Desktop Broker TV

Market wraps 2nd August 2023

Morning Bell - Grady Wulff

US equities closed mixed on Tuesday as investors digested corporate earnings results against the release of key economic data. The S&P500 fell 0.27%, and the tech-heavy Nasdaq lost 0.43% but the Dow Jones reversed earlier losses to close up 0.2%.

The key economic data released in the US again came in favourable showing signs of resilience in the US economy against cooling inflation to support the idea that a soft landing is expected over a recession. JOLTs Job Openings data for June showed the economy added 9.582m jobs over the month, down slightly from May’s reading of 9.616m and US PMI manufacturing for July came in at 46.4 points, a slight uptick from the 46 points recorded in June.

Caterpillar shares rose 8% on reporting stronger-than-expected results, while shares in pharmaceutical giant Pfizer slid after the company posted a mixed result due to COVID product sales plummeting. Uber also lost 6% on mixed earnings and JetBlue tumbled more than 8% after cutting guidance. Analysts suggest the pullback in stocks on Tuesday was simply due to an overbought market on the back of strong earnings results so far and favourable economic data.

In Europe, markets closed lower on Tuesday as investors digested corporate earnings results during this busy week of corporate results being released. The STOXX600 fell 0.88%, Germany’s DAX lost 1.26%, the French CAC shed 1.22% and, in the UK, the FTSE100 shed 0.43%. Eurozone manufacturing activity also fell in July at the fastest pace since the start of the COVID-19 pandemic, while a report on eurozone inflation showed inflation eased further in July in the region, gaining just 1.9% through the month according to Eikon data.

Locally yesterday, the ASX200 rose 0.54% as investors and Australians alike breathed a deep sigh of relief as the RBA announced a hold on rate hikes for a second consecutive month. Every sector closed in the green yesterday but the sectors that benefit from lower interest rates felt the biggest rally, led by the tech sector jumping almost 1.14%, while consumer discretionary and real estate stocks rose 0.77% and 0.43% respectively.

The RBA has held the nation’s cash rate at 4.1% for the month ahead which sparked a sharp rally on the local index in afternoon trade. RBA governor Phil Lowe said the pause ‘will provide further time to assess the impact of the increase in interest rates to date and the economic outlook’. In a similar note to last month though, Mr Lowe also warned further interest rate hikes may be required to get inflation to the target range of 2-3%, from the current annual rate of 6%. Over the last month we have seen favourable economic data drive the RBA’s pause decision yesterday including inflation cooling and retail spend easing. Services price inflation has remained the sticky point overseas and the RBA fears the same could occur in Australia.

What to watch today:

  • Ahead of the local trading session here in Australia, the SPI futures are expecting the ASX to open 0.53% lower for the midweek session.
  • On the commodities front this morning, oil is trading down half a percent at US$81.39/barrel, gold is down almost 1% at US$1944/ounce and iron ore is down 3.06% at US$111/tonne.
  • All eyes have been on the Chinese government over the last few weeks amid speculation further stimulus policy will be announced. This came on Monday in the form of China releasing a policy document containing 20 measures to restore and boost consumption including increasing consumer loans to encourage car purchases and building more affordable homes for young people.
  • AU$1.00 is buying 66 US cents, 94.76 Japanese Yen, 51.94 British Pence and NZ$1.08.

Trading Ideas:

  • Bell Potter has increased the price target on Gold Road Resources (ASX:GOR) from $1.95 to $2.05 and maintain a buy rating on the gold miner and producer following the release of the company’s second quarter CY23 report including 76,000 ounces of gold produced which topped Bell Potter’s expectations and all-in-sustaining-costs came in at $1620/ounce which fell below Bell Potter’s expected $1885/ounce. The company also upgraded guidance for the calendar year and Gold Road is setting up for a big CY24.
  • And Trading Central has identified a bullish signal on Cedar Woods Properties (ASX:CWP) following the formation of a pattern over a period of 397-days which is roughly the same amount of time the share price may rise from the close of $5.19 to the range of $6.80 to $7.20 according to standard principles of technical analysis.