Two cyclical upgrades from Credit Suisse

The Morning Wrap

Livewire Markets

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.

MARKETS WRAP

  • S&P 500 - 4,207 (-0.07%)
  • NASDAQ - 12,880 (-0.58%)
  • CBOE VIX - 20.20
  • FTSE 100 - 7,466 (-0.55%)
  • STOXX 600 - 440.27 (+0.09%)
  • US 10YR - 2.882%
  • USD INDEX - 105.11
  • GOLD - US$1,788/oz
  • WTI CRUDE - US$94.24/bbl

THE CALENDAR

This afternoon, it's all about UK GDP where all eyes are on whether the country can avert another monthly contraction as it marches ever more into a recession. Later tonight, we'll get the crucial University of Michigan consumer sentiment survey.

I hope you enjoyed the break from a lot of data. Because next week, it's going to be extra busy again.

Source: Forex Factory
Source: Forex Factory

THE WEEK IN EARNINGS

Despite a fall in revenues, earnings, and profit, Telstra (ASX: TLS) raised its dividend for the first time in seven years. Shareholders took the falls more seriously than the dividend hike. In contrast, AMP (ASX: AMP) also saw revenues and profits fall. However, it is commencing a $1.1 billion shareholder return scheme, including buybacks but no interim dividend. 

Fund manager GQG Partners (ASX: GQG) reported a bump in revenues but a fall in after-tax profits. Meanwhile, Viva Leisure (ASX: VVA) expects its second-half revenue to exceed its previous guidance. In contrast, Mirvac Group (ASX: MGR) scraped a profit increase despite a 20% bump in revenues. Finally, QBE Insurance (ASX: QBE) reported a 66% slide in net profits for the first half. But positive comments around premia growth sent its shares north. 

Today, it's all about ResMed, IAG, and Baby Bunting. 

STOCKS TO WATCH

Newsflash: markets are cyclical! Many a company has had its survival quite literally rest on the weather, the quality of its minerals, or even the state of interest rates. I'm noting this - even if you know it already - because Credit Suisse upgraded two companies yesterday post-earnings-related newsflow. 

GrainCorp (ASX: GNC) upgraded its FY22 guidance and so did Credit Suisse. The story should be pretty well-known by now. The consistent upgrades this year are a direct product of the company's supply chains, supported by a positive trading environment and high-quality crops due to the rains.

GNC is now rated "outperform", with a bumped-up price target as well.

And following its back-and-forth with BHP, Oz Minerals (ASX: OZL) now has a neutral rating after sitting at an underperform for two months. The broker now expects it to hit 12x earnings and believes the company is now the most valuable in its field.

The new price target has doubled to $28 from $14.50. The $28 price target is now also the most bullish of any of the brokers covered by FNArena. 

THE CHARTS

History doesn't always repeat itself but who knows if this time also happens to be different. Andreas Steno Larsen at Heimstaden noted this interesting correlation - the returns in equities soared AFTER inflation peaked. This week's US CPI print has already been hailed by some as THE cue for inflation's peak stateside. 

That must beg the question - are we near the bottom? 

But I hear you, dear reader. What about the 1980 portion of the chart? Where inflation was super high and the equity market's returns were relatively resilient?

Enter this chart:

The correlation in this next chart is consumer sentiment and crude oil prices. And it, in many ways, makes a lot of sense. High oil prices mean people can't afford to fill up their cars - meaning fewer long drives and a few unhappier faces.

Energy prices were also the one factor in Wednesday's inflation print that allowed the headline, month-to-month figure to remain flat. 

So is this time 1974-75 or 1980-81? I guess we're all about to find out.

FRIDAY FUN

Source: Jack Derwin/Twitter
Source: Jack Derwin/Twitter

If you need a spring in your step, this is definitely one that you can take with you to the Friday lunch water cooler. This chart was posted by Business Insider's Jack Derwin and shows the most popular musical styles at various points in the investing life cycle. Although, if it was up to me, the next phase after "bubble gum" pop to describe this era would be "unbearable" pop.

(Full disclaimer: I'm a jazz man, myself.) 

Today's report was written by Hans Lee.

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The Morning Wrap
Markets Wrap
Livewire Markets

Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Kerry Sun.

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