Six of UBS' best pre-reporting season ASX ideas

Charts and Caffeine

Livewire Markets

In today's Charts and Caffeine, we'll take a look at a slew of great stock ideas from UBS, discuss why consumer sentiment is so important, and a chart that looks at consumer sentiment in its purest form - Google searches!

First, here's the markets overnight:

MARKETS WRAP

  • S&P 500 - 3,854 (-1.15%)
  • NASDAQ - 11,373 (-2.26%)
  • CBOE VIX - 26.17
  • GERMAN DAX - 12,832 (-1.4%)
  • GOLD - US$1,732/oz
  • WTI CRUDE - US&103.46/bbl
  • USD INDEX - 108.41 (the US Dollar is so strong at the moment that the Euro could break parity against the greenback for the first time in a generation.)
  • US10YR - 2.993%

THE CALENDAR

Locally, we will receive an update on how aggressive rate hikes from the RBA are affecting the mood among households and businesses. In June, the Westpac-Melbourne Institute consumer sentiment index sank to 86.4, its lowest level in 22 months. What will tomorrow's print bring? We shall see.

For most of this week's highlights, look at yesterday's report

THE CHARTS

That's a lot of red. (Source: Macrobond, Eurostat)

This is not the easiest chart to read first thing in the morning - so please bear with me. What you are looking at is the change in the last 10 years of the components of inflation throughout Europe. The Harmonised Index of Consumer Prices (HICP) is the basis for this data. It measures changes over time in the prices of consumer goods and services. 

Food, housing and utilities, furnishings, transportation, and hospitality are experiencing the highest inflation. In simple terms, the dark red areas represent the variation between the price and the 10-year average price rise. 

The items in dark red are significantly higher than their 10-year average price; while the lighter shades represent the items are closer to their 10-year average price.

Gee, I wonder why that might be.

Then, there's how inflation is being reflected across the pond. (Source: Twitter)

Speaking of inflation, if you ever want to feel how regular people are digesting all this news, just look at Google searches. "Recession" and "inflation" have not been searched this much (together) since 2004. Investopedia must be getting a workout!

STOCKS TO WATCH

As we continue our march towards August earnings season in Australia, today I've decided to take a look at some more of the brokers' "best ideas" lists. 

Today - it's the turn of UBS which has had an ongoing stagflation base case for the global economy. As a result, their stock picks are based on what might outperform during periods of high inflation and rising interest rates, and slowing growth. 

Short answer? Go for defensive names.

Among the team's newest additions, awarded for their stable earnings in tough times:

  • Metcash (ASX:MTS)
  • Transurban (ASX:TCL)
  • TPG Telecom (ASX:TPG)

For their attractive valuations, the awards go to: 

  • ANZ (ASX:ANZ)
  • Steadfast (ASX:SDF)

And... for strong cash flow support and an "enticing" (their words not mine) growth story, UBS selects IGO (ASX:IGO).

THE QUOTE

According to the documents and interviews with former employees, the company used a program called Greyball to keep authorities from hailing cars — and potentially impounding them and arresting their drivers.
It used a technology called “geofencing” that, based on location data, blocked ordinary use of the app near police stations and other places where authorities might be working. And it used corporate networking management software to remotely cut computers’ access to network files after they had been seized by authorities.

This is an excerpt from an absolutely fascinating piece I've been reading in the Washington Post. The company concerned in this excerpt is ride-hailing giant Uber. Reporting from the Post's Investigations team finds that the company has been using "stealth" technology to defeat regulators and skirt their way around local laws to operate in hundreds of cities. Journalists from 29 countries have been working on this story for months and the findings are only being released now.

The full summary is here - and it's absolute must-read stuff.

THE TWEET

Today in "things that didn't age well". 

Today's wrap was written by Hans Lee.

GET THE WRAP

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Charts and Caffeine
Markets Wrap
Livewire Markets

Charts and Caffeine is Livewire's daily pre-market news and analysis wrap. Every day, Livewire's team of market journalists and editors get you across the overnight session and share their best insights to get you better set for the investing day...

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