European Equities: U.S Economic Data and FED Chair Powell to Have the Final Say

Economic Calendar:

Friday, 28th August

GfK German Consumer Climate (Sep)

French Consumer Spending (MoM) (Jul)

French GDP (QoQ) (Q2) Final

The Majors

After a flat Tuesday, it was a bullish day for the European majors on Wednesday. The DAX30 and EuroStoxx600 rose by 0.98% and by 0.91% respectively, with the CAC30 gaining 0.80%.

Once more, the markets brushed aside the latest COVID-19 figures from Europe, with government fiscal support plans driving the majors.

News of the German government extending its COVID-19 relief package was positive for riskier assets on the day.

From France, Prime Minister Castex announced the government’s intentions to roll out a relief package of its own next month. This was also positive for riskier assets.

On the geopolitical risk front, positive updates from talks between the U.S and China on trade added further support, as did COVID-19 vaccine news.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Key stats included French consumer confidence and job seeker total numbers.

In August, consumer confidence remained steady in August, with the Consumer Confidence Index remaining unchanged at 94.

According to Insee,

  • The share of households considering it is a suitable time to make a major purchase fell by 4 points from July. August’s balance continued to sit below its long-term average.
  • Household’s opinion on their past financial situation rose by 1 point, holding above its long-term average.
  • The balance related to their future financial situation remained unchanged and slightly below its long-term average.
  • Household’s opinion balance relating to their expected saving capacity fell by 4 points while holding well above its long-term average. In August, the household’s balance of their opinion on their current saving capacity fell by 2 points.
  • Both remained well above its long-term average.
  • The share of households considering it is a suitable time to save increased by 1. The balance remained well above its long-term average.

Employment conditions improved in the summer, with the job seekers total falling from 3,964.7k to 3,792.5k.

From the U.S

It was also a relatively busy day on the economic calendar. Key stats included July’s durable goods and core durable goods orders.

Following a 4.0% rise in June, core durable goods orders rose by 2.4% in July. Economists had forecast a 2.0% increase.

Durable goods orders jumped by 11.2%, following a 7.7% rise in June. Economists had forecast a 4.3% rise.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. BMW rallied by 2.58% to lead the way. Continental, Daimler, and Volkswagen saw more modest gains of 1.40%, 1.39%, and 1.58% respectively.

It was yet another bullish day for the banks. Deutsche Bank and Commerzbank ended the day with gains of 1.65% and 2.69% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.49% to lead the way, with Credit Agricole and Soc Gen rising by 0.81% and by 0.75% respectively.

It was another mixed day for the French auto sector, however. Peugeot rose by 0.81%, while Renault fell by 0.39%.

Air France-KLM fell by 0.73%, with Airbus SE ended the day down by 1.84%.

On the VIX Index

It was back into the green for the VIX, which ended a run of 3 consecutive days in the red. Reversing a 1.52% fall from Tuesday, the VIX rose by 5.63% to end the day at 23.27.

The S&P500 and NASDAQ rallied by 1.02% and by 1.73% respectively, with the Dow gaining 0.30% on the day.

Tech stocks were on the move once more, delivering more record highs for the NASDAQ and the S&P500.

Positive updates from U.S and China trade talks and progress towards a COVID-19 vaccine provided a boost to the indexes.

Following Trump’s announcement to fast track Oxford University’s COVID-19 vaccine, Moderna delivered upbeat news on Wednesday. The company announced that it’s trial COVID-19 vaccine showed effective results amongst elderly patients.

On the economic data front, positive durable and core durable goods orders for July added to the upside on the day.

In spite of the fresh record highs for the NASDAQ and the S&P500, the VIX moved northwards ahead of today’s speeches from Jackson Hole.

With the majors sitting at record highs, there are plenty of downside risks that continue to linger. A lengthy trial period for an effective COVID-19 vaccine could put the economic recovery at risk as winter approaches.

Tensions between the U.S and China could also flare up at any time as Trump looks to narrow the gap against Biden.

VIX 27/08/20 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no key stats from the Eurozone to provide the European majors with direction.

The lack of stats will leave the majors in the hands of economic data from the U.S and speeches from the Jackson Hole Symposium. FED Chair Powell’s speech will be the keynote speech of the day.

Economic data from the U.S include 2nd estimate GDP numbers for the 2nd quarter and the weekly jobless claims figures.

The markets will be looking for an upward revision of the GDP numbers. More importantly, however, initial jobless claims will need to fall back to sub-1m levels.

Away from the economic calendar, geopolitics, Brexit, and COVID-19 news will also need monitoring.

The Futures

In the futures markets, at the time of writing, the Dow was down by 20 points.

For a look at all of today’s economic events, check out our economic calendar.

Salesforce.Com Soars After Blowout Quarter

Salesforce.Com Inc. (CRM) is trading higher by more than 20% in Wednesday’s U.S. session after beating fiscal Q2 2021 profit estimates by $0.77 per-share and guiding fiscal year top and bottom line above consensus. The San Francisco-based cloud software company earned $1.77 per-share during the quarter while revenue rose an impressive 28.9% year-over-year to $5.15 billion, triggering a strong buy-the-news reaction despite lowered Q3 EPS guidance.

Salesforce.Com Added To Dow Jones Industrial Average

The keepers of the Dow indices announced on Monday that Salesforce.com would be added to the Dow Jones Industrial Average, one of three blue chips replacing the departing Pfizer Inc. (PFE), Exxon-Mobil Corp. (XOM), and Raytheon Technologies Corp. (RTX). The bullish news lifted the stock more than 3.0% in Tuesday’s session on the heaviest trading volume since June 2019, ahead of this morning’s vertical slingshot.

Monness Crespi and Hardt analyst Brian White raised his target from $195 to $275 after earnings, noting the company “reported excellent 2Q 2021 results and provided a strong 3Q 2021 outlook while sharply increasing FY2021 guidance. Although we expect this new economic reality to mask Salesforce’s true growth potential over the next year, we believe this crisis will prove a catalyst for digital transformation initiatives and Salesforce will emerge from this downturn even stronger.”

Wall Street And Technical Outlook

Wall Street consensus is off-the-charts after this week’s bullish events, with a ‘Strong Buy’ rating based upon 28 ‘Buy’, 2 ‘Hold’, and just one ‘Sell’ recommendation. Price targets currently range from a low of $160 to a street-high $300 while the stock is now trading just $26 below the high target. This placement is a two-edged sword because it could persuade some analysts to raise price targets while others issue downgrades based on valuation.

