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Morning Bell 28 September

Grady Wulff
September 28, 2022

US markets were mixed overnight following a number of Federal Reserve policymaker speeches showing an increased appetite for further rate hikes even at the risk of throwing the economy into a recession. The Dow Jones industrial index ended the session down 0.43% and the S&P500 lost 0.21% to hit a two-year low, but the tech-heavy Nasdaq posted a gain of 0.25%. Over in London, stocks on the FTSE 100 were knocked down by rate rise worries as the central bank may look to raise rates further to support the hammered British pound, with the index closing the session down 0.52%. The global market sell-off extended into Europe with Germany’s DAX and the French CAC declining 0.72% AND 0.27% respectively on Tuesday.

What to watch today:

  • Russia’s rationing of natural gas and energy commodity withdrawal to Europe continues to fuel concerns over an energy crisis in the region, which led to a rally for local energy sector on Tuesday especially for coal producers. Russia’s moves to ration and withdraw commodities from Europe have caused countries in the region to invest more in coal to keep the electricity on in the region as winter fast approaches. ASX-listed coal mining and energy stocks have benefitted from the growing energy crisis in Europe by signing commodity supply deals.
  • Taking a look at the turbulent commodity prices, over the last few days we’ve seen a rebound with brent crude oil now trading 2.6% higher around US$86.2 per barrel, coal is up 0.64% around US$438 per MT, but natural gas is down 3.14%. The recent dive in gold prices eased overnight as the dollar rally took a breather, with the price of the precious metal trading 0.66% higher at US$1,632 per ounce.
  • Ahead of the local session today, the ASX futures are expecting the local market to follow the global sell off, anticipating a 0.68% decline when the market opens.
  • Stocks going ex-dividend today include Myer Holdings (ASX:MYR) and Cedar Woods Properties (ASX:CWP). If you have been thinking about these stocks it might be worth considering buying in today as stocks going ex-dividend generally trade lower on the ex-dividend date.
  • There is no local economic data set to be released today, but over in the US New Home Sales data for August was released overnight at a 5-month high of 685K for the month, which is an increase of 28.8% on July and beat market expectations of 500K.

Trading Ideas:

  • Bell Potter has initiated coverage of DroneShield (ASX:DRO) with a Speculative Buy rating on this stock and a price target of $0.24 per share, for the reasons that Bell Potter believes DRO is well placed to capitalise on favourable macroeconomic conditions accelerating structural growth in the market, with the strong sales pipeline identified by the company demonstrating long-term demand. The rating and price target are also based on the fiscal support DRO receives from the Australian government’s $270 billion funding for domestic defence, comprehensive product offering by the company and opportunity for growth in adjacent markets.
  • Trading Central has identified a bearish signal on Orora (ASX:ORA) following the formation of a pattern over 334 days which is roughly the roughly period the of time in which the target price range between $1.95 and $2.15 may be achieved, according to standard principles of technical analysis.

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