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Morning Bell 18 January

Grady Wulff
January 18, 2023

Wall Street closed mixed on Tuesday which was the first trading session of the week in the US as investors digested contrasting earnings results out of investment banks Goldman Sachs and Morgan Stanley, as well as GDP data out of China indicating a rise of just 3% in 2022, which fell short of Beijing’s target of 5.5%. The Dow Jones closed 1.14% lower, the S&P500 fell 0.2% but the tech-heavy Nasdaq closed the day up 0.14% Goldman Sachs fell 6% after releasing fourth quarter and full year results that fell short of analysts’ expectations including EPS of US$3.32 per share compared with the expected US$5.48/share, revenue of US$10.59 billion compared to the US$10.83 billion estimate, and profits fell by two-thirds in the final three months of last year. Meanwhile, Morgan Stanley shares rose 6% after the investment bank also released fourth quarter and full year results including net income of US$2.11 billion or US$1.26/share which topped analysts’ estimates of EPS at US$1.19/share. The bank also announced cost cutting measures in December last year through reducing its staff by 2% and boosted its safety net by setting aside US$85 million for credit losses compared with just US$5 million in the same quarter a year earlier amid rising interest rates in the US.

Over in Europe markets were relatively unchanged on Tuesday as investor concerns are focused on the World Economic Forum in Davos this week. The STOXX600 closed 0.3% higher, Germany’s DAX rose 0.35%, the French CAC added 0.48% and, in the UK, the FTSE100 fell 0.12%.

On the commodities front, crude oil is up 1.27% at US$79.71/barrel, gold is down 0.63% at US$1905.86/ounce, and iron ore is down 4.33% at US$121.50/tonne.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open the midweek session 0.29% higher.
  • Important economic data out today includes the highly anticipated Bank of Japan interest rate decision, with the market expecting the maintenance of the economy’s -0.1% interest rate however recent indications may spell a surprise increase for the first time in 8-years.
  • The Aussie dollar is buying, US$0.70, 89.51 Japanese Yen, 57.14 British Pence, and NZ$1.09.

Trading Ideas:

  • Bell Potter has upgraded its price target on DroneShield (ASX:DRO) to $0.34/share following the aerial tech company announcing another new contract to kick off the new year. The $11m contract is a purchase order for several different types of the company’s counter-drone/C-UAS equipment. This is the second $10m+ contract announced by the company in less than 3-weeks, after the initial record contract of the same size in December’22, which establishes solid revenue foundation for CY23.
  • Trading Central has identified a bullish signal on Goodman Group (ASX:GMG) following the formation of a pattern over a period of 172-days which is roughly the same amount of time the share price may rise from the close of $19.05 to the range of $23.75-$24.75 according to standard principles of technical analysis.

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