ASX Gains 0.50% as Tech Stocks Surge, Financial Sector Boosts Market - Bendigo In the Buy Zone

Bendigo and Adelaide Bank Limited (ASX: BEN) is emerging as a strong income stock pick with notable growth potential and a reliable dividend yield. The stock has risen by 25% year-to-date, reflecting strong market confidence and solid financial performance.

The recent appointment of Richard Fennell as CEO is expected to drive the next phase of growth. Fennell, with his extensive experience in consumer banking and digital transformation, is likely to enhance the bank’s customer focus and accelerate growth. His leadership will build on Bendigo’s strengths in deposit management and digital platforms.

Financially, Bendigo has performed well, reporting unaudited cash earnings of about $464 million for the ten months ending April 2024, despite a slight 2.3% decrease from the previous period. The bank's Net Interest Margin (NIM) remains competitive at 1.87%, with an exit NIM of 2.30% in April 2024, demonstrating strong profitability.

Bendigo also offers an attractive dividend yield of around 5%, supported by consistent dividend payments over the past 32 years. This combination of steady dividends and growth potential makes Bendigo a compelling choice for income-focused investors.

Market Movers

Aussie stocks saw a notable rebound from the previous session’s losses, ending 0.50% higher at 7971.10 points. This recovery was largely driven by gains in technology stocks, which took their cue from positive movements in Wall Street's tech sector.

Wisetech Global (ASX: WTC) led the charge with a 2.21% rise, reflecting broader optimism in the tech sector.

The financial sector also contributed to the market's upward movement. Major banks performed well, with National Australia Bank (ASX: NAB) increasing by 1.19%. Zip Co Ltd (ASX: ZIP) saw a significant bounce of 6.19%, marking a recovery from recent declines. Insignia Financial Ltd (ASX: IFL) continued to build on its recent strength, adding to the positive sentiment in financial stocks.

However, not all sectors shared in the optimism. Woodside Petroleum (ASX: WPL) emerged as one of the worst performers of the day. The company disclosed that many of its assets are underperforming relative to initial forecasts. Despite this, Woodside remains on track to meet its annual guidance, which somewhat mitigated the negative impact on its share price.

Iluka Resources (ASX: ILU) was another notable underperformer. The company’s performance was hampered by subdued demand from China, impacting its overall financial results. Similarly, Atlas Arteria Group (ASX: ALX) reported a marginal decline in traffic for the June quarter, down 0.2%, which contributed to its weaker performance.

A significant development was the debut of Brazilian rare earths miner Axel REE (ASX: AXE) on the ASX. The company's initial performance was lacklustre, with its share price falling 39% from the IPO price to 12.5 cents. This sharp decline highlights the volatility and risk associated with new market entrants.

Looking ahead, tonight’s focus will shift to earnings reports from major US companies, including Alphabet and Tesla. Additionally, the commencement of spot ether ETFs trading on Wall Street is anticipated to attract significant attention from investors interested in cryptocurrency investments.

Turning to our largest trading partner, the Shanghai Composite experienced a sharp decline, tumbling 1.65% to 2,915. The Shenzhen Component fared even worse, plunging 2.97% to 8,607. This extended the losses from the previous session, reflecting ongoing economic concerns and policy uncertainties in China.

Despite a surprise interest rate cut by the People’s Bank of China (PBOC) on Monday, which reduced the one-year and five-year loan prime rates to record lows of 3.35% and 3.85%, respectively, investor sentiment remained negative. The recent Third Plenary Session of the Communist Party focused on long-term goals but did not introduce concrete measures to address immediate economic challenges. Consequently, growth-oriented technology and auto stocks bore the brunt of the declines, with significant losses recorded by companies such as Cambricon Technologies (-6.3%), Luxshare Precision (-3.3%), Shanghai Belling (-2.9%), Bluepark New Energy (-4.9%), and BYD Company (-4.7%).

Iron ore prices with a 62% iron content slid toward US$108, reaching their lowest levels in three weeks. This drop is attributed to the lack of a major policy shift from China’s Third Plenary Session and a rise in iron ore inventories at Chinese ports, which now approach 150 million tons.

Although Australian miners reported strong annual production for the current fiscal year, the increase in supply has put downward pressure on prices. The rebound in the US dollar and expectations of US Federal Reserve rate cuts in September further influenced metal prices.

US stock futures showed a slight decline on Tuesday as the earnings season continues. Major companies including Coca-Cola, Comcast, General Motors, Spotify, and UPS are set to report their earnings before the market opens, while technology giants Alphabet and Tesla will release their results after the bell.

In Monday’s regular trading, the Dow Jones Industrial Average rose 0.32%, the S&P 500 gained 1.08%, and the Nasdaq Composite advanced 1.58%. The technology, communication services, and industrial sectors led the gains, driven by strong performances from mega-cap tech companies such as Nvidia (+4.8%), Tesla (+5.2%), Microsoft (+1.3%), AMD (+2.8%), and Meta Platforms (+2.2%). Conversely, CrowdStrike experienced a significant decline of 13.5%, and is now down 34% from its all-time high earlier in July. Additionally, political developments, including President Joe Biden's endorsement of Vice President Kamala Harris as his successor, are also influencing market dynamics.

In the oil market, WTI crude futures stabilised around US$78.50 per barrel after a three-session decline. Investor focus shifted to US stockpile data, with the People’s Bank of China’s interest rate cut providing temporary relief from concerns about weakening demand from the top oil consumer.

Short-term supply concerns, such as Canadian wildfires threatening oil production, also supported prices. However, the prospect of a global oil glut, exacerbated by OPEC's plans to restore crude production in Q4, exerted downward pressure on prices. Traders are awaiting API’s oil inventory estimates later in the day, followed by official US government data on Wednesday for further insights.

Gold prices stabilized near US$2,400 per ounce after a four-session decline. Traders are closely monitoring upcoming US economic data, including the advance estimate for Q2 GDP growth, personal spending and income, and the June PCE price index.

Recent data revealed a drop in headline inflation to 3% in June, its lowest in a year, with core inflation falling to 3.3%, the lowest in over three years. This has bolstered expectations for a potential rate cut by the Federal Reserve in September, with traders currently pricing in a 94% chance. The market is also factoring in the political implications of President Biden's endorsement of Vice President Kamala Harris, as this may influence future economic and monetary policies.

Looking ahead, the market is expected to be influenced by several key factors. Fluctuations in commodity prices like gold, oil, and iron ore could impact mining and energy stocks, while stable wage growth might lead to more relaxed monetary policy from the Reserve Bank of Australia, which could boost market sentiment. The ASX 200 has started the month positively, partly due to strong U.S. market performance and gains in the technology and financial sectors. However, geopolitical tensions and economic policies from major economies, especially the U.S. and China, could introduce volatility. Overall, the market’s direction will be shaped by these economic indicators, sector performance, and global conditions.

Regards,

Mark Elzayed

Investor Pulse

General advice only. If seeking personal advice, please consult your financial planner. Past performance is not indicative of future performance.