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Morning Bell 1 June

Sophia Mavridis
June 1, 2022

The local market fell into the red yesterday as the financials and technology sectors weighed down on the market, after hawkish comments from the US Fed, that moved US yields higher. Also weighing down on the market was the European Union’s decision to pursue the ban on Russian oil. This has been in discussion for a while now and yesterday the EU agreed to a partial oil embargo on Russia over the invasion of Ukraine. This aims to cut 90% of Russia’s crude imports by the end of the year and aims to reduce Russia’s income to finance the war it launched on Ukraine three months ago.

The ASX200 closed 1% lower yesterday will all sectors in the red. Zip (ASX:ASX:ZIP), EML Payments (ASX:EML), Megaport (ASX:MP1), Tyro Payments (ASX:TYR) and Suncorp Group (ASX:SUN) declined the most yesterday. Suncorp was also downgraded yesterday by Morgan Stanley, who now rate SUN as Underweight.

As for the best performers, Beach Energy (ASX:BPT), De Grey Mining (ASX:DEG) and Whitehaven Coal (ASX:WHC) fought against the market sell-off.

The most traded stocks by Bell Direct clients yesterday were Lake Resources (ASX:LKE), Scentre Group (ASX:SCG) and the BetaShares Geared Australian Equity Hedge Fund (ASX:GEAR).

Over in the US, all three major benchmarks closed lower. The Dow Jones down 0.7%, the S&P500 down 0.6% and the Nasdaq down 0.4%.

What to watch today:

  • The decline is set to continue today. Locally, the SPI futures are suggesting the Australian market will fall 0.36% at the open this morning.
  • In commodities, the oil price is trading lower. OPEC is considering suspending Russia’s participation in the cartel, and this could make room for other producers. And as mentioned earlier, the EU has agreed to ban 90% of Russian crude by the end of this year. This embargo will cover Russian oil brought in by sea, while keeping a temporary exemption for pipeline crude, to meet the demand of Hungary, Slovakia and the Czech Republic.
  • The gold price is also trading lower, weighed down by a rebound in the US dollar and firmer US Treasury yields. And iron ore is higher with better demand prospects in the market.
  • In economic data, at 11:30am AEST the GDP Growth Rate for Q1 will be announced.
  • Keep watch of Western Areas (ASX:WSA), as today there’ll vote on the company’s nickel-lithium merger with IGO.
  • Sezzle (ASX:SZL) will hold its AGM today.
  • United Malt Group (ASX:UMG) goes ex-dividend today.
  • Also watch Nordic Nickel Limited (ASX:NNL), which lists on the ASX today.

Trading Ideas:

  • Bell Potter maintain a Speculative Buy rating on De Grey Mining (ASX:DEG), after the company released an updated Mineral Resource for its 100%-owned Mallina Gold Project in Western Australia. They have increased their valuation on DEG by 5% to $1.80. And at its current share price of $1.13, this implies 59% share price growth in a year.
  • Trading Central have identified a bullish signal in Strandline Resources (ASX:STA), indicating that the stock price may rise from the close of $0.37 to the range of $0.44 – to $0.46 over 22 days, according to the standard principles of technical analysis.

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