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Morning Bell 4 September

Grady Wulff
September 4, 2023

Favourable jobs data out in the US boosted investor sentiment on Friday to close out a winning week on Wall Street. The Dow Jones added 0.3% on Friday while the S&P500 rose 0.18% and the Nasdaq fell 0.02%. For the week though the Dow and Nasdaq each added 1.4% and 3.3% respectively while the S&P500 rose 2.5%.

Non-farm payrolls data out in the US on Friday showed the unemployment rate ticked higher to 3.8% in August, well above economists’ expectations of a hold at 3.5%. The rise in unemployment provides further signal that the Fed’s aggressive interest rate hikes are proving effective in cooling the tight labour market.

Following recent favourable data being released, the market has factored in a 93% chance the fed will hold interest rates at the next meeting, according to CNBC.

Dell Technologies soared 21% on Friday after reporting stronger-than-expected earnings in the latest quarterly results update.

Over in Europe, it was a mixed session on Friday as key US data and a lag in automaker stocks weighed on investor sentiment in the region. Auto stocks fell 2.6% on Friday after a survey out of Germany showed a deterioration in sentiment among automakers with almost half saying lack of orders is impeding production. The STOXX600 closed flat, Germany’s DAX fell 0.7%, the French CAC lost 0.27%, and in the UK, the FTSE100 rose 0.34%.

Locally, the ASX200 fell 0.37% on Friday, weighed down by the healthcare sector falling 1.42% while utilities stocks lost just shy of 1%. Qantas shares have been heavily sold off in recent sessions as the national carrier is facing a record corporate penalty of $600m from the consumer watchdog for allegations that Qantas was selling tickets for around 8000 allegedly already cancelled flights in May and June 2022.  This comes alongside the airline facing scrutiny for making it difficult for customers to access and use flight credits, of $570m in total value, for flights cancelled during the COVID-19 period.

What to watch today:

  • Ahead of the local trading session here in Australia, the SPI futures are expecting the local market to open 0.43% higher ahead of a big week on the economic front this week including the RBA interest rate decision tomorrow, GDP Growth Rate data out tomorrow and trade balance out later in the week.
  • On the commodities front this morning, oil is trading 0.57% higher at US$86.04/barrel, gold is flat at US$1939/ounce and iron ore is down 0.43% at US$117/tonne.
  • AU$1.00 is buying 65 cents, 94.28 Japanese Yen, 51.24 British Pence and NZ$1.09.

Trading Ideas:

  • Bell Potter has downgraded Resimac Group (ASX:RMC) from a Buy to a Hold and slightly decreased the price target from $1.12 to $1.09 on the back of the company releasing mixed FY23 results including home loan book shrinking 14% to $13.1bn while net interest income decreased to $222.5m from $238.1m and Bell Potter’s analyst expects the home loan book to decline 4% in FY24 before returning to growth in FY25.
  • And Bell Potter has decreased the price target on XTEK (ASX:XTE) from 80cps to 70cps and maintain a buy rating on the defence manufacturer following the release of the company’s FY23 results that beat both guidance and Bell Potter estimates. The downgrade in price target was due to Bell Potter having lack of visibility over future revenue which is weighing on the share price, however this is not uncommon in the defence industry. Bell Potter is awaiting updates on the referenced multiple large ballistic orders and multi-year new SUAS Support Contract shortly.

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