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Morning Bell 16 December

Bell Direct
December 16, 2022

US equities sharply fell overnight. The selling began after the Federal Reserve’s 50 basis point interest rate hike yesterday, taking the main rate 4.25% to 4.5% range. The shift to a lower gear following four consecutive 75 basis point hikes was widely anticipated, and bond yields barely moved in response. Overnight, US retail sales data was released – retail sales declined more than expected in November which heightened concerns around rate hikes, with the data showing that inflation has taken a toll on consumers. The Dow Jones saw its worst day in three months, falling more than 700 points or 2.25%, the S&P500 dropped 2.5% and the Nasdaq dropped 3.2%.

European markets also closed in the red after the European Central Bank signalled that “significant” rate increases are still to come. The STOXX 600 down 2.85%, Germany’s DAX and France’s CAC both closed more than 3% lower, and the FTSE 100 down 0.9%.

What to watch today:

  • The SPI futures are suggesting the Australian market will fall 1.16% at the open this morning.
  • In economic data, this morning the S&P Global Manufacturing and Services Flash PMI will be released. Remember the Flash PMI is a forward-looking estimate of the final PMI, set to be released next week.
  • In commodities, the price of oil has dropped 1.4%, currently trading just over US$76 per barrel, as Chinese factory data piled onto demand concerns. Gold has dropped 1.7% to US$1,776 an ounce, while iron ore is down 0.5% at US$110.
  • Keep watch of NAB and Link Administration (ASX:LNK) – both companies are set to hold their AGMs today.

Trading Ideas: 

  • Bell Potter maintain a Speculative Buy rating on Arafura Rare Earths (ASX:ARU) and have increased their valuation from $0.64 to $0.70. At its currently share price of $0.52 this implies 36% share price growth in a year.
  • Trading Central has identified a bullish signal in Qualitas (ASX:QAL) indicating that the stock price may rise from the close of $2.28 to the range of $2.70 to $2.76 over 37 days, according to the standard principles of technical analysis.

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