Technically speaking, Saleforce.com is nearing historic extremes in overbought readings, with relative strength indicators approaching levels that set off major sell signals in 2017 and 2019.  The stock has also rallied more than 20% on Wednesday and more than 40% in the last four weeks. Taken together with approaching Wall Street targets, the vast majority of investors should stand aside and look for lower-risk buying opportunities with greater upside potential.

S&P 500 Price Forecast – Stock Markets Continue Relentless Drive Higher

The S&P 500 has rallied a bit during the trading session on Wednesday and therefore it is likely that we will continue to go looking towards the 3500 level above. I think short-term pullbacks continue to offer buying opportunities and what is an extraordinarily volatile market. Jerome Powell speaks during the day on Thursday and he will certainly do what he can to boost the stock market then as well.

S&P 500 Video 27.08.20

The candlestick from last week suggests that the 3400 level is going to be massive support, extending down to at least the 3350 level. In this environment, buying on the dips should continue to pay dividends, as this is a market that will certainly see a lot of momentum chasers, and of course with the US dollar losing strength it is obvious that the liquidity will continue to be rammed down the throat of these markets. Earnings season is just about over, and we have escaped it, and it now looks like we continue to go higher over the longer term.

If we were to break down below the 3350 level, then the 50 day EMA comes into the picture about 100 points and will attract a lot of attention. I have no interest in shorting this market, at least not yet and I believe that the “hard floor” in the market is closer to the 3200 level. It is not until we break down below there that I become concerned about the overall trend, and that looks increasingly unlikely as this momentum continues.

For a look at all of today’s economic events, check out our economic calendar.

Gold Traders Bet Long Despite Record Highs in Global Stocks

Gold prices reached as high as $1,950 an ounce, at London’s trading session on Wednesday as gold traders created fresh positions on the precious metal.

At previous trading session, Gold prices drifted lower on higher U.S yields amid COVID- 19 vaccine optimism, and positive macros coming from the US-China trade front however that changed when gold bulls triggered the upward movement of the yellow metal prices on growing geopolitical concerns

Gold traders are presently looking toward the U.S Federal Reserve chairman’s speech at Jackson Hole scheduled to hold tomorrow, thereby keeping gold prices above the $1925 support levels today.

The precious metal however remains fragile to the prevailing macros that include a recent uptick in US interest rates, especially the 10-year yield, putting more pressure on the yellow metal.

Gold traders have noticed a significant liquidation of long positions whenever gold touches the $1,950 price level in recent days, showing a sign of price rejection and exhaustion by gold bulls prior to the recent high hopes on the two major economies negotiating a trade deal.

In addition, record highs in risker assets such as global equities and higher hopes on the COVID-19 vaccine being readily available could most likely push the precious metal below the $1800 price support levels and further if risker assets continue printing impressive highs.

The greenback’s recent weakness is not having much a price effect on the yellow metal as it should ,adding more pressure on gold bulls that the yellow metal seem to be in an overbought position partially due to the “risk-on” nature of the soft greenback sell-off as it’s not as damaging as anticipated.

Gold traders are presently positioning their bets for a limited upside impact from an announcement of a soft average inflation target. It has been well-telegraphed by the recent U.S Federal Reserve public statements.

For a look at all of today’s economic events, check out our economic calendar.

 

Evonik to Acquire Porocel for $210 Million to Accelerate Catalyst Business

Evonik Industries, a Germany-based speciality chemicals company, said it will acquire the Porocel Group for $210 million to accelerate the growth of its catalyst business, sending its shares up over 1% to EUR 24.65 on Wednesday.

The purchase price (enterprise value) is 9.1 times adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in 2019, which is an attractive valuation for a high-quality asset in the catalyst sector.

Porocel’s global position strengthens the worldwide presence of Evonik’s catalyst activities. The complementary fit to Evonik’s existing catalyst portfolio and especially the available production capacities offer considerable growth opportunities, the company said.

Evonik expects to increase sales of the combined catalyst business to significantly more than EUR 500 million by the end of 2025 without the need for investment in new capacities.

The deal is expected to close by the end of this year and is subject to approval by the relevant authorities.

Evonik shares traded over 1% higher at EUR 24.65 on Wednesday. However, the stock is down about 10% so far this year.

Executive comments

“This acquisition is the next logical step in the strategic development of our portfolio. Our focus is on stable and high-margin speciality chemicals,” said Christian Kullmann, chairman of the executive board.

“We are systematically expanding the share of our speciality businesses – and that at an attractive valuation.”

Evonik stock forecast

Morgan Stanley gave a target price of EUR 28.50 with a high of EUR 36 under a bull-case scenario and EUR 16 under the worst-case scenario. Evonik Industries has been assigned a EUR 27 price objective by analysts at Barclays. The firm currently has a “buy” rating on the stock.

Other equity analysts also recently updated their stock outlook. Berenberg Bank set a EUR 24 target price and gave the company a “neutral” rating. Independent Research set a EUR 25 target price and gave the company a “neutral” rating. Deutsche Bank set a EUR 33 target price and gave the company a “buy” rating.

Analyst view

“We’re Overweight as we think Evonik is the clearest example of a “change” story in EU chemicals. A combination of: (1) SG&A savings of EUR 200 million; (2) additional business line restructuring projects, notably bioamino acids and SAP; (3) synergies to deliver on M&A by 2020/21; and (4) future portfolio transition. Valuation is attractive, on our numbers,” said Charles Webb, equity analyst at Morgan Stanley.

“Our price target of EUR 28.5 is the blended average of our DCF EUR 28 (WACC 6.3%, terminal growth 1.4%), RI EUR 28 (same assumptions as DCF), DDM (CoE 8%, terminal growth 4.7%) and spot peer-group multiple EUR 30,” Webb added.

Upside and Downside risks

Upside: Perfect execution on new capex ramp-ups, delivering on €200m cost savings, acquisition synergies and portfolio optimisation, higher methionine prices driven by tighter S&D dynamics – highlighted by Morgan Stanley.

Downside: Volatility in methionine prices, FX, C4 chain pricing, M&A and European demand.

Stock Pick Update: August 26 – September 1, 2020

The broad stock market has extended its medium-term uptrend in the last five trading days (August 19 – August 25). The S&P 500 index has set new record high of 3,444.21 on Tuesday, as it further extended its rally after breaking above February 19 high of 3,393.52. Five months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears erased more than a third of the broad stock market value. But since then stocks rallied 57.1%.

