Between the Bells

The ASX took strong lead from global markets overnight into Thursday’s session, finishing the day down 0.75% as investors continued to flee high growth tech stocks in the rising interest rate environment. The worst performing sector today was energy stocks, while 7 of the 11 sectors also closed red today.

Chalice Mining (ASX:CHN) soared 13% today after the exploration company announced promising new sulphide mineralisation at the company’s initial drilling at the greenfield Hooley Prospect, around 5km north of the current Gonneville Resources at the 100%-owned Julimar Nickel-Copper-Platinum Project in WA. Sulphide mineralisation was intersected at all 5 reconnaissance holes from three drill sites over the prospect, with assays pending for a further nine holes.

All four big banks have passed on the full 25-basis points rate hike to variable interest rate customers, but none have announced whether, if at all, the rate hike will be passed onto term deposit customers.

Downer (ASX:DOW) shares plunged more than 21% today after the engineering group flagged accounting irregularities and cut its profit guidance for FY23 in an update to investors. The winning stocks from today’s session were led by Chalice Mining (ASX:CHN) adding 13%, West African Resources (ASX:WAF) added 4.65% and Sliver Lake Resources (ASX:SLR) jumped 3.88%. And on the losing end of the session, Downer (ASX:DOW) led the losses tanking 20.42%, Core Lithium (ASX:CXO) fell almost 10% and Novonix (ASX:NVX) shed 8.09% today.

The most traded stocks by Bell Direct clients today were Whitehaven Coal (ASX:WHC), Yancoal (ASX:YAL), and Commonwealth Bank of Australia (ASX:CBA).

On the commodities front this afternoon, crude oil is trading 0.86% higher at US$72.64 per barrel, coal is down 0.93% at US$405 per tonne, gold is down 0.22% at US$1,782 per ounce, and iron ore is down almost 2% at US$107.50 per tonne.

The Aussie dollar is buying 67.15 US cents, 91.99 Japanese Yen, 55.01 British Pence, and NZ$1.06.

In economic data out today, Australia’s trade balance for October was unveiled with a surprise slight fall to $12.217 billion in trade surplus, which well exceeds the forecasted decline to $11.9 billion, indicating exports and imports remained relatively unchanged from September to October.

Wall Street extended the recent red run into the midweek session as investors fear higher interest rates and a subsequent economic downturn are increasingly likely given recent surprising economic data out in the US. The Dow Jones fell 0.2%, the S&P500 lost 0.3% and the tech heavy Nasdaq shed 0.7%.

Further remarks from a host of Wall Street executives added to investor fears of recession, with JPMorgan CEO Jamie Dimon saying the US$1.5trn in excess savings across America’s bank accounts was quickly diminishing amid rising prices of goods and services.

Over in Europe, the global sell-off continued amid rising fears of a global recession. Germany’s DAX fell 0.57%, the French CAC lost 0.41% and in the UK, the FTSE100 closed the midweek session down 0.43%.

On the commodities front, oil extended losses overnight trading 2.78% lower at US$72.18/barrel, coal is down almost 1% at US$405/tonne, gold is up almost 1% at US$1787.67/ounce and iron ore is flat at US$109.50/tonne.

The Aussie dollar is buying 67.27 US cents, 91.76 Japanese yen, 55.05 British pence and 1 New Zealand dollar and 6 cents.

What to watch today: 

• Ahead of the local trading session here in Australia the SPI futures is anticipating the ASX to open 0.26% lower on the back of the turbulent global sessions overnight.
• Taking a look at economic data out today, Australia’s trade balance data for October is released with the market expecting a decline in trade surplus to $11.9bn from $12.44bn in September.

Trading Ideas:

• Bell Potter has initiated coverage of The Environmental Group (ASX:EGL) with a buy rating and a price target of $0.26, as the company is seen to be at a significant inflection point. In Bell Potter’s view, core segments validate the majority of EGL’s current share price, providing a cheap option on a high ceiling polyfluoroalkyl substances (PFAS) opportunity.
• Trading Central has identified a bullish signal on Maggie Beer Holdings (ASX:MBH) following the formation of a pattern over a period of 24-days which is roughly the same amount of time the share price may rise from the close of $0.21 to the range of $0.24-$0.26 according to standard principles of technical analysis.

US equities declined overnight, with the Dow dropping by 526 points or 1.5%, while the S&P500 and the Nasdaq fell by 2% and nearly 2.3%, respectively. While equities fell, bond yields pushed higher, with the yield on the benchmark 10-year Treasury last trading up 10 basis points. 

