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Morning Bell 23 January

Bell Direct
January 23, 2024

Wall Street opened the new trading week in record territory across two of the three key indices as investors shook off the equity slump that started 2024 lower ahead of key Q4 GDP data out later this week.

The Dow Jones rose 0.36% to trade above 38,000 for the first time during the session, while the S&P500 added 0.22% to reach a new all-time high and the Nasdaq advanced 0.32% on Monday.

The strength in US equities signals a strong bull run that has been in effect since October 2022 and the duration of this rally will depend on whether the US central bank can successfully pull off a soft landing over a recession as inflation continues to cool in the world’s largest economy. Later this week, Q4 GDP data will further indicate how well the Federal Reserve’s rate policy has been at bringing inflation down while maintaining economic stability.

Department store giant Macy’s rallied over 3% on Monday after rejecting a $5.8bn takeover offer while cost-cutting measures through laying off 16% of the workforce sparked a rally for SolarEdge shares.

Over in Europe, markets closed higher in the region to start the new trading week on a positive note as investors await the release of eurozone consumer confidence and monetary policy meeting data out later this week. The STOXX600 rose 0.78% on Monday, Germany’s DAX added 0.77%, the French CAC climbed 0.56%, and, in the UK, the FTSE100 ended the session up 0.35%.

The ASX has started the new trading week on a very positive note with the key index closing 0.75% higher on Monday, taking strong lead from Wall Street’s rally on Friday and driven by a tech surge on the local index. The global tech rally that took over markets in 2023 has extended into the new year as earnings growth on the AI and semiconductor front drives investor appetite for the high growth sector. The tech sector also benefits from interest rate cuts as it makes funding growth outlook more affordable for the high growth sector.

Big miners across a few key commodities were hit hard yesterday for a range of reasons. Lithium market darling of the past few years, Liontown Resources tanked over 20% yesterday after the company announced it is reviewing its expansion plans and associated ramp-up of its

Kathleen Valley lithium project due to weakness in lithium prices. Iron ore miners were also sold off amid the declining price of the commodity on growing concerns around China’s sluggish and prolonged recovery post-pandemic.

Rare earths producer Lynas Rare Earths also fell out of favour with investors yesterday after releasing a December quarter update indicating output more than halved during the three months due to a temporary shutdown at its Malaysian facilities to complete an upgrade.

It was a mixed session across the Asia markets on Monday, with Japan’s Nikkei rising 1.62% to close at a near 34-year high as the Bank of Japan monetary policy meeting kicked off where it is widely expected Japan’s central bank will maintain the rate of -0.1% for the month ahead. China’s CSI 300 index fell 1.56% on Monday and Hong Kong’s Hang Seng ended the day down 2.52% led by real estate stocks after the People’s Bank of China maintained the one and five-year loan prime rates despite recent data outlining the uneven nature of China’s economic recovery.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are expecting the ASX to open Tuesday’s session mostly flat.
  • On the commodities front this morning oil is trading 2.38% higher at US$75.02/barrel, gold is down 0.3% at US$2023/ounce, and iron ore is up 2.71% at US$132.50/tonne.
  • AU$1.00 is buying US$0.66, 97.44 Japanese Yen, 51.89 British pence and NZ$1.08.

Trading Ideas:

  • Bell Potter has decreased the 12-month price target on Lynas Rare Earths (ASX:LYC) from $8.50 to $7.60 however, maintain a buy rating on the leading producer of rare earths following, after the company released a first half trading update outlining production on the weaker side, a slide in revenue, and weaker outlook in amid China’s sluggish recovery.
  • And Trading Central has identified a bullish signal on Washington H Soul Pattinson (ASX:SOL) following the formation of a pattern over a period of 124-days which is roughly the same amount of time the share price may rise from the close of $33.21 to the range of $37.30 to $38.20 according to standard principles of technical analysis.

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