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Morning Bell 12 October

Grady Wulff
October 12, 2023

US equities closed higher again on Wednesday as Treasury yields continued to decline, and investors await the release of the latest inflation data out on Thursday US time. The Dow Jones industrials index rose 0.19%, the S&P500 added 0.43% and the tech-heavy Nasdaq rose 0.71%. The latest slate of US inflation data will be released on Thursday with economists expecting a rise of 0.3% on the previous month and 3.6% annually. Producer price index in the US rose 0.5% for September which was higher than economists were expecting but a decline from the 0.7% rise reported in August. The latest FOMC meeting minutes also eased investor sentiment on Wall St overnight with signals that just one more interest rate hike may be needed in this monetary tightening cycle to ensure inflation remains under control in a downward trend toward the target 2% reading.

Over in Europe, markets closed mixed on Wednesday, a day after the markets reported the best session in 11-months. The STOXX600 added 0.2% on Wednesday driven by food and beverage stocks while retail stocks fell 2.1%. Germany’s DAX rose 0.24% on Wednesday, while the French CAC fell 0.44% and, in the UK, the FTSE100 lost 0.11%.

Shares in luxury brands retailer LVMH group fell over 6% after reporting a slowdown in growth.

Locally yesterday, the ASX200 rose just shy of 0.7% led by the tech sector jumping 1.7% while consumer discretionary and industrials stocks added 1.23% and 1.12% respectively. All 11 sectors closed the midweek session higher for a second consecutive session.  Talks of a Chinese stimulus package worth at least 1 trillion yuan for spending on infrastructure to further stimulate the economic recovery in the world’s second largest economy. These reports boosted local miners’ yesterday amid the outlook for higher demand of Australian produced commodities, especially iron ore.

Qantas shares rallied almost 2% on Wednesday after chairman Richard Goyder agreed to leave the embattled airline’s board next year, while Telstra shares came under pressure after the telco giant announced plans to buy Versent, a cloud consulting company, for $267.5m in a bid to further its cloud business expansion and digitisation.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open 0.08% higher on Thursday.
  • On the commodities front this morning oil is trading 3.12% lower at US$83.29/barrel, gold is up 0.76% at US$1874/ounce and iron ore is down 1.73% at US$113.50/tonne.
  • AU$1.00 is buying US$0.64, 95.56 Japanese Yen, 52.24 British Pence and NZ1.06.

Trading Ideas:

  • Bell Potter has increased the 12-month price target on Eagers Automotive (ASX:APE) from $15.25 to $15.50 and maintain a hold rating on the leading Australian automotive retailer following the company announcing it has entered into a non-binding agreement to acquire a portfolio of dealerships and key strategic properties located across Melbourne and the Mornington region of Victoria from a group of companies for a total purchase price of $245m comprising $111m in good will, $100m for the properties and $34m of net assets.
  • And Trading Central has identified a bullish signal on Terracom (ASX:TER) following the formation of a pattern over a period of 25-days which is roughly the same amount of time the share price may rise from the close of $0.42 to the range of $0.57-$0.61 according to standard principles of technical analysis.

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