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Morning Bell 14 December

Grady Wulff
December 14, 2022

Wall St had a positive session on Tuesday as investors digested softer-than-expected inflation data out of the US for November. Annual inflation data released for November showed the US inflation rate slowed for a fifth straight month to 7.1%, the lowest level since December last year, and below forecasts of 7.3%. For the month, inflation rose just 0.1% where the markets had been expecting a rise of 0.3%. The Dow Jones pared back earlier gains to close the session up 0.1% as investors look ahead to the FOMC meeting and Fed’s rate hike out tomorrow with the expectation of another 50-basis point rate hike. The S&P500 added 0.5% while the tech-heavy Nasdaq rallied 0.65%.

What to watch today:

  • Over in Europe it’s been a turbulent start to the week with markets as investors in the region are less optimistic about the outcome of the Fed’s rate hike decision and the rate decision out of the Bank of England, European Central Bank and Swiss National Bank all revealed on Thursday. On Tuesday though, markets rallied after US inflation data came in lower than forecasted.
  • The STOXX600 closed 1.1% higher, Germany’s DAX rose 1.34%, the French CAC added 1.42% and in the UK, the FTSE100 rallied 0.76%.
  • In commodities:
    • On the commodities front, crude oil is trading 3.95% higher at US$76.08/barrel, natural gas is up 6.3%, uranium is flat at US$48.70/pound, gold is up 1.57% at US$1809.18/ounce and iron ore is up 1.8% at US$113.50/tonne.
  • Taking a look at economic data out today, core inflation data is the UK is out later this evening, while MBA mortgage applications in the US is out late tonight. Tomorrow local investors will be closely eyeing off Australia’s unemployment rate data for November with some economists expecting a decline to 3.3% from 3.4% in October.
  • Locally, RBA Governor Philip Lowe is speaking at 9:30am eastern daylight time today at the annual AusPayNet Summit in Sydney.
  • The Aussie dollar is buying 69 US Cents, 92.79 Japanese Yen, 55.1 British Pence, and 1 New Zealand Dollar and 6 cents.
  • Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open 0.19% higher.

Trading Ideas:

  • Bell Potter has initiated coverage of XTEK (ASX:XTE) with a buy rating and a price target of $0.95 as the Australian defence manufacturer of advanced ballistics protection equipment and supplier of cutting edge military technologies is leveraged to the current global trend of rearmament, which is likely to be a central market narrative over the next decade. The company also boasts a strong contract order book with the anticipating of first half revenue in FY23 to be ~$47m based on previously announced material contracts, and $35m in contract backlog from the technology division has XTE on track to exceed $82m in revenue in FY23 which would be another record year for the company.
  • Trading Central has identified a bullish signal on DGL Group (ASX:DGL) following the formation of a pattern over a period of 18-days which is roughly the same amount of time the share price may rise from the close of $1.48 to the range of $1.83 – $1.91 according to standard principles of technical analysis.

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