The S&P 500 index has gained 1.51% between August 19 and August 25. In the same period of time our five long and five short stock picks have gained 0.40%. So stock picks were relatively weaker than the broad stock market. Our long stock picks have gained 1.20% and short stock picks have resulted in a loss of 0.41%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • August 25, 2020
    Long Picks (August 19 open – August 25 close % change): VFC (+3.87%), IBM (-0.15%), CAT (+1.91%), CVX (-1.34%), SCHW (+1.72%)
    Short Picks (August 19 open – August 25 close % change): WMB (-2.11%), TROW (-1.15%), XEL (-1.84%), HD (-0.46%), AAPL (+7.62%)Average long result: +1.20%, average short result: -0.41%
    Total profit (average): +0.40%
  • August 18, 2020
    Long Picks (August 12 open – August 18 close % change): BA (-7.49%), SCHW (-1.55%), CXO (-4.91%), BXP (-5.58%), MSI (+5.14%)
    Short Picks (August 12 open – August 18 close % change): CCI (+1.85%), AAPL (+4.58%), CHTR (+3.33%), ROP (+0.48%), SPGI (+3.65%)Average long result: -2.88%, average short result: -2.78%
    Total profit (average): -2.83%
  • August 11, 2020
    Long Picks (August 5 open – August 11 close % change): V (+2.18%), WBA (+2.45%), ECL (+3.13%), XOM (+1.86%), PSA (-1.38%)
    Short Picks (August 5 open – August 11 close % change): COP (+3.14%), CCI (-2.75%), SPGI (-0.95%), PYPL (-5.01%), K (-2.35%)Average long result: +1.65%, average short result: +1.59%
    Total profit (average): +1.62%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, August 26 – Tuesday, September 1 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (August 26) and sold or bought back on the closing of the next Tuesday’s trading session (September 1).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Technology, 1 x Consumer Discretionary, 1 x Communication Services
  • sells: 1 x Energy, 1 x Utilities, 1 x Health Care

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Utilities
  • sells: 1 x Technology, 1 x Consumer Discretionary

Trend-following approach

Top 3 Buy Candidates

FIS Fidelity National Information Services, Inc. – Technology

  • Stock broke above its downward trend line
  • The next resistance level of $150
  • The support level is at $140

MAR Marriott Intl Inc New – Consumer Discretionary

  • Stock broke above short-term downward trend line
  • Possible uptrend resuming
  • The resistance level of $115 (short-term upside profit target)
  • The support level is at $80-85

DISH DISH Network Corp. – Communication Services

  • Stock remains above its two-month-long upward trend line
  • The resistance level and a short-term upside profit target level is at $37

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Technology, Consumer Discretionary and Communication Services sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

U.S. Stocks Set To Open Higher As Durable Goods Orders Increase By 11.2%

Traders Prepare Themselves For Fed Chair Jerome Powell’s Speech At Jackson Hole Symposium

Markets are rather quiet today as traders wait for the key commentary of Fed Chair Jerome Powell which is set to speak at Jackson Hole Symposium on Thursday.

The key question is whether the Fed is ready to let inflation get above 2% in an effort to support the economic recovery after the acute phase of coronavirus crisis. If Powell signals that the Fed is ready to push inflation higher, stocks will get an additional boost while the U.S. dollar may suffer.

Such a scenario would also be bullish for commodities like oil and copper, as well as precious metals including gold and silver. However, if Powell is not dovish enough, stocks may pull back from record highs.

Hurricane Laura Continues To Support Oil Prices

WTI oil has managed to settle above the $43 level but failed to get above the nearest resistance at $43.50 as Hurricane Laura moved closer to the shore.

Currently, Laura is a Category 3 storm which may ultimately become a Catergory 4 storm when it hits the shore.

The key question for oil traders is whether the storm deals significant damage to refineries. For now, the threat from Laura was not sufficient enough to push oil prices to new highs but the market’s reaction may quickly change once the hurricane makes landfall.

Yesterday’s API Crude Oil Stock Change report was also positive for oil as it indicated that crude inventories decreased by 4.52 million barrels.

Durable Goods Orders Increase By 11.2%

U.S. has just provided Durable Goods Orders data for July. On a month-over-month basis, Durable Goods Orders rose by 11.2% compared to analyst estimates which called for growth of 4.3%.

The Durable Goods Orders report was much stronger than expected which could provide additional support to stocks and the U.S. dollar which continues its attempts to rebound against a broad basket of currencies ahead of Powell’s speech at Jackson Hole Symposium.

S&P 500 futures are gaining some ground in premarket trading after the release of the report.

For a look at all of today’s economic events, check out our economic calendar.

Daily Gold News: Wednesday, August 26 – Precious Metals Lower Ahead of Tomorrow’s Fed Talk

The gold futures contract lost 0.83% on Tuesday, as it extended its short-term consolidation following recent decline below $2,000 price level. Gold reversed lower on August 7 after much better than expected Nonfarm Payrolls release, among other factors. The following upward correction reached a local high of $2,024.60 a week ago on Tuesday.

Gold is 0.6% lower this morning, as it is trading along its short-term local lows. What about the other precious metals? Silver lost 1.26% on Tuesday and today it is 0.9% lower. Platinum gained 1.03% and today it is 1.5% lower. Palladium gained 0.30% on Tuesday and today it’s 0.6% lower. So precious metals’ prices are going down this morning.

Yesterday’s CB Consumer Confidence release has been worse than expected. However, financial markets remained risk-on, as stocks extended their multi-year bull market. Today we will get Durable Goods Orders number at 8:30 a.m. But investors will be waiting for tomorrow’s Fed talk and the U.S. preliminary GDP release.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Wednesday, August 26

  • 8:30 a.m. U.S. – Durable Goods Orders m/m, Core Durable Goods Orders m/m

Thursday, August 27

  • 8:30 a.m. U.S. – Preliminary GDP q/q, Unemployment Claims
  • 9:10 a.m. U.S. – Fed Chair Powell Speech
  • 10:00 a.m. U.S. – Pending Home Sales m/m
  • 11:15 a.m. Canada – BOC Governor Macklem Speaks
  • All Day, U.S. – Jackson Hole Symposium Day 1

What future gold price behavior may be? Let’s take a look at our proprietary Gold True Seasonality for the third quarter of 2020 where we combined the regular seasonality with the effect of the expiration of options and accuracy estimation. The yearly seasonal pattern of the price of gold was calculated using a 18-year-long period from 2002 to 2019 and then adjusted for the expiration of options that we observed between 2009 and 2019.

