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Morning Bell 27 April

Grady Wulff
April 27, 2023

Wall Street wavered during the midweek session before closing mixed as investors fears of a banking crisis rise on the back of First Republic Bank’s first quarter results and subsequent 49% decline on Tuesday. Upbeat earnings out of Alphabet, Microsoft and Boeing softened the sharp losses but weren’t enough to turn Wall Street positive at the closing bell on Wednesday. At the closing bell, the Dow Jones fell 0.68%, and the S&P500 lost 0.38%, but the tech-heavy Nasdaq added almost half a percent buoyed by strong earnings results.

Over in Europe, markets closed lower as investor fears of a banking crisis worsened. London-listed bank Standard Chartered posted a 21% rise in pre-tax profit which beat estimates and helped restore some relief in the European banking sector. Germany’s DAX ended the midweek session down 0.48%, the French CAC dropped 0.86%, and in the UK, the FTSE100 fell 0.49%.

The local market rallied after midday yesterday following the release of Australia’s inflation data for Q1, showing inflation cooling to 7% over the twelve months to the March quarter, in a sign inflation has peaked down under. Quarter-on-quarter, inflation rose 1.4%, with the highest price rises from Medical and hospital services, up 4.2%, tertiary education, up 9.7%, and gas and other household fuels, up 14.3%. The rise to 7% for the March quarter was slightly above consensus expectations of a rise to 6.9% but does show inflation is beginning to cool.

The rise in medical and hospital services is to be expected in the March quarter as this is generally the period GPs and other health service providers review their fees, and the Medicare Safety Net is reset at the start of every calendar year. Tertiary education fees are also indexed at the start of the year. The significant rise in gas and other fuel costs reflects major events over the past year globally including Russia’s war with Ukraine and unplanned outages at coal fired power stations according to the ABS. At the closing bell of the midweek session though, a sharp sell-off in Utilities stocks weighed the local bourse down to close 0.08% lower.

What to watch today:

  • Ahead of the local trading session here in Australia, the SPI futures are anticipating the local index to open 0.22% lower to start Thursday’s trading session in the red.
  • On the commodities front this morning oil continues to trade sharply lower, down 3.68% at US$74.23/barrel, gold is down 0.41% at US$1989.7/ounce and iron ore is down 2.74% at US$106.50/tonne.
  • On the economic calendar today, US GDP growth rate data for Q1 is released tonight with consensus expecting a decline in economic expansion to 2% from 2.6% in Q4.
  • On the Aussie dollar front, AUD$1.00 is buying US$0.66, 88.32 Japanese Yen, 53.43 British Pence and NZ$1.08.

Trading Ideas:

  • Bell Potter has increased its price target on Gold Road Resources (ASX:GOR) from $1.90 to $2.05 and maintain a buy rating on the gold miner following the release of the company’s Q1 results including record quarterly free cash flow of $44.2m which beat Bell Potter expectations. The company also maintained production guidance and ended the quarter with cash and equivalents of $128m, up $47m. GOR is debt free and updated on retained stockpiles at Gruyere which stand at 5.9 million tonnes at 0.72 grams per tonne which provides an ongoing buffer against mining disruption.
  • Trading Central has identified a bearish signal on Rio Tinto (ASX:RIO) following the formation of a pattern over a period of 94-days which is roughly the same amount of time the share price may fall from the close of $111.94 to the range of $98-$101 according to standard principles of technical analysis.

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