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Morning Bell 25 July

Grady Wulff
July 25, 2024

Wall Street crumbled on Wednesday as underwhelming results out of two of the tech mega caps weighed on investor sentiment around valuations at the current levels. The Dow Jones fell 1.25% on Wednesday while the Nasdaq and S&P500 had their worst sessions since 2022 with each indices tumbling 2.31% and 3.64% respectively. Shares in Google parent company, Alphabet, fell 5% despite the tech giant beating on the top and bottom-line expectations for Q2. Investors may have sold out of Alphabet after YouTube advertising revenue came in below expectations.

Tesla shares tanked 12.3% for the EV giant’s worst session since 2020 on weaker-than-expected results and a 7% YoY decline in auto revenue as appetite for EVs continues to decline globally.

Across the European markets overnight, markets also closed in the red as investors digested the latest release of corporate earnings results. The STOXX 600 fell 0.6%, Germany’s DAX lost 0.92%, the French CAC declined 1.12% and, in the UK, the FTSE100 ended Wednesday’s session down 0.17%. Deutsche Bank shares fell over 8% on Wednesday after the bank snapped a 15-quarter profit streak in the latest quarter, while LVMH shares fell 4.7% on Wednesday after the luxury fashion house missed second quarter revenue expectations.

Markets across Asia closed lower on Wednesday tracking the global market sell-off, with Hong Kong’s Hang Seng falling 1.1% while China’s CSI declined 0.63% and Japan’s Nikkei ended the day down 1.11%

The local market eased on Wednesday to post a 0.1% loss tracking Wall Street’s negative close on Tuesday and as local energy and REIT stocks weighed on the key index during the midweek session.

Red 5 and Emerald Resources were the best performers on the ASX200 on Wednesday with each posting a gain over 6% tracking the rising price of gold.

Australia’s Judo flash manufacturing PMI data out yesterday indicated a slight growth in manufacturing PMI for July from 47.2 points in June to 47.4 points in July which beat economists’ expectations of a dip to 47 points as input costs increased at a softer pace than average while selling prices rose slightly. Australia’s Judo flash services PMI business activity index data was also out yesterday and came in at a decline to 50.8 points in July from 51.2 points in June, which fell short of economists’ expectations of a slight decline to 50.9 points. The services PMI reading fell in July as the sector faced a renewed decline in orders amid decreased client demand and a drop in international business in 2024.

Flight Centre shares fell almost 5% on Wednesday after the travel agent revised its underlying profit before tax downwards to expect a range of $316m to $324m for FY24, which notably excludes circa $4m in trading losses for the Discova Central Americas (DCA) business that Flight Centre decided to close.

What to watch today:

  • Ahead of Thursday’s trading session, the SPI futures are anticipating the ASX to open the day down 0.95% tracking the global market sell-off overnight.
  • On the commodities front this morning, oil is trading 0.02% higher at US$77.455/barrel, gold is down 0.52% at US$2395/ounce and iron ore is down 0.27% at US$108.16/tonne.
  • The Aussie dollar has further weakened overnight to buy US$0.65 cents, 101.18 Japanese yen, 51.88 British pence and NZ$1.11.

Trading Ideas:

  • Bell Potter has increased the rating on Pantoro (ASX:PNR) from a hold to a buy and maintain a 10cps 12-month price target on the West Australian gold production and development company following the release of the company’s June quarter report which included a second consecutive quarter of record production for the Norseman Gold Project. Bell Potter’s analyst sees recent share price depreciation, Pantoro’s unhedged gold leverage to the rising gold price, and production growth in FY25 as reasons for the upgrade to a buy.
  • And Trading Central has identified a bearish signal on Lendlease (ASX:LLC) following the formation of a pattern over a period of 19-days which is roughly the same amount of time the share price may fall from the close of $6 to the range of $5.15 to $5.30 according to standard principles of technical analysis.

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