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Morning Bell 29 November

Sophia Mavridis
November 29, 2022

Global markets closed in the red overnight, after protests in China raised worries around supply chains. Stocks fell as social unrest from China’s prolonged COVID restrictions weighed on markets around the world. Chinese governments tightened some COVID controls as case numbers rose, even though earlier this month Beijing adjusted some policies that otherwise suggested the country’s reopening.

This saw oil futures hovering around brand-new lows for this year, earlier in the trading day, due to concerns around demand.

In US equities, the Dow Jones dropped more than 500 points or 1.5%. The S&P500 and the Nasdaq each dropped 1.7%.

China is the world’s second-biggest economy, so almost all markets are affected in some way. We also saw Bloomberg report that it could mean 6 million fewer iPhone units for the year, as the factories in China are shutdown, and this saw Apple shares drop 2.8%.

European equities were down also. The STOXX 600 down 2.9%, Germany’s DAX down 1%, France’s CAC down 0.7% and in the UK the FTSE 100 down 0.2%.

What to watch today:

  • The SPI futures are suggesting the Australian market will open flat this morning.
  • In commodities:
    • Currently oil prices have rebounded, now trading 1% higher at US$77 per barrel, after having hit an 11-month low of US$73.50 earlier in the session. As well as the protests in China, there are also rumours of an OPEC production cut. Keep your eye on energy producers today such as Santos (ASX:STO) and Beach Energy (ASX:BPT).
    • Meanwhile the price of gold is reading 0.85% lower, pressured by a recovery in the US dollar.
    • The iron ore price has jumped 2.5% at US101.50 per tonne and is set to close the month nearly 25% higher at levels last seen in mid-September. In iron ore markets, expansionary measures from China to sustain slowing economic growth, outweighed the concerns about the protests. So keep watch of Rio Tinto (ASX:RIO), Fortescue Metals (ASX:FMG), Champion Iron (ASX:CIA) and BHP Group (ASX:BHP).

Trading Ideas:

  • Bell Potter maintain a Buy rating on IPD Group (ASX:IPG), which is a leading Australian distributor of electrical equipment and industrial digital technologies operating nine distribution centres and services over 4,200 customers nationally. Bell Potter maintained their recommendation after the company’s AGM yesterday, where they released H1 2023 estimated guidance well-ahead of Bell Potter’s estimated forecasts. Bell Potter say that the company provides investors with leverage to a new life cycle of demand, which in Europe has seen a more than 15% market growth per annum over the last two years. Bell Potter have increased their price target from $2.25 to $3.35, and at its current share price of $3.05, this implies 9.8% share price growth in a year.
  • Trading Central have identified a bullish signal in NEXTDC (ASX:NXT) indicating that the stock price may rise from the close of $9.82 to the range of $11 to $11.30 over 51 days according to the standard principles of technical analysis.

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