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Morning Bell 24 July

Grady Wulff
July 24, 2023

It was a mixed session in the US on Friday as investors digested the latest slew of earnings results and the Dow Jones extended its rally to 10 sessions, the longest for the key index since 2017. American Express shares slipped around 4% on Friday after the company reported second quarter revenue of US$15.05bn which fell short of analysts’ expectations at US$15.48bn.

Corporate earnings so far have been mixed with 75% of S&P500 companies that have reported, exceeding analysts expectations according to FactSet. For the week, the Dow Jones rose 2.08%, the S&P500 added 0.7% and the tech-heavy Nasdaq fell 0.57% over the 5 trading days.

Over in Europe on Friday, a results-driven rally fuelled markets to close higher in the region as investors responded to key corporate earnings results released. UK retail sales data for June was released on Friday coming in at a rise of 0.7% month-on-month, in a sign UK consumer spend remains resilient despite rising inflation and interest rates. Swiss miner Glencore released results on Friday including profits around US$4bn as the commodity market continues to normalise after a particularly strong 2022.

Europe’s earnings season ramps up into full swing this week with key Pharmaceuticals, banks and automotive companies releasing results. On Friday the STOXX600 rose 0.3%, Germany’s DAX fell 0.17%, the French CAC rose 0.65%, and, in the UK, the FTSE100 rose 0.23%.

Locally on Friday, the ASX200 closed the last trading session of the week down 0.15%, weighed down by a 2.73% sell-off in the technology sector while energy stocks offset some of the heavy losses, closing up 1.3% at the session’s end. The local tech sell-off followed a slide in the Nasdaq on Wall St on the back of a disappointing revenue forecast out of Netflix and Tesla reporting a drop in tis gross margins.

What to watch today:

  • Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open the new trading week up 0.4%.
  • Looking at commodities this morning, oil is trading almost half a percent lower at US$76.75/barrel, coal is up 0.76% at US$133/tonne, gold is up 0.04% at US$1962.57/ounce and iron ore is down 0.85% at US$116/tonne.
  • AU$1.00 is buying US$0.67, 95.42 Japanese Yen, 52.36 British Pence and NZ$1.09.
  • This week we may see some market movements following the release of key economic data including Australia’s annual inflation rate data for Q2 out on Wednesday with consensus expecting a fall from 7% in Q1 to 6.2% in Q2.
  • Overseas, the US interest rate decision is out on Thursday with the expectation of the Fed’s to announce a 25-basis point rate hike, which will take the cash rate in the US to 5.5%.

Trading Ideas:

  • Bell Potter has decreased the price target on Coronado Global Resources (ASX:CRN) from $2.15/share to $2/share and maintain a buy rating on the coal miner and producer following the release of the June trading update including quarterly saleable coal production of 4.5 million tonnes and sales volume of 4 million tonnes. This was an improvement on the prior weather impacted quarter however revenue fell 5% quarter-on-quarter driven by lower index and realised prices. Net cash for the company also fell from US$256m to US$192m over the quarter, and Bell Potter expects a lift in second half production and CAPEX which are the factors contributing to the price target decline to $2/share.
  • And Trading Central has identified a bullish signal on GrainCorp (ASX:GNC) following the formation of a pattern over a period of 180-days which is roughly the same amount of time the share price may rise from the close of $8.12 to the range of $9.60 to $10 according to standard principles of technical analysis.

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