Big movers overnight were Microsoft, Amazon and Netflix which all closed lower on growth concerns. Tesla shares also dropped about 7% on reports of an output cut at its Shanghai factory. 

In Europe, markets closed fixed, with the FTSE 100 closing in the green, while the other major benchmarks were lower. Oil prices turned negative in late afternoon trade in Europe as OPEC stuck to its policy of lowering oil production and as China relaxed some of its COVID rules. The alliance of OPEC and non-OPEC producers agreed to stay the course on output policy ahead of the EU’s ban on importing Russian crude that came into force yesterday. 

What to watch today:

• The Australian market is set to open lower ahead of the final RBA policy meeting of the year, with the SPI futures suggesting a fall of 0.67% at the open. 
• The RBA will announce the next interest rate decision at 2:30pm AEDT. The cash rate is currently at 2.85%, and the market is expecting an increase to over 3%, which will be the eighth consecutive increase and will lift the cash rate to its highest level in 10 years. 
• In other economic news, the ABS will release Q3 data on Australia’s current account surplus, which last jumped to $18.3 billion in Q2. And US trade balance data for October will be out tonight. 
• In commodities, 
  • Oil is trading over 3.5% lower at around US$77 per barrel, which is a dramatic reversal from its daily highs of around US$82. Investors grew risk averse, which boosted the US dollar but hurt equities, and made the commodity more expensive for holders in other currencies. 
  • Gold is down 1.65%, falling from a 5-month high as the US dollar and Treasuries lifted. 
  • While iron ore is trading over 1% in the green, the highest since late August as eased COVID curbs and measures to stimulate China’s economy has increased expectations for higher demand. 
• Watch the Bank of Queensland (ASX:BOQ) today as the company is set to hold its AGM. 

Trading Ideas: 

• Bell Potter maintain a Speculative Buy rating on Strike Energy (ASX:STX) with a $0.42 valuation. At its current share price of $0.32, this implies 29% share price growth in a year. 
• Trading Central have identified a bullish signal in BetMakers Technology (ASX:BET) indicating that the stock price may rise from the close of $0.32 to the range of $0.37 to $0.39, over 30 days according to the standard principles of technical analysis. 

The local market advanced 0.33% today driven by a rally for materials stocks amid a rise in the price of iron ore. Fortescue Metals Group (ASX:FMG), BHP Group (ASX:BHP) and Rio Tinto (ASX:RIO) each added almost 7%, almost 3% and 4% respectively.

The price of iron ore also jumped today as China loosened the curbs on its COVID-19 restrictions including Shenzhen and Beijing removing the requirement for commuters to produce a negative COVID-19 test before boarding public transport, enhancing demand outlook for iron ore. The price of oil jumped 1.28% today after OPEC+ decided to maintain oil production and current levels of reducing oil output by 2 million barrels a day from November through 2023 amid increased Western sanctions set to be placed on Russian oil set to kick in soon in addition to China easing restrictions boosting demand outlook. The EU is set to ban most seaborne Russian oil imports from Monday.

Splitit (ASX:SPT) lifted over 8% today after the buy now, pay later company expanded its agreement with Google, to bring instalment payments solutions to the Google store in the US, Canada and Australia. OreCorp (ASX:ORR) took flight today amid production outlook of 240,000 ounces of gold per year for 1—year at its Nyanzaga Gold Project in Africa. The company recently received debt funding proposals to fund the development of this project, including non-binding expressions of interest from banks in Europe, Africa and Tanzania for more than US$400 million. Gina Rinehart has expanded her presence in the rare earths space through buying a 10% stake in Arafura Rare Earths via a $60 million investment in a $121m capital raising.

The most traded stocks by Bell Direct clients today were St Barbara (ASX:SBM), Rio Tinto (ASX:RIO) and Nickel Industries (ASX:NIC).

The Aussie dollar is buying 68.46 US cents, 55.36 British Pence, 91.95 Japanese Yen and NZ$1.06.

On the economic data front today, third quarter company profits in Australia unexpectedly fell 12.4% in data released today, missing market expectations and indicating the RBA’s rate hike actions to date have started taking effect. The decline in company profits for the quarter was the first drop since Q4 2020, with the largest decline felt in mining, manufacturing and recreation services. Year to date, Q3 corporate profits rose by 8.5% which is a sharp decline from the 28.2% surge in Q2.

