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Morning Bell 11 October

Grady Wulff
October 11, 2023

Over in the US on Tuesday, a sharp decline in Treasury yields boosted equities on Wall Street to extend this week’s rally into Tuesday as investors assess the geopolitical and long-term risks of the war in Israel. The Dow Jones rose 0.4%, the S&P500 added 0.6% and the Nasdaq rose 0.7%. Easing oil prices on Tuesday also boosted investor sentiment after the price of the commodity rose 5% on Monday on concerns of the long-term effect of the war in Israel. Investors in the US are also looking ahead with optimism at the release of third-quarter earnings results out later this week.

In Europe on Tuesday, markets reversed Monday’s losses to close higher across the region despite rising tensions in the Middle East. The STOXX600 rose 2% boosted by travel stocks rising 3.9% despite the global uncertainty around travel as airlines cancel flights to Israel, while mining stocks rose 2.9%. Germany’s DAX added 1.95% on Tuesday, the French CAC rose 2.01%, and, in the UK, the FTSE100 lifted 1.82%.

The rally on the ASX extended into a third session on Tuesday with the ASX200 gaining 1.01% to close above 7000 points again at the closing Bell, driven by the utilities sector jumping 4.17% followed by technology stocks climbing just over 3%. All 11 sectors closed Tuesday’s session in the green. The local rally followed a positive night in the US overnight after some Fed Officials suggested the recent surge in long-term treasury yields may reduce the need for the Fed to raise its benchmark interest rate again. Rate sensitive sectors in Australia were the best performers on Tuesday, including tech and REIT stocks.

Origin Energy did most of the heavy lifting in the Utilities sector on Tuesday, closing the session up 5.5% after Australia’s competition watchdog the ACCC approved Brookfield and EIG Partners’ $18.7bn takeover offer for the leading energy wholesaler.

Weebit Nano, a semiconductor company based in Israel, rallied 6% on Tuesday after confirming its its Israel-based operations had been unaffected by the Hamas-led attacks on the region over the weekend.

Lithium miners were also among the sessions’ winners yesterday with Core Lithium adding 7.3% after being upgraded to neutral by Citi, while Pilbara Minerals jumped 6.17% after being upgraded to a buy rating by Citi.

The local market was also boosted yesterday by Westpac Consumer Confidence data showing a rise of 2.9% for October which well exceeded economists’ expectations of a 0.7% decline and NAB Business Confidence Data also released showed a reading of 1 point which was the third straight month of a steady reading and above the -2 points expected by markets.

On the building crisis front, building permits data for the month of August released yesterday came in at a 7% rise in August which is a strong rebound from the 7.4% decline in July, but building permits year on year still fell 22.9%. Private house approvals month on month though rose 5.8% from a 0.4% rise in August, which shows a slight recovery in the housing sector.

What to watch locally:

  • Ahead of the local session here in Australia the SPI futures are suggesting the ASX will extend its green run into a 4th straight session, by opening the midweek session up 0.49%.
  • On the commodities front this morning, oil is trading 0.6% lower at US$85.84/barrel, gold is down just 0.06% at US$1859/ounce and iron ore is flat at US$119.50/tonne.
  • AU$1.00 is buying US$0.64, 95.45 Japanese Yen, 52 British Pence and NZ$1.06.

Trading Ideas:

  • Bell Potter has decreased the 12-month price target on Paradigm Biopharmaceuticals (ASX:PAR) from $2.20 to $1.40 and maintain a speculative buy rating on the Australian-based biotech company following the company releasing a report on the 12-month efficacy data from PARA_OA_008 yesterday. The study continued to show patients on the highest dose continued to show significant reductions in pain along with improvements in function 12-months after dosing. Despite the promising outlook and study results, the stock has been sold off as the sector remains out of favour with investors hence the downgrade to the price target reflecting an increased discount rate in the DCF model and earnings adjustments to FY24/FY25.
  • And Trading Central has identified a bullish signal on Sandfire Resources (ASX:SFR) following the formation of a pattern over a period of 17-days which is roughly the same amount of time the share price may rise from the close of $6.25 to the range of $6.75-$6.90 according to standard principles of technical analysis.

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