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Morning Bell 27 April

Sophia Mavridis
April 27, 2022

Yesterday, the local market yesterday was trading in negative territory, ignoring the positive lead from Wall Street and closing with a loss of 2% or 155 points.

There is a lot of focus recently on the impact that the lockdowns in China will have on the demand outlook of commodities, which weighed down on the market. The materials sector suffered the greatest loss, shedding more than 5%, following a decline in commodity prices. A drop in oil prices also saw energy shares also suffer heavy losses, with the sector closing 4% lower. And all 11 industry sectors closed in the red.

Mining shares accounted for most of the worst performers, however the stock that declined the most was EML Payments (ASX:EML), which dropped 38.6% after cutting its EBITDA guidance by 8%, revenue guidance by 4% and profit guidance by 6.6%. Meanwhile, stocks that managed to post gains included Virgin Money (ASX:VUK), Block (ASX:SQ2) and Nufarm (ASX:NUF).

The most traded stocks by Bell Direct clients yesterday included BHP Group (ASX:BHP), the Vanguard Australian Shares ETF (ASX:VAS), Lake Resources (ASX:LKE), Bank of Queensland (ASX:BOQ) and Northern Star Resources (ASX:NST).

There was broad selling in New York, with 10 of the 11 S&P500 industry sectors closing lower, while higher oil prices lifted energy shares. A big tech-sell off saw the Nasdaq hit a fresh 52- week low, closing 4% lower and retreating further into bear market territory. The Dow Jones closed 2.4% lower and the S&P500 closed 2.8% lower.

What to watch today:

  • The Australian share market is set to extend losses. The SPI futures are suggesting a sharp drop of 1.47% or 107 points at the open this morning.
  • In economic data, today we’ll receive a key update on inflation. The inflation rate will be released at 11:30am AEST, and this rate measures the change in prices of goods and services for consumers. So, this will give us an indication of consumer price pressures and will also determine expectations for rate rises. Inflation is expected to lift above the RBA’s 2-3% target range for the first time since 2010, which is the last time rates rose.
  • In commodities, oil prices have lifted as China’s central bank pledged to increase support for their economy. Iron ore prices are in the red, while gold is trading higher, following a slight pullback in the US dollar and lower Treasury yields.

Trading Ideas:

  • Bell Potter maintain their Buy rating on Mineral Resources (ASX:MIN) with a $70 price target. Mineral Resources last closed at $54.67, implying 28% share price growth in a year.
  • Trading Central have identified a bullish signal in AUB Group (ASX:AUB), indicating that the stock price may rise from the close of $22.90 to the range of $24.70 – $25.10 over 16 days, according to the standard principles of technical analysis.

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