On the commodities front, natural has is down 6.3%, coal is up 1.56% at US$391 per tonne, uranium is down 1.2% but gold is up 0.62% at US$1809 per ounce, and iron ore is up 1.43% at US$106.70.

The local market dipped 0.72% on Friday, ending the recent rally, as investors await the RBA’s interest rate decision for December out on Tuesday this week. The gold miners had a run on Friday as investors piled into gold stocks on the back of a rise in the price of the precious commodity, while investors fled REIT stocks in anticipation of the RBA’s latest rate hike announcement on Tuesday. REIT stocks have faced a tough run in 2022 as every interest rate hike implies further dent into real estate company balance sheets.

The winning stocks on Friday were led by St Barbara (ASX:SBM) jumping 10.40% amid the rising price of gold, while Capricorn Metals (ASX:CMM) and Silver Lake Resources (ASX:SLR) each added just over 8% and 7% respectively at the closing bell on Friday. On the losing end, Corporate Travel Management (ASX:CTD) fell 5.85% on Friday despite no price sensitive news out of the travel company on Friday. Meanwhile IPH (ASX:IPH) and Charter Hall (ASX:CHC) each also fell 5.15% and 5.13% respectively to close out the week.

The most traded stocks by Bell Direct clients on Friday were Karoon Energy (ASX:KAR), Alcidion (ASX:ALC) and Fortescue Metals Group (ASX:FMG).

Wall Street also finished the last trading session of the week mixed across the key indices as non-farm payrolls data for November was released, coming in a lot stronger than expected which leaves the door open for the Fed’s to consider continued aggressive interest rate hikes to tackle the red-hot inflation in the region. The Dow Jones added just 0.1%, the S&P500 was unchanged and the Nasdaq fell 0.18%. Nonfarm payrolls data for November showed the US economy added 263,000 jobs for the month which beat consensus expectations for an increase of 200,000. While this is just one market report, it comes at a time where there was also a recent upside surprise on wage growth and weakening participation rate. Wages growth in inflation is a bad thing as wages are a large share of company costs, so when wages rise companies continue raising prices to counter the wage cost increase on finances. Investors and the market will now shift focus in the US to the upcoming CPI data for November out on December 13.

Over in Europe, stocks closed mixed across the European markets as investors react to US jobs data and the ongoing debate around a price cap on Russian oil. Oil and Gas stocks led losses across markets after the EU tentatively agreed to a $60/barrel price cap on Russian seaborne oil according to Reuters. Germany’s DAX closed Friday’s session 0.27% higher, while the French CAC fell 0.17% and, in the UK, the FTSE100 fell just 0.03%.

What to watch today:

• Ahead of the local trading session here in Australia, the SPI futures are expecting the market to recover from Friday’s sell-off to open 0.26% higher.
• Taking a look at commodities to start the week, it’s a red start across the board with Crude Oil trading down 1.53% at US$79.98 per barrel, natural gas is down 7.53%, gold is down 0.31% at US$1797.35 per ounce but iron ore is up 1.43% at US$106.50 per tonne.
• The Aussie dollar has strengthened to buy 67.9 US cents, 91.28 Japanese Yen, 55.35 British Pence and NZ$1.06.
• In terms of economic data out today, local investors will be keeping an eye out for Australia’s global services PMI final data for November, and company gross profits for the third quarter.

Trading Ideas:

• Trading Central has identified a bullish signal on Red 5 (ASX:RED) following the formation of a pattern over a period of 48-days which is roughly the same time the share price may rise from the close of $0.20 to the range of $0.23 to $0.24 according to standard principles of technical analysis.
• Bell Potter has maintained a buy rating on IPD Group (ASX:IPG) but has increased the price target from $2.25 to $3.35 following a new cyclical trend noticed in demand for electrification which IPD Group is

The Aussie share market rallied 1.3% this week (Mon-Thu), encouraged by the Chairman of the Federal Reserve, Jerome Powell’s speech, that essentially confirmed the Fed will slow the pace of interest rate hikes in December. 

In this week's wrap, Sophia covers:

• (0:15) What to expect from OPEC's meeting on Sunday
• (0:34) The impact of a price cap on Russian crude
• (1:01) What production cuts really mean for energy markets
• (3:20) The best performing stocks on the ASX200
• (4:11) The most traded stocks & ETFs by Bell Direct clients
• (4:38) Five economic news items to watch out for

Following Fed chairman’s Jerome Powell’s speech that essentially confirmed that the Fed will slow the pace of interest rate hikes, we saw a surge in equities that added over $1 trillion to the market capitalisation of the S&P500 alone. Meanwhile the Dow Jones hit a 7-month high and its 12-month return turned positive. The Dow has already rallied over 20% from its year-to-date low.

