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Morning Bell 4 August

Sam Kanaan
August 4, 2023

Wall St closed lower on Thursday amid increasing pressure from rising bond yields, which have been on the rise since the Fitch downgrade earlier this week. The S&P 500 fell for the third straight day, closing the session down 0.25%, while the Dow Jones shed 0.19% and the tech-heavy Nasdaq closed marginally lower, down 0.1%.

US bond yields are trading at 4.18%, close to the highest levels since November 2022. This has had a significant impact on the real estate sector which closed more than 1% lower on Thursday.

After rallying for the most part of the year, it is expected that the US market may slow after both the S&P 500 and tech heavy Nasdaq secured their 5th straight month of gains earlier this week.

Over in Europe, markets in the region closed lower again on Thursday as investors assessed the latest slew of corporate earnings results alongside the Bank of England announcing a 25-basis point rate hike in a bid to tackle the stubbornly high inflation in the region.

The STOXX600 fell 0.7% with tech leading the losses, closing down by 1.8% as global sentiment remains shaky on the Fitch US downgrade. Oil and gas stocks rallied though after Saudi Arabia said it would extend output cut to 1 million barrels per day. Germany’s DAX closed 0.8% lower, the French CAC lost 0.72% and, in the UK, the FTSE100 fell 0.43%.

Locally, the Australian market closed 0.58% lower as a sentiment-driven sell-off in technology stocks weighed on the key index, while materials ended the day down 1.06%. The sell-off locally yesterday was driven by global market turbulence which has been the central theme over the last few days following the Fitch downgrade of the US.

What to watch today:

  • The Australian share market is set to open lower with the SPI futures suggesting a fall of 0.10% at the open this morning, extending the theme from global turbulence overnight.
  • In terms of economic data, at 11:30am AEST the RBA is set to make a statement on monetary policy.
  • On the commodities front this morning,
    • Oil has jumped 2.80%, trading at US$81.61 per barrel. The price has rebounded after both Russia and Saudi Arabia announced an extension in oil output cuts.
    • Gold rose marginally by 0.01%, however is at its lowest level in the past three weeks with incoming pressure from a strong dollar.
    • And Iron ore has fallen 1.35% to US$109.50 after a fourth straight contraction in China’s factory activity.

Trading Ideas:

  • Bell Potter maintains a buy rating on IVE Group (ASX:IGL) as a lack of trading update suggests the FY23 guidance is set to be met or exceeded. Trading currently at $2.31, Bell potter has a 12-month price target on the company of $3.00, which suggests a 29.9% share price growth in a year.
  • And trading central has identified a bearish signal on Ingenia Communities Group (ASX:INA), indicating that the stock price may fall from the close of $4.05 to the range of $3.35-$3.50 over a period of 18 days, according to standard principles of technical analysis.

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