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Morning Bell 21 February

Sophia Mavridis
February 21, 2023

The major US benchmarks closed mixed overnight, with energy stocks down the most, while yields on the 10-year and 2-year Treasury bonds also weighed on equities. European equities were higher however, boosted by gains in mining stocks.

Coming up this week – the thinking behind monetary decisions at the Fed will be under the spotlight on Wednesday as the US central bank releases the minutes of its latest meeting, while Friday’s release of US Personal Income and PCE, the Federal Reserve’s preferred inflation measure will be closely watched for signs of whether inflationary pressures will re-accelerate or become less intense. Also, US earnings season is also full swing a few big names announcing Q4 results during this week.

What to watch today:

  • Our local market is poised to open lower this morning, with the SPI futures suggesting a 0.38% drop.
  • It’s another busy day in reporting season – these reports are causing a lot of movement in markets this month. So today we’ll be watching out for AMA Group, BHP, Coles, G8 Education, Tabcorp and Viva Energy.
  • BHP Group (ASX:BHP) earnings will be one of the most watched today. Goldman Sachs are expecting underlying EBTDA US$13.7b, NPAT of US$6.9b, and an 88 US cents per share interim dividend, compared to the consensus estimate of 98 US cps.
  • In commodities, the oil price is higher, rebounding from an almost two-week low of around US$75 touched last week, as investors weighed optimism about a recovery in Chinese demand against rising US supplies and persistent worries about a global economic slowdown. Gold has steadied after hovering near its weakest levels in seven weeks after hawkish comments from the Fed and strong eco data weighed down on gold, while iron ore has extended its rebound, so keep your eye on iron ore miners this week, such as Champion Iron (ASX:CIA), Fortescue Metals (ASX:FMG), and Rio Tinto (ASX:RIO).

Trading Ideas:

  • Following the H1 results for The a2 Milk Company (ASX:A2M) announced yesterday, Bell Potter have reiterated their Buy rating, after A2M reported underlying NPAT ahead of Bell Potter’s expectations. There price target has been increased from $6.80 to $7.65, which at its current share price of $6.49, implies 18% share price growth in a year.
  • Trading Central have identified a bearish signal in Metals X (ASX:MLX) indicating that the stock price may fall from the close of $0.33 to the range of $0.23 to $0.25 over 34 days.

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