We can see that gold is usually going higher in the end of August. However, notice the declining accuracy in that period too. Then in September the market is trading within a consolidation.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Asia Pacific Stocks Stumble; Alibaba’s Hong Kong Shares Jump

Most major Asia Pacific stock indexes are set to finish lower on Wednesday after reversing earlier gains. Shares in mainland China led losses among the regional indexes. Over in New Zealand, trading on the country’s stock exchange was halted earlier on Wednesday following a potential second cyber-attack, Reuters reported citing the New Zealand Stock Exchange.

In the cash market on Wednesday, Japan’s Nikkei 225 Index settled at 23290.86, down 5.91 or -0.03%. Hong Kong’s Hang Seng Index finished at 25452.73, down 33.49 or -0.13% and South Korea’s KOSPI Index closed at 2369.32, up 2.59 or +0.11%.

In China, the Shanghai Index settled at 3329.74, down 43.84 or -1.30% and Australia’s S&P/ASX 200 finished at 6116.40, down 45.00 or -0.73%.

Ant Group Files for Hong Kong-Shanghai IPO

Ant Group, an affiliate of Alibaba, has given the first look at its financials ahead of its highly-anticipated initial public offering (IPO), in a document filed on Tuesday.

The financial technology powerhouse, which is still controlled by Alibaba founder Jack Ma, reported profit of 21.9 billion Chinese Yuan ($3.2 billion) on total revenues of 72.5 billion Yuan in the first half of the year, according to the exchange filing.

That represented a more than 1000% jump in profits from the same period a year ago, when the company raked in 1.9 billion Yuan. Revenues were also up significantly, climbing about 38% from the 52.5 billion Yuan the firm made in the first half of 2019.

The company has not yet disclosed details about the pricing of its shares. But one analyst previously told CNBC that its market valuation could be north of $200 billion, making it larger than some of America’s biggest banks.

New Zealand Stock Exchange NZX Hit by Probable Second Cyber Attack

Trading on New Zealand’s stock exchange was halted on Wednesday after a likely second cyber-attack, bourse operator NZX said.

NZX was working with its network service provider to fix further connectivity issues which appeared similar on Tuesday’s breakdown caused by a cyberattack, it said in a statement.

Wednesday’s disruption follows a halt in its cash market Tuesday evening after a distributed denial of service (DDoS) attack impacted network connectivity. The attack was from offshore, the company said.

Australia Shares Slip on Rising Virus Death Toll

Australian shares snapped two straight sessions of gains on Wednesday as risk sentiment was hit by the rising coronavirus death toll in the country’s second-most populous state, although additional stimulus and hopes for a local vaccine capped losses.

Victoria recorded its second-deadliest COVID-19 daily death toll on Wednesday, while the state government’s intention to extend a state of emergency of another year also weighed on the market.

The benchmark stock index cut some of its losses after the government announced fresh stimulus by way of A$1 billion ($719.20 million) in defense spending to grow the military and support employment.

For a look at all of today’s economic events, check out our economic calendar

Wall Street Finishes Mixed as Apple Split Forces Dow Reshuffle

The major U.S. stock indexes finished mixed on Tuesday. The S&P 500 and the NASDAQ Composite were up moderately before closing at record highs. But the Dow, which has yet to reclaim its February high, was firmly in the red.

Apple Inc weighed heaviest on all three indexes, its stock retreating 1.6% days ahead of its 4-to-1 stock split. Its weakness capped gains from positive developments in U.S.-China trade and fresh progress in the medical battle against the coronavirus pandemic.

On Tuesday, the benchmark S&P 500 Index settled at 3443.62, up 12.34 or +0.41%. The blue chip Dow Jones Industrial Average finished at 28248.44, down 60.02 or -0.24% and the technology-based NASDAQ Composite closed at 11466.47, up 86.75 or +0.91%.

Apple’s Split Leads to Dow Shake-Up

Apple’s stock split will reduce its weight in the Dow, which prompted a reshuffle in the blue-chip industrial average, with Salesforce.com replacing Exxon Mobil Corp, Amgen Inc taking Pfizer Inc’s spot, and Raytheon Technologies Corp ousted by Honeywell International Inc.

Salesforce.com, Amgen and Honeywell shares were up between about 3% and 5% as money managers scrambled to add them to their portfolios.

Mixed US Economic News

On the economic front, the Conference Board’s Consumer Confidence Index plunged to a 6-year low this month, while a report from the Commerce Department showed sales of new homes in July surged to a more than 13-1/2 –year high.

Later in the week the Kansas City Fed will convene its virtual Jackson Hole Economic Policy Symposium, with U.S. Federal Reserve Chairman Jerome Powell expected to speak.

Trade and COVID-19 Chatter Remain at Forefront

Trade officials in Washington and Beijing reaffirmed their commitment to Phase One of a bilateral trade deal, but goodwill between the countries soured as China called a U.S. spy plane’s flight through a no-fly zone a “naked provocation.”

Meanwhile, British drugmaker AstraZeneca has begun trials of its antibody-based drug for the treatment and prevention of COVID-19, the latest development in a global race to combat the pandemic.

Stocks in the News

American Airlines Group Inc dropped 2.8% after announcing it would layoff 19,000 employees in October unless the government extends airline payroll aid.

Electronics chain Best Buy Inc beat analysts’ second-quarter sales expectations but warned of a current quarter slowdown following the work-from-home demand surge. Its shares were off 4.6%.

Medtronic rose 2.8% after the medical device maker’s quarterly profit beat consensus. The company said a revival in elective surgeries was boosting demand.

For a look at all of today’s economic events, check out our economic calendar.

Salesforce.com Shares Hit Record High on Strong Earnings; Buy with Target Price of $280

Salesforce.com Inc, an American cloud-based software company headquartered in San Francisco, reported a 29% jump in quarterly revenue as demand for online business software surged amid COVID-19 pandemic and raised its revenue forecast for the fiscal year 2021, sending its shares to a record high of $245.10 in after trading hours on Tuesday.

Salesforce’s second-quarter revenue jumped 29% to $5.15 Billion, higher than the market consensus of $4.90 billion. Excluding items, the leading provider of enterprise cloud computing solutions said it earned a profit of $1.44 per share and net income surged to $2.63 billion, or $2.85 per share, from $91 million, or $0.11 per share, a year earlier.

