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Morning Bell 29 May

Grady Wulff
May 29, 2023

US markets are set to rally on Monday following the conclusion of a length negotiations process over raising the U.S. debt ceiling which finally concluded on Saturday (US time). Stocks in the US rallied on Friday as investors grew hopeful of an outcome in the debt ceiling negotiations between President Biden and House Speaker Kevin McCarthy. The Dow Jones rose 1%, the S&P500 added 1.3%, and the tech-heavy Nasdaq rallied 2.2%. On Saturday night in the US, President Biden and Kevin McCarthy held a 90-minute-long phone call to discuss the deal where a compromise was reached and an agreement in principle has been decided. House speaker Kevin McCarthy expects congress to pass the debt deal, which is called a compromise and is good for the country because according to Biden, ‘it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastates and millions of jobs lost’.

And over in Europe, markets closed higher as investors looked ahead to a crucial weekend for the U.S. debt ceiling negotiations. Technology stocks in the region rallied late in the week following the release of chipmaker Nvidia’s strong results. Germany’s DAX rose 1.2% on Friday, the French CAC rose 1.24% and, in the UK, the FTSE100 added 0.74%.

The local index closed 0.23% higher on Friday, buoyed by a rally for technology stocks, also on the back of Nvidia’s strong results which fuelled a rally for tech stocks around the world. Investor appetite is also growing for technology stocks as rate hike pauses and potential cuts are on the horizon in the future. Materials stocks also had a strong end to the week with the sector rising 0.93% on Friday on a solid rebound in the price of iron ore which has been slammed lately on weakened demand outlook out of China.

What to watch today:

  • Ahead of the local trading session here in Australia, the SPI futures are anticipating the ASX to open almost 1% higher, driven by a boost in sentiment as debt ceiling negotiations come to a close.
  • On the commodities front this morning, oil is trading 0.86% higher at US$73.32/barrel, coal is flat at US$160/tonne, gold is up 0.14% at US$1943/ounce and iron ore is up 3.55% at US$102/tonne.
  • Stocks trading ex-dividend today include Dalrymple Bay Infrastructure and Infratil. If you’ve been thinking about these stocks it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.
  • AU$1.00 is buying US$0.65, 91.83 Japanese Yen, 52.8 British Pence and NZ$1.08.

Trading Ideas:

  • Bell Potter has decreased the price target on Eagers Automotive (ASX:APE) from $15.25 to $15 but maintain a buy rating on the leading automotive retailer following the release of the company’s trading update at its AGM which was slightly below Bell Potter expectations with underlying NPAT before tax for the first four months of the year only in line with the PCP. Bell Potter expects a stronger H2 due to further improvement in deliveries from the big three – Toyota, Mitsubishi and Mazda as well as BYD.
  • Trading Central has identified a bullish signal on APM Human Services International (ASX:APM) following the formation of a pattern over a period of 17-days which is roughly the same amount time the share price may rise from the close of $2.04 to $2.14 to $2.18 according to standard principles of technical analysis.

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