Overnight however, the three major benchmarks closed mixed ahead of the US jobs report. The Dow closed 0.6% lower, the S&P500 down 0.1%, while the Nasdaq is slightly higher, up just 0.09%.

On the other hand, European equities hit six-month highs. The Stoxx 600 is up 0.9%, however the FTSE 100 closed 0.2% lower.

What to watch today:

• Following the mixed sessions in global markets, the SPI futures are suggesting out local market will drop 0.2% at the open this morning.
• In commodities:
  • Oil is trading higher, as investors are weighing the prospects of a recovery in demand against further supply cuts from OPEC, ahead of OPEC’s upcoming meeting on December 4th.
  • Gold has jumped almost 2% higher, reaching its highest level since early July, due to the sharp US dollar depreciation.
  • Iron ore is currently trading flat.
• In economic data, there are a few key figures set to be released globally. Locally, Australia’s retail sales data and home loans data for October is set to be released today. Plus, RBA Governor Phillip Lowe is set to give a speech at 1pm AEDT. Overseas, the Eurozone Producer Price Index for October and the US unemployment rate for November are out tonight. And investors are also awaiting OPEC’s meeting on Sunday.
• Watch Premier Investments Limited (ASX:PMV) as the company is set to hold its AGM today.

Trading Ideas: 

• Bell Potter maintain a Buy rating on PolyNovo (ASX:PNV), which is a commercial stage medical device company. The $30 million placement conducted last week significantly strengthens the company’s balance sheet. Bell Potter says it provides the growth platform facilitating the expansion of the US and global sales team with key markets in Asia and Canada being targeted. Bell Potter have increased their price target from $1.90 to $2.30, and their price target is purely generated from their Discounted Cash Flow methodology, as this best captures the longer term potential for PolyNovo. At PNV’s current share price of $2.03, this implies 13.3% share price growth in a year.

The Australian market jumped at the open this morning, after the US Federal Reserve Chairman Jerome Powell confirmed last night that smaller rate hikes could start as early as December. Our market then followed the rally on Wall Street and the ASX200 closed 0.96% in the green. 

In economic news, domestic new capital expenditure fell 0.6% for the September quarter. 

The materials sector climbed for the second straight day, as commodities rallied overnight. Both Ramelius Resources (ASX:RMS) and South32 (ASX:S32) posted strong gains, closing 10.5% and 6.7% respectively. Meanwhile the energy sector was the worst performing sector, dragged down by Woodside Energy (ASX:WDS), Whitehaven Coal (ASX:WHC) and New Hope (ASX:NHC). 

Financials were generally higher, with the big four banks adding between 0.3% and 0.8%.

Artificial intelligence company Appen (ASX:APX) jumped today, following  a strong night of trade among tech stocks on Wall Street, with the Nasdaq up more than 3% by the close. Also boosted by the strong session In tech shares was accounting software company Xero (ASX:XRO) and payment company Block (ASX:SQ2). Citi also released a bullish broker note on XRO, maintaining their Buy rating and price target of $97.90. XRO today closed at $75.08. 

The comments by the Fed also provoked investors to move back into gold. The All Ords Gold Index (ASX:AXGD) closed 4% higher today, and gold mining stocks such as Evolution Mining (ASX:EVN) posted strong gains. 

The most traded stocks by Bell Direct clients today were Telstra (ASX:TLS), Core Lithium (ASX:CXO), Rio Tinto (ASX:RIO) and BHP Group (ASX:BHP). 

As for economic data out tonight, the US Manufacturing PMI, run by the Institute for Supply Management will be release at 2am local time. This is the US’s version of the monthly economic indicator, based on a survey of purchasing managers at more than 300 manufacturing firms. And the purchasing managers’ index is considered to be a key indicator of the state of the US economy and provides us data on economic trends in the manufacturing sector. 

The Australian dollar is firmer, with 1 Australian dollar buying US$0.68, 93.06 Japanese Yen, 55.77 British Pence and NZ$1.08. 

It was a strong session overnight after Federal Reserve chairman Jerome Powell signalled that the pace of rate rises will slow as soon as this month. The Dow Jones jumped 535 points or 1.6%. The S&P500 added 2.4% and the Nasdaq jumped 3.6%, while the 10-year Treasury yield slightly eased. The Fed also cautioned that they may still stay with restrictive policy, with a long way to go in restoring price stability. 

