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Market wraps 3rd July 2024

Morning Bell - Grady Wulff

Wall St closed higher on Tuesday after Fed Chair Jerome Powell acknowledged progress on inflation but reiterated that the Fed was not quite ready to cut rates just yet. The Dow Jones rose 0.41%, while the the S&P500 gained 0.62% to close at a record 5509 points and the Nasdaq jumped 0.84% to a record close of 18,028.76 points.

Tesla shares rose 4% on Tuesday after the EV company reported better-than-expected deliveries for the second quarter, while Apple shares hit a new intra-day high over US$220/share on Tuesday as investors assess the company’s plans to introduce AI to its iPhones and other products.

In Europe overnight, markets closed lower following the release of key eurozone inflation data. The STOXX 600 fell 0.4% on Tuesday, while Germany’s DAX lost 0.69%, the French CAC declined 0.3% and, in the UK, the FTSE100 ended the day down 0.56%. Headline inflation in the euro area dipped to 2.5% in June which met economists’ expectations, however, core and services inflation remained stubbornly high which sparked the equity-sell off yesterday.

Across the Asia markets on Tuesday, it was a mostly green close across the region as Japan’s Nikkei rose 1.12% to close at a 3-month high while Japan’s broader Topix index rose 1.15%. Elsewhere, Hong Kong’s Hang Seng rose 0.33% while South Korea’s Kospi index fell 0.84% after South Korea’s inflation rate came in at 2.4% which missed economists’ expectations of 2.7%.

What to watch today:

  • The local market extended this week’s red run into Tuesday’s session with the ASX200 closing the day down 0.42% as investors assessed the hawkish comments out of the RBA in the latest meeting minutes release yesterday. A near two-month high price of oil boosted the energy sector to a 2% gain which offset some of the heavy losses among REIT and bank stocks yesterday.
  • The latest RBA meeting minutes were released yesterday with a very hawkish tone continuing through the latest update. Michele Bullock outlined in the minutes that it is difficult to rule in or out future policy moves as the outlook remains highly dependent on economic data in order to tame inflation to the target 2-3% range by the RBA’s deadline of 2026. Retail sales and new building permits data in Australia released today will play a vital role in the economic data-driven rate outlook for the RBA at the next meeting.
  • Lithium developer Liontown Resources (ASX:LTR) rallied over 7% on Tuesday after announcing the securement of US$250m in funding from South Korean battery conglomerate LG Energy Solutions under a 10-year funding agreement.
  • Domino’s Pizza (ASX:DMP) shares came under pressure yesterday after Barrenjoey and Ord Minnett noted the Pizza giant is facing three major earnings challenges through a weakening Japanese Yen, a jump in cheese prices and a slower than forecast store rollout, which are likely to hurt earnings in FY24.
  • On the commodities front this morning, oil is trading 0.61% lower at US$82.87/barrel, gold is down 0.3% at US$2325.83/ounce, iron ore is up 1.4% at US$108/tonne.
  • 1 Aussie dollar is buying 67 US cents, 107.63 Japanese Yen, 52.56 British Pence and 1 New Zealand dollar and 10 cents.
  • Ahead of the midweek trading session in Australia the SPI futures are anticipating the ASX to open the day up 0.25% on the back of Wall Street’s strength overnight.

Trading Ideas:

  • Bell Potter has downgraded the rating on Monadelphous Group (ASX:MND) from a buy to a hold and reduced the 12-month price target on the leading Australian engineering group following the analyst revisiting key indicators including the outlook for a quietening major project development pipeline with limited visibility on near-term contract awards. With the outlook for reduced Engineering Construction division revenue contribution to the group, it will likely lead to EBITDA pressures.
  • Trading Central has identified a bearish signal on HMC Capital (ASX:HMC) following the formation of a pattern over a period of 23-days which is roughly the same amount of time the share price may fall from the close of $6.98 to the range of $6.35 to $6.50 according to standard principles of technical analysis.