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Morning Bell 19 April

Grady Wulff
April 19, 2023

The RBA meeting minutes for April were released yesterday which spooked the market into sell-off mode with hints that the RBA is eyeing off further rate hikes after pausing in April to assess economic conditions. The RBA’s board believe there is a strong case for further rate hikes to come amid concerns that the growing population and ongoing wages growth in the public sector are still not under control and in line with the slowdown in economic growth previous rate hikes have been targeting. CBA and some economists now expect the RBA to hike the nation’s cash rate by a further 25-basis points in May which will take the cash rate to 3.85%, while ANZ says the RBA could go either way. The local bourse responded negatively to the release of the RBA’s minutes yesterday, with the ASX closing the second trading session of the week down 0.29% led by a sharp sell-off in energy and consumer staples stocks. The energy sector was weighed down amid declining gas prices on the back of excess global LNG supply.

It was a big day for healthcare companies yesterday with some big news moving some key names in the sector. Drug development company Neuren Pharmaceuticals (ASX:NEU) jumped over 5% yesterday reaching a record high share price after announcing it has earned US$40m as an earnout payment from its US partner, Acadia Pharmaceuticals, for the first commercial sale of the company’s drug Trofinetide in the US. Telix Pharmaceuticals (ASX:TLX) led the market gains yesterday, soaring over 12% a day after the commercial-stage biopharmaceutical company released its quarterly cash-flow statement and accompanying activities report for the first quarter including revenue of $100.1m.

Overseas, China’s GDP growth rate data released yesterday came in at 4.5% growth year on year in the first quarter, which beat expectations of 4% growth and up from 2.9% growth in Q4 as the country ramps up operations after emerging from length COVID-19 lockdowns. Chinese retail sales also grew the most in nearly 2-years in March, increasing by 10.6% year-on-year as sales picked up especially for gold and silver jewellery.

Overnight in the US Wall St closed mixed as investors digest big corporate earnings results including from Goldman Sachs which reported weaker-than-expected revenue, and Johnson & Johnson which beat estimates. Investors are concerned the Fed will continue raising rates into a potential recession, so big corporate profits beating already low expectations aren’t surprising in the current environment. The Dow Jones fell 0.03%, the S&P500 closed 0.09% higher and the Nasdaq inched down 0.04% at the end of a lacklustre day on Wall St.

In Europe overnight, markets closed higher as investors continue to gauge the health of the global economy on top of big corporate earnings results. The STOXX600 rose 0.4% to close at a 14-month high, Germany’s DAX added 0.6%, the French CAC rose 0.47% and, in the UK, the FTSE100 rose 0.4%.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open 0.12% higher to start the midweek session in the green.
  • Taking a look at commodities this morning, oil is down 0.23% at US$80.65/barrel, gold is up almost half a percent at US$2004.24/ounce and iron ore is down 1.67% at US$118/tonne.
  • AU$1.00 is buying, US$0.67, 90.13 Japanese Yen, 53.99 British Pence and NZ$1.08.
  • There is no local economic data out today however over in the UK, the country’s inflation rate data for March will be released at 5pm AEST with consensus expecting a slight decline to 9.8% from 10.4% in February.

Trading Ideas:

  • Bell Potter has downgraded its price target on Regis Resources (ASX:RRL) from $2.88 to $2.77 but maintain a buy rating on the company after the gold miner released preliminary group gold production for the March quarter 2023 of 103.7 thousand ounces which fell short of expectations and was down 11.6% quarter-on-quarter.
  • Trading Central has identified a bullish signal on Cleanaway Waste Management (ASX:CWY) following the formation of a pattern over a period 32-days which is roughly the same amount of time the share price may rise from the close of $2.49 to the range of $2.61 to $2.65 according to standard principles of technical analysis.

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