Wrapping up the month, the Dow and the S&P500 are up more than 4%, and the Nasdaq up around 3%. 

European markets closed higher, as regional investors reacted to the latest inflation data. Eurozone inflation dropped by more than expected in November, fuelling market hopes that record-high price growth has peaked, and the European Central Bank will begin slowing its interest rate hikes next month. The major benchmarks were all in the green, with the Stoxx 600 up 0.6%, Germany’s DAX up 0.3%, France’s CAC up 1.04% and the FTSE 100 up 0.8%. 

Asia-Pacific shares were mostly higher even after data for China’s factory activity fell short of expectations, dropping to the lowest reading since April. 

What to watch today:

• Our local market is set to open higher, with the SPI futures suggesting a rise of 0.73% this morning. 
• In economic data, the S&P Global Manufacturing final PMI for November will be released a 9am AEDT this morning. Remember a PMI above 50 represents an expansion from the month prior. The degree to which the reading is above 50 reflects how fast the manufacturing sector is expanding. 
• Looking at commodities, 
  • Oil has rallied, trading 3.2% higher at US$80.70 per barrel, supported by larger-than-expected crude inventories. 
  • Gold has jumped 1.2% higher, closing in on its highest level in two weeks, on expectations of a smaller rate hike by the Fed in December. Markets are now expecting a 50-basis point hike, after the Fed delivered four straight 75 basis point increases. 
  • Iron ore is trading 2.5% higher at US$103 per tonne, the highest since mid-September, while seaborne iron ore is also trading just under 1% higher. 
  • Nickel is trading almost 5% higher. The London Metals Exchange stepped up market surveillance activity in response to a rally that saw Nickel surge by 40% to a six-month high of around US$30,000 in just two weeks. The sharp price swing raised concerns about a liquidity crisis. Nickel is currently trading at US$26,744 per tonne. 
  • Aluminium has also gained, up 4%. 
• Watch BHP Group (ASX:BHP) and Rio Tinto (ASX:RIO) today, after the mining giants both posted gains on the New York Stock Exchange overnight. ASX-listed BHP and RIO may follow lead. 
• Stocks set to go ex-dividend today are Pendal (ASX:PDL) and TechnologyOne (ASX:TNE). Remember this often sees shares fall as investors take their profits. 

Trading Ideas:

• Bell Potter maintains their Buy rating on Life360 (ASX:360) and their price target of $9, which is expected to return 49%. The next potential catalyst they see for 360, is the release of the 2022 results in March next year. Preliminary results will be released in February, where they expect the guidance to be met. 
• And Trading Central have identified a bullish signal in DevEx Resources (ASX:DEV) indicating that the stock price may rise from the close of $0.33 to the range of $0.38 to $0.40 over 30 days, according to the standard principles of technical analysis. 

In the first hour of trade, the Australian share market was lower ahead of the monthly inflation reading, however when CPI was announced at 11:30am, good news boosted the market. The monthly consumer price index advanced 6.9% in the year to October, slowing from September’s record high of 7.3%, and below market consensus of a 7.4% gain.  The reading showed a softer rise in food prices than previously, however prices were rising across most food categories, with prices rising the most in fruit and vegetables and meat and seafoods. The RBA expects inflation to peak at the end of the year at around 8%. 

In other economic news, October residential building approvals slid 6.4% on the year. 

The materials sector advanced today, with lithium miners lifting the group. Coal miners were also buoyant, with Whitehaven Coal (ASX:WHC) and New Hope Corporation (ASX:NHC) closing with solid gains. The energy sector was the best performer, advancing 1.8%, followed by real estate stocks. Financials on the other hand, were weighed down by insurance companies, with Insurance Australia (ASX:IAG), Suncorp (ASX:SUN) and QBE Insurance (ASX:QBE) all in the red. And utilities, consumer staples and healthcare were the worst performing sectors. 

Looking at the AX200 leaderboard, Sayona Mining (ASX:SYA) jumped over 12% today, followed by Whitehaven Coal (ASX:WHC), New Hope (ASX:NHC) and Lake Resources (ASX:LKE). The worst performing stock was gold miner St Barbara (ASX:SBM). 

The Australia dollar is slightly up, with 1 Aussie dollar buying US$0.67, 55.85 British Pence, 92.81 Japanese Yen, and NZ$1.08.