“Salesforce (CRM) remains a top front office pick as pipelines continue to improve despite the current environment. Despite the 13% AH increase, we believe Salesforce is valued attractively at 9.1x EV/2021 rev vs. group at 9.9x. As such, we maintain Buy and raise our PT to $285,” said Brent Thill, equity analyst at Jefferies.

“We believe Salesforce can deliver more margin improvement given its scale and will continue to monitor. Mgmt. also noted that this is not the best M&A environment primarily due to elevated multiples within Software. We continue to highlight this in our valuation piece and believe the next leg of growth has to be driven by fundamentals,” Thill added.

Salesforce forecast revenue between $20.7 billion and $20.8 billion in the fiscal year 2021, up from its previous forecast of $20 billion.

Salesforce.com shares closed 3.64% higher at $216 but surged over 13% to a record high of $245.10 in after trading hours on Tuesday. However, the stock is up over 30% so far this year.

Salesforce.com stock forecast

Morgan Stanley gave a target price of $275 with a high of $335 under a bull-case scenario and $172 under the worst-case scenario. Credit Suisse raised the target price to $245 from $200. Other equity analysts also recently updated their stock outlook. JP Morgan upped target price to $250 from $200, Jefferies increased their price objective to $285 from $235, Piper Sandler raised the target price to $285 from $210 and Wedbush rated outperform with a price target of $250.

Twenty-six analysts forecast the average price in 12 months at $208.40 with a high forecast of $254.00 and a low forecast of $120.00. The average price target represents a -3.54% decrease from the last price of $216.05. From those 26 analysts, 22 rated “Buy”, two rated “Hold” and two rated “Sell”, according to Tipranks.

We think it is good to buy at the current level and target $280 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Salesforce remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation. We see the company as a long-term share gainer within an estimated >$200 billion TAM spread across areas ranging from Sales, Customer Service, Marketing, and Digital Commerce to App Cloud, Analytics, and Integration Cloud,” said Keith Weiss, equity analyst at Morgan Stanley.

“With an expanding solution portfolio, a large and incremental contribution from recent M&A, we see total revenue nearly doubling by FY24, while expanding margins support durable ~20% CAGR in FCF/share through FY24. We remain Overweight CRM shares with our $275 PT is based on 27X our CY25e FCF per share of $13.08, discounted back at 7.5%,” he added.

Upside and Downside risks

Upside: 1) Better than expected synergies with newly acquired assets. 2) Bigger bounce back in margins after recent M&A – highlighted by Morgan Stanley.

Downside: 1) M&A may complicate raise concerns about core business strength and margin expansion potential. 2) Competition from apps vendors and emerging Internet platforms (ORCL, SAP, MSFT, AMZN).

European Equities: Economic Data, Geopolitics, and COVID-19 News in Focus

Economic Calendar:

Wednesday, 26th August

French Consumer Confidence (August)

French Jobseekers Total

Friday, 28th August

GfK German Consumer Climate (Sep)

French Consumer Spending (MoM) (Jul)

French GDP (QoQ) (Q2) Final

The Majors

It was a mixed day for the European majors on Tuesday. The DAX30 and EuroStoxx600 slipped by 0.04% and by 0.30% respectively, with the CAC40 ended the day down by 0.01%.

Following the disappointment of August’s private sector PMIs, economic data was skewed to the positive on Tuesday.

Optimism towards successful treatment of COVID-19 and easing tensions between the U.S and China were also positive.

Concerns over the Eurozone economy, however, limited the upside on the day.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Key stats included 2nd estimate GDP numbers for the 2nd quarter and IFO Business Climate figures from Germany.

According to Destatis,

  • The German economy contracted by 9.7% in the 2nd quarter, revised up from a 10.1% contraction. In the 2nd quarter, the economy had contracted by 2%.
  • Household final consumption slumped by 10.9%, with the gross fixed capital formation in machinery and equipment down by 19.6%.
  • Gross fixed capital formation in construction fell by 4.2%, reversing most of a 5.1% increase from the 1st
  • Providing support, however, was a 1.5% rise in the final consumption expenditure of the general government.
  • Trade with foreign countries also weighed. Exports of goods and services slid by 20.3%, with imports down by 16.0%.
  • In the same quarter, a year earlier, the economy contracted by 11.3%, which was revised up from an 11.7% contraction.

From the IFO, the Business Climate Index rose from 90.4 to 92.6. Economists had forecast a decline to 92.2.

According to the August survey,

  • In manufacturing, the business climate saw improvement, supported by a pickup in company assessment of their current situation. While many companies still considered their current situation as poor, their outlook improved.
  • The Business Climate Index for the service sector saw a large increase in August. Both the current situation and outlook sub-indexes were on the rise.
  • By contrast, the upward trend in trade’s business climate index flattened. While companies were more satisfied with their current situation, pessimism over their outlook remained.
  • The IFO Business Expectations sub-index rose from 97.0 to 97.5, with the Current Assessment sub-index rising from 84.5 to 87.9.

From the U.S

It was a relatively quiet day on the economic calendar. Key stats included August consumer confidence figures and housing sector numbers for June and July.

In August, the CB Consumer Confidence Index fell from 91.7 to 84.8. Economists had forecast a rise to 93.0.

From the housing sector:

  • New home sales rose by 13.9% in July, following a 15.1% jump in June. Economists had forecast a 1.3% rise.
  • On an annualized basis, new home sales stood at 901k, up from 791k in June. Economists had forecast 785k new home sales.
  • Year-on-year, the S&P/CS HPI Composite – 20 n.s.a rose by 3.5% in June, following a 3.6% rise in May.

The housing sector numbers had a muted impact on the European majors, however.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Tuesday. Continental rose by 0.94% to buck the trend on the day. BMW and Daimler fell by 0.26% and by 0.64% respectively, with Volkswagen declining by 0.13% on the day.

It was another bullish day for the banks, however. Deutsche Bank and Commerzbank ended the day with gains of 0.59% and 0.66% respectively.

From the CAC, it was a mixed day for the banks. Soc Gen fell by 0.30%, while BNP Paribas and Credit Agricole rose by 0.21% and by 0.26% respectively.

It was also a mixed day for the French auto sector. Peugeot slipped by 0.67%, while Renault rose by 0.14%.

Air France-KLM rose by 1.29%, following on from Monday’s 2.09% gain, while Airbus SE ended the day down by 0.75%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX. Following on from a 0.75% loss on Monday, the VIX fell by 1.52% to end the day at 22.03.

The S&P500 and NASDAQ rose by 0.36% and by 0.76% respectively, while the Dow fell by 0.21%.

