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Morning Bell 6 July

Grady Wulff
July 6, 2023

The release of the Federal Reserve’s meeting minutes sent Wall Street into sell-mode on Wednesday in this shortened trading week as investors digested the minutes including the outlook for further tightening of monetary policy. Also adding to the negative sentiment on Wall St was data released on Wednesday morning showing factory orders were weaker than expected in May. Investor sentiment may also waver later in the week when a batch of employment data is released which will enable insights into the strength and tightness of the US labour market to date. The Dow Jones fell 0.38% on Wednesday while the S&P500 lost 0.2% and the Nasdaq dropped 0.18%.

Over in Europe, markets in the region closed lower on Wednesday as investors shifted focus back to weakening global growth outlook and recessionary concerns. PMI figures for June in the eurozone showed business output for the month contracted as services growth eased despite easing inflationary pressures. This combined with China’s service sector activity also slowing considerably has investors worried about slowing global economic growth. The STOXX600 fell 0.7%, Germany’s DAX lost 0.63%, the French CAC fell 0.8%, and in the UK, the FTSE100 fell 1.03%.

The RBA rate pause-driven rally of yesterday was very short-lived as the key index closed 0.35% lower on Wednesday. The ASX traded in negative territory for almost all of yesterday’s session weighed down by sharp losses for financial, healthcare and energy stocks, while Telecommunications and Utilities stocks offset some of the heavy losses on the market yesterday. CSL weighed down the healthcare sector yesterday with the biotech giant losing 0.63% yesterday, while AMP took the biggest hit on the ASX200 yesterday losing over 6% before entering a trading halt as the Federal Court in Victoria ruled in favour of claimants against AMP in a class action known as the ‘buyer of last resort’ proceedings.

The winning stocks on the ASX200 yesterday were Elders (ASX:ELD) adding 4.8%, Bellevue Gold (ASX:BGL) lifting 4.09% and Seek (ASX:SEK) rising 3.9%. And on the losing end aside from AMP (ASX:AMP), Netwealth Group (ASX:NWL) fell 3.8% and Telix Pharmaceuticals (ASX:TLX) lost 3.4%.

Overseas, China’s latest Caixin manufacturing data released yesterday for June came in at 53.9 points which fell short the forecasted 56.5 points and is a sharp decline from the 57.1 points recorded in May, adding further concerns around China’s overall economic recovery post-pandemic.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are anticipating the local index to open 0.51% lower following the global market sell-off overnight.
  • AU$1.00 is buying US$0.67 cents, 96.28 Japanese Yen, 52.63 British Pence and NZ$1.08 dollar.

Trading Ideas:

  • Bell Potter has increased the 12-month price target on Nanosonics (ASX:NAN) from $3.90 to $4.15 and maintain a sell rating on the healthcare equipment and services company following a site visit to the company’s US headquarters in Indianapolis, where the US accounts for around 90% of group revenues. The key learning from the Bell Potter team visit was that Nanosonics’ Trophon 2 device remains under penetrated in many clients, in particular amongst former GE clients. Bell Potter maintains a sell rating as they believe this stock is full priced, however increase the price target based on revenue for FY23 likely to be at the top end of guidance around 41% and gross margin in the range of 77-79%.
  • And Trading Central has identified a bullish signal on Beacon Lighting (ASX:BLX) following the formation of a pattern over a period of 30 days which is roughly the same amount of time the share price may rise from the close of $1.74 to the range of $1.94 to $2.00 according to standard principles of technical analysis.

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