is down 180 Odd points. But there are some interesting things to take away. First and foremost, it's fairly defensive stock. It's a packaging manufacturer. I don't know whether you guys saw the Coke Cola results last night, but their revenues were up 16% And whilst these guys don't do the cans for Coca Cola, they do make cans they've got Aurora beverage division as well as well as their boxes like visie and so on and so forth. But this is a fairly defensive stock in quite a nice uptrend just needs to break above sort of $3.80 and then it could be on its way but I think those The point I'm trying to make is I think those kinds of stocks those defensive high quality names that have got stable earnings chart looks good. They're probably the type of stocks that I personally will be having a look for in the coming days weeks and maybe have in mind as we wade through this sell off. So the little something in there in terms of the type of stocks that I'll be looking at.

Marcus Padley  09:17

Aurora, of course is the Amcor paper and packaging division is split off...

Chris Conway  09:20

Spun out quite some time ago. Yeah, but it's grown. Yeah, it's grown into its own sort of packaging niche section as well. 

Ben O'Leary  09:27

Very good. Thank you. Christopher Marcus, back to you for strategies ideas.

Marcus Padley  09:31

It is worth mentioning Henry's still away. But he's back tomorrow and I am away to Tasmania on a motorbike the end of this week. That aside, we've covered a bit of strategy in my beginning bit about Chinese lockdowns, worried about economic slowdown rates going up Russia still a risk commodity prices coming off the charts. The main comment though, I think at this point, and we've talked about rejection of the 7600 level by the ASX 200 I think the main thing has to be though that it doesn't look like Okay precipitous moment there's nothing terribly wrong all these risks are slow burn Russia to start with wasn't slow burn it was fast burn but it's become slow burn the interest rate even is slow burn the China issue is slow burn it could turn around tomorrow. And I do think as you look at the charts of these 10 year bond yield ripping up at some point these 10 year bond yields are going to come off again. And although we're in fear of 250 basis point REITs from the FOMC with the first one coming next week, but chances are at some point, we're going to get some inflation and interest rate relief if the Russian war ended with stop worrying so much about inflation. If the Fed raised rates and make some comments about gradual patient nature of interest rate rises, this whole risk off could go risk on again. So I at this point would be yes, I can fully understand if you said I'm going to sell some resources as an active investor. But I can fully understand if you as a long term investor said, I'm not going to worry about this because I don't think you need to quite honestly for more active investors and for newsletter readers who are generally going to be more active or more active investors, I'd be looking for the moment that the concerns about inflation and interest rates bottomed out and at that point, I'd be looking at tech stocks and risk on again. And at the same time, I possibly still be getting out of resources as an active investor. If you look at all the charts and the strategy piece today, we're up at the top still. And we've got sell signals all over the charts. And we're not selling at the bottom. If you look at the four dispute chart in there, sell signals, and we're still pretty much up at the top, you've missed the very top that's about it, I could see you selling some resources. And again, I'd be looking for the Chinese situation to subtly improve Shanghai to open up and Beijing to open up and the resources will come back again. So this is a trading a macro background which is suited to trading. I don't think investors need to stress about it too much. And you've got this bank sector as well with dividends pregnant with dividends, although the sector usually predictably tops out over the dividends. It's never a precipitous topping out thing you collect your dividends relax about that sector probably does well during an initial stages of interest rate rises anyway and look for the volume and resources and look for the bottom in technology. This is not a dangerous market moment. I don't think I think that's probably the best thing I could say on the strategy front today.

Ben O'Leary  12:22

Nice. We'll finish with our question as always, and today after Elon has finalised

Chris Conway  12:28

Taken it private yeah it is a done deal.

Ben O'Leary  12:31

Elon has now taken Twitter private so the question is, is that going to make you more likely to use Twitter? Tom?

Tom Wegner  12:36

Absolutely not then I've never used Twitter. So that is a lie. I use CommSec their Twitter account that is about it. I don't have a personal Twitter. I don't think I've got another and enough hours in the day for me to bother with looking at what everyone thinks about everything that's going on in the world. 

Chris Conway  12:51

You don't want to know what some...

