Both the Brambles Limited (ASX: BXB) and Amcor PLC (ASX: AMC) share prices are up in early trading today. Amcor was up more than 1.5% in the first couple hours of trading, and Bramble’s share price rise wasn’t far behind.
With both companies’ share prices having declined over the last 6 months, and neither having released any particularly exciting news to the ASX recently, why today’s rise? Is this the first hint of a turnaround, or just a blip?
Stand-ins for trade and growth
Brambles and Amcor are 2 companies that are highly dependent on external economic activity for their own revenue. Now, that can be argued about a lot of stocks, but it’s particularly true for these 2 providers of packaging and shipping material.
Brambles specialises in management of pallets, crates and containers. The company provides pallets, reusable crates, produce containers and logistics software as a service in 60 countries, including the US, Australia and throughout the Asia-Pacific region.
Amcor, meanwhile, is a packaging company encompassing everything from food and beverage containers, to medical device and pharmaceutical packaging.
As you can probably imagine, given the only products produced by these 2 companies is the packaging used to ship or sell other companies’ products, both are highly dependent on the fluctuations of global trade and economic activity.
Cautious optimism worldwide
With the Reserve Bank of Australia (RBA)’s Board meeting this afternoon, most investors are expecting an interest rate cut. If correct, this will likely take Australian interest rates to a new record low of 0.75%.
Low rates are a response to a sluggish economy, and with Australia’s construction industry sluggish, lower rates make sense.
However, the horizon doesn’t look entirely bleak. Property prices rebounded strongly last month, which could spell an end to the pain coming for the construction industry. Stronger than expected domestic consumption figures in China could be a positive sign for international trade, and the Dow Jones and Nasdaq indices in the US rose overnight.
The US and Chinese governments’ rhetoric on trade conflicts remains antagonistic. However, investors seem to be betting that strong words now are at least partly for show, and that tensions will be relaxed as the two nations head back into talks on 10 October.
With both coming with a dividend yield over 2.5%, Amcor and Brambles could be good choices for income and growth if the RBA cuts interest rates again this afternoon.
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Motley Fool contributor Tyler Jefferson has no position in any of the shares mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.