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Morning Bell 2 December

Sophia Mavridis
December 2, 2022

Following Fed chairman’s Jerome Powell’s speech that essentially confirmed that the Fed will slow the pace of interest rate hikes, we saw a surge in equities that added over $1 trillion to the market capitalisation of the S&P500 alone. Meanwhile the Dow Jones hit a 7-month high and its 12-month return turned positive. The Dow has already rallied over 20% from its year-to-date low.

Overnight however, the three major benchmarks closed mixed ahead of the US jobs report. The Dow closed 0.6% lower, the S&P500 down 0.1%, while the Nasdaq is slightly higher, up just 0.09%.

On the other hand, European equities hit six-month highs. The Stoxx 600 is up 0.9%, however the FTSE 100 closed 0.2% lower.

What to watch today:

  • Following the mixed sessions in global markets, the SPI futures are suggesting out local market will drop 0.2% at the open this morning.
  • In commodities:
    • Oil is trading higher, as investors are weighing the prospects of a recovery in demand against further supply cuts from OPEC, ahead of OPEC’s upcoming meeting on December 4th.
    • Gold has jumped almost 2% higher, reaching its highest level since early July, due to the sharp US dollar depreciation.
    • Iron ore is currently trading flat.
  • In economic data, there are a few key figures set to be released globally. Locally, Australia’s retail sales data and home loans data for October is set to be released today. Plus, RBA Governor Phillip Lowe is set to give a speech at 1pm AEDT. Overseas, the Eurozone Producer Price Index for October and the US unemployment rate for November are out tonight. And investors are also awaiting OPEC’s meeting on Sunday.
  • Watch Premier Investments Limited (ASX:PMV) as the company is set to hold its AGM today.

Trading Ideas:

  • Bell Potter maintain a Buy rating on PolyNovo (ASX:PNV), which is a commercial stage medical device company. The $30 million placement conducted last week significantly strengthens the company’s balance sheet. Bell Potter says it provides the growth platform facilitating the expansion of the US and global sales team with key markets in Asia and Canada being targeted. Bell Potter have increased their price target from $1.90 to $2.30, and their price target is purely generated from their Discounted Cash Flow methodology, as this best captures the longer term potential for PolyNovo. At PNV’s current share price of $2.03, this implies 13.3% share price growth in a year.

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