A combination of easing tensions between the U.S and China and positive COVID-19 news provided support for the majors.

An easing in the number of new COVID-19 cases and hopes of successful treatment and vaccine were positives.

On the geopolitical risk front, there was also news of the U.S and China making progress on trade talks and reaffirming commitment to the phase 1 trade agreement.

VIX 26/08/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats include French consumer confidence and job seeker totals.

We can expect both sets of numbers to have an influence on the CAC40 in the early part of the European session.

Later in the day, durable goods and core durable goods orders from the U.S will also influence the European majors.

Away from the economic calendar, chatter from Beijing and Washington and COVID-19 news will also need monitoring.

The Futures

In the futures markets, at the time of writing, the DAX was up by 2.5 points, while the Dow was down by 51 points.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Price Forecast – Stock Markets Initially Rally but Gives Up Gains Early

The S&P 500 has initially tried to rally during the trading session on Tuesday but gave back quite a bit of the gains as we have formed a less than desirable candlestick. That being said, it looks as if the three 450 level is going to offer a significant amount of resistance, but more importantly we have the support level near the 3400 level. I think that a couple of hammers that were formed previously before breaking above that level shows just how much interest there is in this market, so I like the idea of buying a dip that shows some type of bounce.

S&P 500 Video 26.08.20

At this point in time, it is likely that the market will continue to be very noisy, but I do think that we are going to go looking towards the 3500 level. With that being the case, it is very likely that we will continue to see a lot of choppy and volatile trading, but at the end of the day with Jerome Powell speaking at Jackson Hole this week, it is likely that there will be some type of dovish statement that could help the stock market as well. The market has been relentless in its move higher, but now needs to retest the previous all-time high at the 3400 level to get a lot of confidence flowing into the market and thereby sending stocks much higher. The pullback that we are seen during the Tuesday session is typical and a completely normal.

For a look at all of today’s economic events, check out our economic calendar.

Chipotle Mexican Grill At Resistance After Big Breakout

Chipotle Mexican Grill Inc. (CMG) met Q2 2020 earnings and revenue estimates in July, prompting a sell-the-news reaction that held short-term support. Revenue fell 4.8% year-over-year, with comparative sales slumping badly in May and June but rising 2% in June. The popular fast food chain noted a healthy sales escalation throughout July, with a 6.4% increase in comparative restaurant sales.

Chipotle Posts Impressive Return Since 2018

Chipotle Mexican Grill operates 2,580 Mexican-themed fast food restaurants in the United States, along with 39 international locations. The stock was a top NYSE and restaurant sector performer until 2015 when it got blamed for a major food poisoning outbreak that uncovered questionable sanitizing procedures. The downtrend finally bottomed out at a 6-year low in 2018, giving way to a strong recovery that’s gained more than 500% in the last 2½ years.

Bernstein raised their target from $1,300 to $1,600 on Tuesday, with analyst Sara Senatore noting that, “Chipotle Mexican Grill appears to have taken the first small steps toward the margin part of the recovery path with delivery fees; we expect modest pricing could also play a role as could a slacker labor market. Even relatively modest fees support margins. Mobile order ahead has also tripled; reduced delivery support will likely translate into ordering channel shift, not lost traffic.”

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Moderate Buy’, with an even split of 15 ‘Buy’ and 15 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions and move to the sidelines. Price targets currently range from a low of $751 to a street-high $1,600 while Chipotle Mexican Grill is now trading $60 above the median $1,207 target. This placement could put a lid on returns, especially with the astronomical 140.46 price-to-earnings ratio (P/E).

The stock broke out above the 2015 high near 750 in August 2019 and failed the breakout in the first quarter’s pandemic swoon. It bounced back to the rally high in May and broke out once again, entering a rising channel that’s contained price action into August. Fortunately for bulls, this pattern significantly lowers risk because stops can be placed relatively close to price action, allowing an easy exit during the first stages of an intermediate correction.

Best Buy Q2 Sales Rose about 6% But Warns of a Slowdown in Q3; Shares Down About 8%

Best Buy Co Inc, an American multinational consumer electronics retailer headquartered in Minnesota, said its comparable sales rose about 6% in the second quarter but cautioned about a slowdown in the third quarter as the company faced a risk of higher unemployment, lower fiscal stimulus and supply chain issues due to COVID-19 pandemic, sending its shares down about 8% on Tuesday.

The technology retailer said its enterprise comparable sales rose 5.8%, which was higher than the market consensus of 3.7% growth. Overall revenue increased about 4% to $9.9 billion and revenue in the U.S. increased by 3.5% to $9.13 billion versus last year. The increase was primarily driven by comparable sales growth of 5%, which was partially offset by the loss of revenue from 25 permanent store closures in the past year.

Best Buy said in the U.S. online revenue increased 242.2% to $4.85 billion on a comparable basis primarily due to higher conversion rates and increased traffic. As a percentage of total revenue in the U.S., online revenue increased to approximately 53.1% versus 16.1% last year. Best Buy’s net earnings climbed 81.5% to $432 million in the quarter.

“Expectations were clearly high heading into Best Buy’s print, and we think their results and early 3Q look met expectations. With the stock having moved up significantly recently, it’s unclear how much is left in the near term, and we could see some profit-taking,” said Michael Baker, MD and senior research analyst at D.A. Davidson.

“But, we continue to like this story as trends accelerate and the company remains very well positioned for the new ‘stay, play, earn and learn’ from home normal, or ‘work, learn, connect and cook’ at home, as Best Buy states it,” Baker added.

Best Buy’s shares traded about 8% lower at $109.19 on Tuesday. However, the stock is up over 30% so far this year.

Executives’ comments

“Enterprise revenue growth was almost 4%, even though our stores were open by appointment only for the first six weeks of the quarter. Specifically, enterprise sales growth was approximately 16% in the last seven weeks of Q2 after we opened our stores and the strength continued into August, with sales up approximately 20% for the first three weeks of Q3,” said Corie Barry, Best Buy CEO.

“As a result of the ongoing uncertainty, we are not providing financial guidance today. However, I would note that we are planning for Q3 sales to be higher compared to last year but likely will not continue at the current quarter-to-date level of approximately 20% growth. Also, as our stores are fully reopened, we are planning for Q3 SG&A expense to be more in line with last year’s third quarter,” Best Buy CFO Matt Bilunas said.

