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Morning Bell 13 July

Sophia Mavridis
July 13, 2022

The Australian market edged higher yesterday, quickly brushing off the weak lead from Wall Street. Materials shares declined the most, as commodity prices fell, while coincidentally the US dollar index rose to the highest level in 20 years, and the US dollar index is a measure against six currency counterparts. The fall in commodities also dragged the Australian dollar down to a two-year low.

Buy-now-pay-later company Zip (ASX:ZIP) has mutually agreed to cancel its proposed merger with Sezzle, another BNPL stock. This announcement saw Zip gain 6% and was the best performing stock on the ASX200, while Sezzle (ASX:SZL) crashed 39% in yesterday’s session, and was the worst performing stock on the All Ords. Zip will be paying Sezzle $US11 million (AUD$16.4 million) for compensation costs.

The most traded stocks by Bell Direct clients yesterday were Westpac (ASX:WBC), Whitehaven Coal (ASX:WHC) and BHP Group (ASX:BHP).

European stocks were boosted by luxury and travel stocks. The STOXX 600 closed 0.5% higher, after having opened lower. US equities were lower however, ahead of June’s inflation report. The Dow Jones closed 0.6% lower, the S&P500 down 0.9% and the Nasdaq down 1%. The latest US Consumer Price Index data is scheduled to be released at 10:30pm AEST (Wednesday morning in the US). It’s expected to rise by 8.8% in June on a year-over-year basis. The last reading in May was 8.6%, and that was the largest increase the US had seen in CPI since 1981. Also, in the US reporting season for the second quarter has begun. The major banks are set to report this week: JP Moran and Morgan Stanley will post results on Thursday before the bell. And the yield on the US 10-year note fell 2 basis points in New York.

What to watch today:

  • The Australian market is set to open flat this morning, as uncertainty continues across global markets.
  • While investors are waiting on US CPI out later tonight, the Reserve Bank of New Zealand is also expected to list its key rate later today.
  • Mining company, South32 (ASX:S32) has announced the sale of four non-core base metals royalties to a company called Anglo Pacific Group. These are royalties from third party interest in copper and nickel projects.
  • In commodities,
    • Oil has heavily dropped, trading over 8% lower around US$95 per barrel and nearing three-month lows. There is little confidence in oil markets currently, amid a continuously poorer demand outlook. There have also been renewed COVID-19 restrictions in China, which of course is a top importer, and this news has also added to expectations of lower demand for energy as central banks look to accelerate monetary tightening.
    • The gold price is hovering near its lowest level in nine months, while iron ore has been dragged down to its lowest levels since January.
    • So, watch the share prices of miners and energy producers today, as they’re likely to start the session lower.
  • Link Administration (ASX:LNK) holds its AGM today.

Trading Ideas:

  • Bell Potter maintain their Buy rating on Envirosuite (ASX:EVS), which is a global provider of environmental management software. They have lowered their price target from $0.25 to $0.23, and at its current share price of $0.16, this implies 43.8% share price growth in a year.

Trading Central have identified a bearish signal in Harvey Norman (ASX:HVN), indicating that the stock price may fall from the close of $3.85 to the range of $3.36 to $3.46, over 17 days according to the standard principles of technical analysis.

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