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Morning Bell 19 October

Grady Wulff
October 19, 2023

The release of hotter-than-expected key economic data out of China boosted the local market yesterday with the big miners leading the charge as economic growth outlook is back on the horizon for the world’s second largest economy. China’s GDP growth rate expanded by 4.9% YoY in Q3 2023 which is cooler than the 6.3% growth in Q2 but above market expectations of a 4.4% rise, indicating the Chinese economy is finally expanding post the end of pandemic lockdowns earlier this year.

China’s retail sales data YoY in September also rose by 5.5%, which is a significant jump from the 4.9% recorded in August and also supports the idea that consumers in China are back to spending again post pandemic.

And Chinese industrial production YoY also remained at 4.5% in September, however this was above market expectations of a 4.3% rise.

The ASX200 rose 0.30% on Wednesday driven by the energy sector rallying 2.47% both on the back of the strong Chinese economic data and a 1.84% rise in the price of oil amid wider conflict in the Middle East.

Whitehaven Coal soared 11.5% on Wednesday after the coal miner announced it would pay US$3.2bn to acquire 100% of the metallurgical coal mines from BMA, or BHP Group and Mitsubishi Development. The acquisition consolidates Whitehaven’s position as the leading Australian ASX listed metallurgical coal producer and increases the company’s exposure to attractive high-growth market regions including India and Southeast Asia.

Luxury online fashion retailer Cettire fell 3.4% on Wednesday despite the company doubling its revenue to $167.4m in the latest trading update released yesterday against tough economic conditions.

Over in the US, rising treasury yields and corporate earnings results weighed on investor sentiment, prompting Wall Street to close the midweek session lower. The Dow Jones lost 332 points or 0.98%, the S&P500 fell 1.34% and the tech-heavy Nasdaq declined 1.62%. The 10-year treasury yield rose again on Wednesday to break above 4.9%, the highest level since 2007, while the average rate on the 30-year fixed mortgage rate hit 8% which is also the highest level since mid-2000.

United Airlines Tumbled 9.7% after delivering softer guidance than expected while Proctor & Gamble rose 2.6% after beating analysts’ earnings and revenues expectations for the quarter.

Over in Europe, markets closed lower in the region as investors assess tensions in the Middle East against corporate earnings results and the release of key inflation data out of the UK. The STOXX600 fell 1%, Germany’s DAX lost 1.03%, the French CAC fell 0.91%, and, in the UK, the FTSE100 fell 1.14%. UK inflation came in at 6.7% for September, which was slightly ahead of consensus expectations and unchanged from August. Shares in chipmakers across the European region fell on Wednesday following the release of disappointing earnings results out of Dutch chipmaker ASML.

What to watch today:

  • Ahead of the local trading session here in Australia this Thursday, the SPI futures are expecting the ASX to open 1.17% lower following the turbulent session on global markets overnight.
  • On the commodities front this morning, oil is trading just shy of 2% higher at US$88.32/barrel, gold is up 1.2% at US$1946/ounce and iron ore is up 1.24% at US$122/tonne.
  • AU$1.00 is buying 63 US cents, 94.96 Japanese Yen, 52 British Pence, and NZ$1.08.

Trading Ideas:

  • Bell Potter has decreased the price target on Australian Agricultural Co. (ASX:AAC) from $2.15 to $1.85 but maintain a buy rating on the integrated cattle and beef producer following a downward movement in live cattle trend and upward movement in northern grain pricing since the company released its FY23 results. Grain pricing has climbed 14-18% since reporting FY23 results while the average cattle price indicators are down 45% YoY in 1H24.
  • And Trading Central has identified a bullish signal on Yancoal (ASX:YAL) following the formation of a pattern over a period of 32-days which is roughly the same amount of time the share price may rise from the close of $5.16 to the range of $5.95 to $6.10 according to standard principles of technical analysis.

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