Best Buy stock forecast

Fourteen analysts forecast the average price in 12 months at $110.00 with a high forecast of $135.00 and a low forecast of $92.00. The average price target represents a -6.28% decrease from the last price of $117.37. From those 14 analysts, nine rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Best Buy had its price target raised by Telsey Advisory Group to $120 from $105. They currently have an outperform rating on the technology retailer’s stock. Morgan Stanley gave a target price of $85 with a high of $105 under a bull-case scenario and $60 under the worst-case scenario.

Other equity analysts also recently updated their stock outlook. Piper Sandler lifted their price objective on shares of Best Buy to $127 from $112 and gave the company an overweight rating.

We think it is good to buy at the current level and target $130 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Best Buy is a best in class retailer led by a capable management team, and we are positive on the longer-term opportunity for the business and stock. BBY’s leading position in a healthy category and strength in key Retail fundamentals including merchandising, labour management, supply chain and omni-channel underpin our view,” said Simeon Gutman, equity analyst at Morgan Stanley.

“The shorter-term outlook seems less favourable, with a high level of uncertainty around sales/margin trends in 2020-2021. This keeps us Equal-weight rated,” he added.

U.S. Stocks Set To Open Higher As Trade Deal With China Is In Good Shape

U.S. And China Confirm Progress On Phase 1 Trade Deal

S&P 500 futures are gaining ground in premarket trading as U.S. and China trade officials confirmed that Phase 1 trade deal was progressing well.

Not surprisingly, coronavirus pandemic put significant pressure on the implementation of the deal but it looks like China is increasing its efforts to stay in line with the original agreement.

This news is a major relief for the world markets which were worried that the continued deterioration of U.S. – China relations could jeopardize the important trade deal and hurt the world economy at a time when it tries to recover from the coronavirus shock.

Interestingly, the news has put some pressure on precious metals. Gold and silver, which have recently enjoyed a major boost from safe-haven buying, have lost momentum and are under pressure today.

Oil In Spotlight As Tropical Storm Laura May Become A Major Hurricane

Oil prices continue to get support from storm news as Tropical Storm Laura is forecasted to turn into a major hurricane.

Oil producers have already shut more than 1 million barrels per day of oil production in the U.S. Gulf of Mexico, and traders focus on whether the storm deals any damage to the existing infrastructure.

While the hurricane news are a positive catalyst for oil in the near term, oil price upside remains limited as market participants are concerned with the negative impact of COVID-19 on oil demand.

New Home Sales Are Set To Increase by 1.3%

Today, the U.S. will report New Home Sales data for July. New Home Sales are expected to grow by 1.3%, continuing the positive trend seen in June when New Home Sales increased by 13.8%.

The recent data on Building Permits and Housing Starts showed strong growth, and analysts expect that a combination of low interest rates and increased demand for living space amidst the pandemic will coninue to push New Home Sales higher.

A better-than-expected New Home Sales report will likely provide additional support to stocks which are eager to rise on any good news as the current upside trend remains very strong.

For a look at all of today’s economic events, check out our economic calendar.

Daily Gold News: August 25 – Gold Going Sideways Since Last Wednesday’s Decline

The gold futures contract lost 0.40% on Monday, as yellow metal extended its short-term consolidation following the recent decline below $2,000 price level. Gold reversed lower on August 7 after much better than expected Nonfarm Payrolls release, among other factors. The following upward correction reached a local high of $2,024.60 a week ago on Tuesday.

Gold is unchanged this morning, as it is trading within a mentioned short-term consolidation. What about the other precious metals? Silver lost 0.47% on Monday and today it is 0.1% lower. Platinum lost 0.09% and today it is 1.5% higher. Palladium lost 0.68% on Monday and today it’s 0.2% higher. So precious metals’ prices are mixed this morning.

Yesterday we didn’t get any important economic data releases. The markets will be waiting for Thursday’s-Friday’s Jackson Hole Symposium’s outcomes.

But today we will also get the important CB Consumer Confidence number along with New Home Sales and Richmond Manufacturing Index at 10:00 a.m.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Tuesday, August 25

  • 2:00 a.m. Eurozone – German Final GDP q/q
  • 4:00 a.m. Eurozone – German ifo Business Climate
  • 9:00 a.m. U.S. – HPI m/m, S&P/CS Composite-20 HPI y/y
  • 10:00 a.m. U.S. – CB Consumer Confidence, New Home Sales, Richmond Manufacturing Index

Wednesday, August 26

  • 8:30 a.m. U.S. – Durable Goods Orders m/m, Core Durable Goods Orders m/m

What future gold price behavior may be? Let’s take a look at our proprietary Gold True Seasonality for the third quarter of 2020 where we combined the regular seasonality with the effect of the expiration of options and accuracy estimation. The yearly seasonal pattern of the price of gold was calculated using a 18-year-long period from 2002 to 2019 and then adjusted for the expiration of options that we observed between 2009 and 2019.

We can see that gold is usually going higher in the end of August. However, notice the declining accuracy in that period too. Then in September the market is trading within a consolidation.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Phase One Trade Deal Optimism Lifts Asia-Pacific Shares

The major Asia-Pacific stock indexes finished mixed but mostly higher on Tuesday after the U.S. and China indicated progress in trade talks, and as hopes of new coronavirus treatments boosted broader sentiment among global investors.

The upbeat sentiment in Asia on Tuesday followed reports that top U.S. and Chinese officials see progress in resolving concerns around the Phase 1 trade deal reached between the two countries in January, Reuters reported.

The markets have also been supported by broader optimism about medical solutions to end the coronavirus pandemic. U.S. regulators on Sunday authorized the use of blood plasma from recovered COVID-19 patients as a treatment option, helping the S&P 500 1% higher to another record close overnight.

In the cash market on Tuesday, Japan’s Nikkei 225 Index settled at 23296.77, up 311.26 or +1.35%. Hong Kong’s Hang Seng Index finished at 25486.22, down 65.36 or -0.26% and South Korea’s KOSPI Index closed at 2366.73, up 36.90 or +1.58%.

China’s Shanghai Index settled at 3373.58, down 12.06 or -0.36% and Australia’s S&P/ASX 200 finished at 6161.40, up 31.80 or +0.52%.

Global Airline Shares Jump

Shares of airlines in the Asia Pacific region rose on Tuesday, following their counterparts in the United States. The move was driven by the positive coronavirus developments.

In Hong Kong, shares of China Eastern Airlines jumped 4% while China Southern Airlines surge 5.19%. Similar gains were seen in Japan, where ANA Holdings soared 7.18%. Meanwhile in Singapore, Singapore Airlines added 3.26%.

