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Morning Bell 4 May

Sophia Mavridis
May 4, 2022

Yesterday the market finished lower for the second straight trading session, down 0.4% or around 30 points. The market was steady yesterday while awaiting the RBA’s interest rate decision. And the central bank raised the cash rate by 25 basis points to 0.35%. The market was waiting to see whether rates would be lifted or if the RBA would hold off for another month, however it was wildly expected that the RBA would lift the cash rate by 15 basis points, so the rise of 25 basis points was greater than market consensus, and it is also the first rate hike in 11 years. Now, inflation has been rising at its fastest pace in 20 years, so the RBA believes it’s an appropriate time to begin the process of normalising monetary conditions, flagging that there is also evidence that wage growth is picking up. Following the announcement, the market had an almost instant reaction, dropping significantly, however the market then lifted again about 30 minutes after the announcement.

Sectors wise, real estate took the biggest hit yesterday, while tech gained the most. These are the two sectors however, that are more likely to pull back, with the cash rate hike

Looking at the ASX200 leaderboard, Magellan Financial Group (ASX:MFG) was the best performer, gaining 5% after reports that Nikki Thomas, formally a fund manager at MFG, is likely to permanently replace Hamish Douglas as CIO. And the company’s new chief executive is expected to be appointed next month. Tech stocks were also higher yesterday with Zip (ASX:ZIP), Appen (ASX:APX) and Block (ASX:SQ2) taking the lead.

The most traded stocks by Bell Direct clients yesterday included Westpac (ASX:WBC), Scentre Group (ASX:SCG), Pilbara Minerals (ASX:PLS) and Australia and New Zealand Banking Group (ASX:ANZ).

Overseas, European markets finished higher, after closing lower a day earlier, after a sudden “flash crash” in the Sweden’s Stockholm OMX 30 index, which fell 8% at one point, before rising again and regaining most of those losses. There was also weak economic data from China and Germany, however European markets still closed in the green. US equities also closed higher, ahead of the Federal Reserve’s policy decision tonight. It is widely expected that the Fed will tonight raise rates by 50 basis points. The Dow Jones closed up 0.2%, the S&P500 up 0.5% and the Nasdaq up 0.2%.

What to watch today:

  • In line with New York, the SPI futures are suggesting the Australian market will rise 0.59% at the open this morning.
  • In commodities, oil is trading lower, with a potential ban on Russian oil from the EU. Germany has said they’re willing to support an immediate embargo on Russian oil, as the EU say they plan to tighten sanctions against Russia. Meanwhile the price of gold is higher, while seaborne iron ore is trading flat.
  • Watch out for Koba Resources (ASX:KOB) as it lists on the ASX today.
  • Also keep watch of ANZ, the bank is set to release its half-year results this morning.
  • Keep watch of AGL Energy (ASX:AGL) share price movements. Yesterday, tech billionaire Mike Cannon-Brookes acquired an 11% stake in AGL, becoming its largest shareholder. He aims to stop AGL from burning coal, saying he’ll vote against the demerger with Accel Energy.

Trading Ideas:

  • Bell Potter maintain their Buy rating on Select Harvests (ASX:SHV) after the company provided updated guidance parameters for FY22. Bell Potter have increased their price target from $6.60 to $7.40. SHV last closed at $6.20, implying 19.4% share price growth in a year.
  • Trading Central have identified a bearish signal in Motorcycle Holdings (ASX:MTO), indicating that the stock price may fall from the close of $2.78 to the range of $2.66 to $2.68, over 21 days, according to the standard principles of technical analysis.

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