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Morning Bell 17 January

Grady Wulff
January 17, 2024

Wall Street closed the first trading session of the holiday shortened trading week lower as investors assessed the latest batch of fourth quarter earnings results alongside rising bond yields. The Dow Jones fell 0.62% lower while the Nasdaq dipped 0.2% and the S&P500 ended the day down 0.37%. The benchmark 10-year Treasury note jumped nearly 12-basis points to 4.068% following Federal Reserve Governor Christopher Waller indicating the central bank may ease monetary policy slower than Wall Street had first anticipated, which prompted investors to sell equities in favour of government bonds.

In Europe, markets closed lower again as investors digested comments made at the World Economic Forum in Switzerland. The STOXX600 fell 0.3%, Germany’s DAX lost 0.3%, the French CAC fell 0.2% and, in the UK, the FTSE100 declined 0.5%.

We also have the European Central Bank indicating rate cuts may come later than first expected which is hurting GDP and economic growth in the region especially for the likes of Germany which are on the edge of technical recessions.

The local market has started the week in the red, with the ASX200 ending Tuesday’s session down 1.09% as utilities and energy stocks weighed on the market, and every sector closed the day in negative territory.

The supermarket giants weighed on the market yesterday, with Coles falling 2% and Woolworths sliding 1.5% after Australia’s competition watchdog said it would not hesitate to take legal action against a big supermarket chain for breaching consumer law, which comes just a week after Labor announced a review of industry codes, telling supermarkets to pass on lower wholesale costs to consumers and not ‘price gauge’ at the checkouts.

Australia’s consumer confidence data slipped in January as Aussies remain concerned about financial pressures following 13 interest rate hikes out of the RBA since May 2022.

What to watch today:

  • Ahead of the midweek local trading session here in Australia the SPI futures are expecting the ASX to open Wednesday’s session up 0.05% despite the negative session across global markets overnight.
  • On the commodities front this morning, oil is trading 0.81% lower at US$72/barrel, gold is down 1.34% at US$2027/ounce and iron ore is down 1.5% at US$131/tonne.
  • The Aussie dollar continues to weaken against the greenback with AU$1.00 buying US$0.66, 96.94 Japanese Yen, 52.21 British Pence and NZ$1.07.

Trading Ideas:

  • Bell Potter has maintained a buy rating on Coventry Group (ASX:CYG) and increased the 12-month price target on the industrial supply and services group from $1.45 to $1.80 following the release of a first half trading update which overall was ahead of Bell Potter forecasts, including the anticipation of first half sales growth of 5.4% YoY and pre-leases standard EBITDA to lift 18.1% after the company implemented a range of buy and sell-side margin initiatives through the Trade network early in FY24.
  • And Trading Central has identified a bearish signal on Sigma Healthcare (ASX:SIG) following the formation of a pattern over a period of 7-days which is roughly the same amount of time the share price may fall from the close of $0.95 to the range of $0.84-$0.86 according to standard principles of technical analysis.

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