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Morning Bell 31 May

Grady Wulff
May 31, 2023

It was a very muted session on the ASX yesterday as the market quickly overcame the boost from US debt ceiling negotiations ending in an agreement to be presented to congress, and investors shifted focus ahead to next week’s rate hike decision out of the RBA and the potential for inflation to remain stickier down under for a little while longer.

The ASX fell 0.11% on Tuesday weighed down by a 0.88% fall in the REIT sector, while communications services stocks rose 0.62%.
Paladin Energy tanked over 20% on Tuesday before being put into a trading halt as investors fled the uranium miner on rumours that Namibia may follow the Chilean government move to nationalise some mining assets. Paladin’s Langer Heinrich Mine is in Namibia which is why investors fled the stock yesterday. The sell-off in miners with operations in South Africa extended to Syrah Resources who’s Balama Graphite operation is in Mozambique which is in the same region as Namibia.

AUSTRAC and embattled casino giant Crown proposed an agreed $450m penalty to Crown to cover breaches of anti-money laundering laws at the company’s Melbourne and Perth casinos. The matter will be heard in court on July 10 to July 11. On the economic data front yesterday, building approvals in Australia sunk 8.1% month-on-month in April and down 25.5% year-on-year, with private sector houses down 3.8%. The market was expecting a rise of 2%, but the sharp decline of 8.1% takes approvals for new home builds to the lowest level in 11-years, in a sign that appetite for building investment properties remains weak and will continue dragging on the economy.

Over in the US, stocks rallied in the early hours of trade as investor sentiment was high following the initial agreement being reached over the debt ceiling crisis. Tech stocks were the top performers led by an AI stock rally after Nvidia became the first chipmaker to join the trillion-dollar market capitalisation club last week. In afternoon trade the key indices pulled back as investors kept a close eye on the Fed’s debt ceiling debates and also on the outlook potential for another rate hike out of the Federal Reserve next month, with the Dow Jones closing Tuesday’s session 0.1% lower, while the S&P500 closed flat and the tech-heavy Nasdaq rose 0.3%.

In Europe, markets had a turbulent session on Tuesday as investors in the region follow progress in the passing of the US debt ceiling agreement through Congress, after a group of Republican lawmakers said on Monday they would oppose the deal reached by President Biden and House Speaker Kevin McCarthy over the weekend. Germany’s DAX fell 0.27% on Tuesday, the French CAC lost 1.29% and, in the UK, the FTSE100 fell 1.38%.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are anticipating the local index to open 0.5% lower on dampened global sentiment over the passing of the debt ceiling through congress.
  • On the commodities front this morning, oil has plunged 4.47% to trade at US$67.73/barrel ahead of OPEC+s meeting this Sunday and amid the US debt ceiling saga. Gold is up 0.81% at US$1958.61/ounce and iron ore is up 2.45% at US$104.50/tonne.
  • AU$1.00 is buying US$0.65 cents, 91.81 Japanese Yen, 52.95 British Pence and NZ$1.08

Trading Ideas:

  • Bell Potter has increased the price target on Clarity Pharmaceuticals (ASX:CU6) from $1.35 to $1.40 and maintain a speculative buy rating on the clinical stage radiopharmaceutical company following a report out of the company on progress in its latest clinical trial investing the use of its proprietary radiopharmaceutical for the treatment of metastatic castrate resistant prostate cancer. The update outlined Cohort 1 dosed 6 patients and the treatment was well tolerated, and Cohort 2 will now commence at a higher dose of the treatment.
  • Trading Central identified a bullish signal on Service Stream (ASX:SSM) on the 30th of May following the formation of a pattern over a period of 16-days which is roughly the same amount of time the share price may rise from the close of $0.64 to the range of $0.73 to $0.75 according to standard principles of technical analysis.

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