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Morning Bell 10 July

Grady Wulff
July 10, 2023

Investor fears of further rate hikes in the US sparked a sell-off in US equities on Friday despite favourable jobs data being released. The US Labour Department’s June jobs report revealed payrolls increased less than expected by 209,000 for the month following an addition of 306,000 in May, in a sign the tight labour market in the US is continuing to ease. The US unemployment rate came in at 3.6%, down from 3.7% in May. Despite the favourable jobs data, the three key indices posted losses for the week as investors digested the latest FOMC meeting minutes with concerns the Fed will begin raising rates again as soon as the end of this month. The Dow Jones fell 1.16% over the week, while the S&P500 lost almost 2% and the tech-heavy Nasdaq declined 0.92% from Monday to Friday.

Over in Europe, markets edged slightly higher on Friday following the release of the favourable US jobs report. Germany’s DAX rose almost half a percent, the French CAC added 0.42%, while in the UK, the FTSE100 fell 0.32% weighed down by OSB Group as the British financial services provider tanked 28% after the company said it expects net income to drop by up to 180 million pounds or $230m as mortgage customers move away from high-rate products.

Locally on Friday the ASX tumbled 1.69% on Friday as every sector closed the last trading session of the week in negative territory, with REIT stocks taking the biggest hit as the sector closed 2.6% lower. The ASX sell-off on Friday was sparked by investor concerns of a robust jobs report out of the US, which was released after our local closing bell and came in quite the opposite to what local investors had been expecting.

What to watch today:

  • With the favourable jobs report in mind, the SPI futures are anticipating the local index to open Monday’s session on a much brighter note, up 0.36% to start the new trading week on a positive note.
  • On the commodities front this morning, oil is trading 0.32% lower this morning at US$73.57/barrel, uranium is down almost 1% at US$55.65/pound, gold is up 0.15% at 1927.93/ounce, and iron ore is down 0.88% at US$112.50/tonne.
  • Taking a look on the economic calendar, China’s highly anticipated annual inflation rate data for June is out today with consensus expecting a rise to 0.2% from 0.1% in May, as the economy continues its struggle to rebound on the growth front post the end of lengthy pandemic restrictions easing.
  • AU$1.00 is buying US$0.67, 95.18 Japanese Yen, 51.94 British Pence and NZ$1.08.
  • Shares trading ex-dividend today include Collins Foods (ASX:CKF), Red Hill Minerals (ASX:RHI), and Turners Automotive Group (ASX:TRA). If you’ve been thinking about these stocks it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.

Trading Ideas:

  • Bell Potter has decreased the price target on Clarity Pharmaceuticals (ASX:CU6) from $1.40 to $1.30 and maintain a speculative buy rating on the healthcare equipment and services company following the company announcing that it will commence a phase three trial of its diagnostic agent in prostate cancer, targeting high risk prostate cancer patients prior to prostatectomy. There is currently no marketed MTR products for this indication hence according to the Bell Potter analyst, if the trial meets the primary endpoints of sensitivity and specificity, the product will become highly differentiated from its peers.
  • And Trading Central has identified a bearish signal on Wesfarmers (ASX:WES) following the formation of a pattern over a period of 110 days which is roughly the same amount of time the share price may fall from the close of $47.09 to the range of $41.50 to $42.50 according to standard principles of technical analysis.

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