South Korean Stocks See Biggest Gain in a Month on Trade Hopes

South Korean shares posted their sharpest gain in nearly a month, after the United States and China indicated progress in their trade talks and daily COVID-19 infections in the country eased from their peaks.

Top U.S. and Chinese officials see progress on resolving issues over the Phase 1 trade deal reached in January and both sides are committed to the success of the agreement, the U.S. Trade Representative’s Office said.

South Korea reported 280 new infections as of midnight Monday, a drop in daily new cases from 397 as of Saturday midnight.

In other news, the Bank of Korea is expected to keep interest rates on hold on Thursday as it weighs concerns about rising household debt and property taxes.

For a look at all of today’s economic events, check out our economic calendar.

Intuit Climbs After KeyBanc Ups Price Target

Intuit Inc. (INTU) shares jumped 3.38% Monday after KeyBanc reiterated its ‘Overweight’ rating on the accounting software maker’s stock and lifted its 12-month price target to $350 from $315. The upgrade implies a 5% premium to Monday’s $333.12 close.

Analyst Josh Beck says his analysis of Key First and IRS data prompts a more positive bias on TurboTax fundamentals. Beck also argues the company has synergy opportunities through its recent acquisition of Credit Karma – a fintech startup with more than 37 million active users. In February, Intuit announced that it had bought the firm for $7.1 billion to bolster its personal finance offerings.

As of Aug. 25, 2020, Intuit’s shares have an $86.87 billion market capitalization, offer a modest 0.66% dividend yield and trade 28% higher on the year. Over the past three months, they have gained 16%. From a valuation standpoint, the stock trades at about 40 times future earnings, above its longer-term multiple of 30 times.

Upbeat Earnings Expected

Analysts expect Intuit to post fiscal Q4 earnings of $1.20 per share when the company reports its quarterly results after the closing bell on Tuesday. This compares to a loss of 9 cents a share in the year-ago quarter. Meanwhile, the Street tips revenues to come in at $1.55 billion, indicating year-over-year (YoY) top-line growth of 55.8%. The postponement of IRS tax filing from the third quarter to the fourth is likely to have provided a considerable tailwind during the period.

Wall Street Ratings

Analysts remain bullish, impressed by financial software company’s opportunity to grow its QuickBooks Online subscriber base. Currently, the stock receives 12 ‘Buy’ ratings, 6 ‘Hold ratings, and just 2 ‘Sell’ ratings. Price targets range from as high as $350 to as low as $220, with the median consensus pegged at $308.

Technical Outlook and Trading Tactics

Intuit shares broke above an ascending triangle pattern last week, with gains accelerating on above-average volume yesterday after the KeyBanc price upgrade. Given the relative strength index (RSI) sits in overbought territory, traders should consider waiting for a pullback entry instead of chasing recent gains.

Look for buying opportunities near $313.50, where the stock finds support from the triangle’s upper trendline. Traders who enter at this level should consider placing a stop-loss order below the 50-day simple moving average (SMA). Set a profit target that is at least twice the amount risked. For instance, if using a $15 stop, consider targeting a move of at least $30.

Scentre Group Posts AU$3.6 Billion Loss in H1 as COVID-19 Pandemic Bites

Scentre Group, the owner of Westfield-branded shopping malls in Australia and New Zealand, reported an interim loss of AU$3.6 billion in the first half of 2020 amid rising concerns given the negative effects of COVID-19 crisis and the impact on tenants’ ability to pay rent.

The owner of over 40 Westfield malls said it also took AU$232.1 million credit charge relating to COVID-19. Overall revenue slumped 16% to AU$1.1 billion and funds from operations plunged 46% to AU$361.9 million.

Scentre reported a net loss for the six months to June 30 from a net profit of AU$740 million in the year-ago period, due to AU$4.1 billion downward revaluation of its assets.

For the six-month period, the Group collected 70% of gross rental billings and for the months of June and July 2020, gross rental billings collections were over 80%. In-store sales, Scentre’s retail partners were impacted by the pandemic and the associated restrictions on people movement.

In-store sales for the retail partners that traded throughout the six-month period were 8.1% lower compared to the previous corresponding six-month period in 2019. Speciality in-store sales were 12.1% lower for the six-month period compared to the previous corresponding period.

Scentre Group’s shares gained about 4% to AU$2.09 on Tuesday. However, the stock is down over 40% so far this year.

Executive comments

“As customers are returning to our centres, more than 93% of retail stores are open across the portfolio (excluding our Victorian centres). Portfolio occupancy was 98.8% at the end of June 2020. We launched Westfield Plus, our membership customer engagement platform, at Westfield Newmarket in New Zealand in late 2019 and recently introduced the program in Australia. We now have more than 500,000 members on Westfield Plus and this continues to grow,” Scentre Group CEO Peter Allen said.

“The shopping centre industry has provided over AU$1.6 billion of support for retailers during the pandemic. Our industry is unique in that it has provided, and self-funded, a level of financial support beyond any other industry as well as most government pandemic support packages. We have agreed arrangements with 2,438 of our 3,600 retail partners, including 1,624 SME retail partners,” Allen added.

Scentre stock forecast

Morgan Stanley target price is AU$2.71 with a high of AU$3.95 under a bull-case scenario and AU$1.70 under the worst-case scenario. Other equity analysts also recently updated their stock outlook. Jefferies lowered their price target to $2.00 from $2.28; retained ‘Hold’ rating.

We think it is good to hold for now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst view

“We believe Scentre Group is better placed to recover from a COVID-19 world than other retail-dominant REITs. Across its portfolio, its malls are located in wealthier areas (by house price), with stronger incomes, and among the highest median population densities in surrounding areas,” said Simon Chan, equity analyst at Morgan Stanley.

“Its discretionary bias means that it is more leveraged to the well-being of consumers than other portfolios. However, we have factored for this by assuming that rent after COVID-19 will be reset to 15% lower, allowing for an economic decline. In our view, what’s priced in is worse than we think our analysis justifies,” he added.

Upside and Downside risks

Upside: 1) A sustained recovery in speciality retail sales, to 3-4% p.a. 2) A pickup in development activities, including third-party activity. 3) Strong recovery trajectory after COVID-19 issues – highlighted by Morgan Stanley.

Downside: 1) Rise in Interest rates at both at the short and long end of the curve. 2) Further deterioration in the shopping habits of consumers – towards omni-channels. 3) Retailers continuing to rationalise store networks. 4) Prolonged COVID-19 impact.