Morning Bell 20 January

Wall St closed higher on Friday to post the firstly weekly gain across the three major averages for the year as the big tech rally resumed momentum. The Dow Jones rose 0.78% on Friday and 3.7% for the week, the S&P500 added 1% on Friday and 2.9% for the week, and the Nasdaq ended Friday’s session up 1.51% and added 2.5% for the week. In Europe on Friday the positive investor sentiment extended into the European region buoyed by a strong rally for mining stocks. The STOXX 600 rose 0.68%, Germany’s DAX added 1.35%, the French CAC gained 0.98%, and, in the UK, the FTSE100 ended the day up 1.35%. Across the Asia markets on Friday it was a mixed session as strong economic data in China boosted investor sentiment in the region. China’s CSI index rose 0.31% on Friday after fresh GDP data showed the Chinese economy expanded by 5% YoY and retail sales rose 3.7% which beat expectations. Hong Kong’s Hang Seng rose 0.21% on Friday and Japan’s Nikkei fell 0.31% at the closing bell. Locally on Friday, the ASX200 took lead from Wall Street’s losses overnight to post a 0.2% loss on Friday as the financials weighed on the key index. The pullback followed the ASX200 rising 1.4% on Thursday so for the week the key index still managed a gain of 0.2% last week.

On an economic data front on Friday, we had the highly anticipated retail sales, industrial production, and GDP readings out of China. The Chinese economy expanded 5.4% in Q4 which was above the 5% forecast and above the 4.6% recorded in Q3 which is a welcome sign of material recovery in the region post pandemic. Retail sales further supported the recovery story with a rise of 3.7% in December which beat the 3.2% economists were expecting and is a sharp rise from the 3% reported in November. And Industrial production in the region also rose 6.2% in December on an annual basis which also exceeded expectations and was a sharp rise from the 5.4% reported in November. Overall, the economic growth in China is finally starting to show signs of material turnaround and this boosted the iron ore price and stocks with exposure to the region on Friday.

The winning stocks on the ASX200 on Friday were led by Megaport rallying 10.10%, Liontown Resources rising 9.5% and Lovisa adding 7.73%. And on the losing end REA Group fell 2.71%, TPG Telecom lost 2.4% and JB Hi-Fi ended the day down 2.15%.

Insignia Financial is the talk of the M&A world right now as Bain Capital and CC Capital fight to acquire the nearly 200-year-old Aussie wealth management company. Shares in Insignia rose 6% on Friday after CC Capital increased its takeover offer to a value over $3bn or $4.60/share, above the $4.30/share Bain matched earlier this week. How this one plays out will be very interesting but it’s no wonder why CC and Bain want to acquire Insignia as the purchase will give the acquirer a market leadership position in Australia’s over $4tn superannuation market. And Telix Pharmaceuticals rose 4% on Friday after the cancer imaging and therapy pharmaceuticals company received approval from Europe’s Marketing Authorisation Application for its prostate cancer imaging agent Illucix which already has FDA and TGA approval. This further expansion into Europe broadens the company’s revenue runway for its leading agent Illucix.

What to watch today:

• Ahead of the first trading session of the new trading week the SPI futures are anticipating the ASX will open the new day up 0.34%.
• On the commodities front this Monday morning, oil is trading 1.02% lower at US$77.88/barrel, gold is down 0.5% 2700.99/ounce and iron ore is up 0.72% at US$101.21/tonne.
• The Aussie dollar is buying US$0.61, 96.85 Japanese Yen, 50.88 British Pence and NZ$1.11.

Trading Ideas:

• Bell Potter has reduced the 12-month price target on Lynas Rare Earths (ASX:LYC) from $7.70 to $7.20 and maintain a hold rating on the rare earths producer following the release of a 2nd quar