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Morning Bell 21 October

Sophia Mavridis
October 21, 2022

Well while European stocks had a good run overnight, US equities closed in the red, as Treasury yields continue to climb to new highs. The benchmark 10-year Treasury yield reached 4.2%, trading at a level not seen since 2008. Stocks declined for the second consecutive session as investors digested some key earnings reports. The Dow Jones closed 0.3% lower, the S&P500 down 0.8% and the Nasdaq down 0.6%.

What to watch today:

  • The Australian market is set to open lower this morning. The SPI futures are suggesting a fall of 0.37% at the open.
  • In commodities, the price of oil is only slightly higher, trading just above US$85 per barrel, while gold is trading lower. Gold is approaching levels last seen in April 2020, weighed down by the rallying US dollar and Treasury yields, on expectations that the Fed will continue its aggressive approach to rate hikes. And iron ore has started to regain some of its earlier losses this week, currently trading 1% higher. Iron ore hit an 11-month low earlier this week after China emphasised the importance of its zero-COVID policy.
  • There are a few stocks set to release a quarterly report today, so these companies will be the ones to watch. They include Allkem (ASX:AKE), AMP (ASX:AMP), Coronado Global Resources (ASX:CRN) and St Barbara (ASX:SBM).
  • Currently, 1 Australian dollar is buying 63 US cents, 94.25 Japanese Yen, 55 British Pence and 1.1 New Zealand.

Trading Ideas:

  • Bell Potter maintain a Buy rating on TechnologyOne (ASX:TNE). The company will release its FY22 results at the end of November, and the brokers view is that is may provide a catalyst for the share price, because firstly, profit before tax is likely to be toward the top end of the guidance range of 10-15% growth. Secondly, on the premise initial licence feeds may be below guidance of $12 million. Also, SaaS metrics and Annual Recurring Revenue could positively change, second half cash flow should be strong, and there is potential of capital management initiatives given the strong cash position. Bell Potter haven’t changed their forecasts, they maintain a price target of $14.25. At TNE’s current share price of $12.16, this implies 17.2% share price growth in a year.
  • Trading Central have identified a bearish signal in Fortescue Metals (ASX:FMG) indicating that the stock price may fall from the close of $16.52 to the range of $11.90 to $19.80 over 39 days, according to the standard principles of technical analysis.

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