Tom Wegner  12:52

Chris Conway trader at four things...

Ben O'Leary  12:57

Fair enough, Layton?

Layton Membrey  13:00

I do have an account but I just forget that I have I have never really been passive on Twitter. I don't really understand the big idea behind it. Whatever I'm rise on about it so much. So I don't think it'll make me change my habits too much, 

Ben O'Leary  13:12

Chris?

Chris Conway  13:12

I very seriously been considering deleting all my social media accounts. And if it wasn't for the Facebook discussion group for the fact that Cosby is sometimes tagging me on Twitter, I'll probably delete them in a second. Here's what I don't understand. You guys might be able to explain it. Twitter came along and had pictures and comments. And then Twitter was just comments and then Instagram is just pictures aren't they all just the same damn thing that's been carved out into these different specialised worth hundreds of billions of dollars it's all the same rubbish. Like I don't understand why we need three things to tell us the same thing that one tool used to be able to tell us I don't get it but I'm also whatever.

Ben O'Leary  13:44

Well I'll jump in there because I'm a Twitter user and I Twitter is definitely my preferred social media platform and a lot of people struggle with it because they end up down in rabbit holes and get as soon as you get political Twitter that horrible I use it for sports and I use it for I follow a few actually quite interesting market people. And it's just a it's a great place to get people's ideas and what they're thinking and insights on things that Instagram sorry. So I think it's actually quite good. If you're in the right spaces back and say how people get derailed completely in the wrong areas.

Layton Membrey  14:16

I have found it's a lot quicker like it's sort of really punchy information that you get whereas other platforms are a lot more convoluted.

Ben O'Leary  14:22

It's actually the if I if something's happened, and I want to know why even if a stock like a stock down 20% There's no announcement I'll go on Twitter and I'll search the stock code and normally that is easier way to find the information than waiting for it to be written up on the bar or it's interesting to hear somewhere but that's my take. Marcus?

Marcus Padley  14:39

As far as Musk taking over Twitter is concerned there's good and bad I can see Yeah, freedom of speech, but if he wants to allow someone like Trump on there to have freedom of speech, then no one's gonna go on there. So yes, and no, I don't know. I do like Moscow was very taken by his series about going back to space. What was that called? Netflix. Yeah, To return to space or something, and they asked him what his priorities are and he almost broke down in tears without saying anything to say it was to get Ben and John back to the planet. He is a human I've massively admire that and if that comes through in it being what he does then all good but as far as Twitter is concerned, Twitter is for me only for information because some people put good information out there regularly like the content otherwise I am now clearing out all my social media because I've I've woken up to the fact is so much garbage. And I now turn off I've got friends on Facebook over the years I am turning off almost turned off 50% of them now anyone who posts a sunset anyone who posts a picture of their latest meal Yeah, anyone who posts anything in name again, it's what's the point? I don't need to know that crap. So I'm just cutting people out now. And also Facebook is commercial as far as I can see. We've spending money on Facebook aren't we on ads? I don't want to be bombarded with other people's ads. But do keep please watching mine. Anyway that's my feeling on social media I'm like everybody my age I bloody hate it I just hate it the providing a voice for the annoyed minority. Well stick it...

TEAM  16:13

Laughter!

Chris Conway  16:17

We will end in a more positive note. I just wanted to say on Elon Musk, he did a TED talk recently within the last couple of weeks it is absolutely brilliant. I've been told absolutely have to watch Yeah, and change my opinion of him dramatically. I mean already thought quite highly of him but even more so now. So for anyone who's interested check that TED Talk. 

Chris Conway  16:33

I was gonna say too, I think he gets a bad rap kind of for being a billionaire because no one likes a billionaire because it's just too much concentration of money but he's got a pretty like not obviously he's got a very good track record and building companies into billion dollar companies but he's kind of agenda has always been fairly wholesome. Like he's always tried to make positive change.

Chris Conway  16:51

It makes that point in the talk and but he does it very eloquently. So I suggest definitely check that out.

Chris Conway  16:55

That was a good takeaway to finish on. We will see you tomorrow.

TEAM  16:59

Thanks, guys.