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Morning Bell 3 May

Sophia Mavridis
May 3, 2023

The Federal Reserve meeting has kicked off, which saw European markets close lower, with oil and gas stocks weighing down on the market the most.

In the US, the Dow Jones tumbled more than 300 points or 1.08% amid concerns on the banking sector and ahead of the Fed’s rate decision. The S&P500 and the Nasdaq also both declined more than 1%.

What to watch today:

  • The SPI futures are suggesting our local market will drop 0.56% at the open, following the global sell-off.
  • Looking at commodities,
    • Oil has sharply fallen further, currently trading 5.4% lower at around US$71.56 per barrel. This marks a five-week low and is due to concerns about a possible recession resulting from interest rate hikes by central banks, as this could ultimately affect energy demand. The RBA unexpectedly raised rates yesterday, and the Federal Reserve and the European Central Bank are set to make announcements this week.
    • Meanwhile iron ore is trading flat.
    • Gold is approaching a 13-month high due to evidence of a slower job market, and concerns over small-cap US banks.

Trading Ideas:

  • Bell Potter maintain a Speculative Buy rating on Pentanet (ASX:5GG). The company is a licensed telecommunications carrier and cloud gaming provider based in Perth. 5GG released a third consecutive flat quarterly update, as the company is focusing on increasing its capacity to serve higher margin on-net subscribers. Bell Potter’s recommendation is based on a successfully scaled rollout of the company’s next-gen network and cloud gaming services, which can meet global tends in entertainment and data proliferation from evolving media consumption. They have lowered their valuation to $0.12, and at the stocks current share price of $0.08, this implies 46.4% share price growth in a year.
  • Trading Central has identified a bearish signal in Woodside Energy (ASX:WDS) indicating that the stock price may fall from the close of $33.38 to the range of $31.40 to $31.80 over 7 days according to the standard principles of technical analysis.

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