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Morning Bell 6 June

Sophia Mavridis
June 6, 2022

Week-to-date, the ASX200 gained 0.78%, with energy and materials gaining the most, while utilities declined. Last Friday was a positive session, with the ASX200 closing 0.9% higher, led by the materials and tech sectors, which each advanced more than 2%.

The major miners gained the most on Friday, boosted by demand for iron ore and well as a lithium stocks, which extended their rebound after Wednesday’s sell-off. The best performers were Champion Iron (ASX:CIA), Pilbara Minerals (ASX:PLS), Gold Road Resources (ASX:GOR), Liontown Resources (ASX:LTR) and Nickel Mines (ASX:NIC). And the worst performer was healthcare company Healius (ASX:HLS), following an update that revealed its EBIT came in just under $100 million, compared to first half EBIT of $376 million.

The most traded stocks by Bell Direct clients on Friday were Lake Resources (ASX:LKE), Fortescue Metals (ASX:FMG), Whitehaven Coal (ASX:WHC), BHP Group (ASX:BHP) and Commonwealth Bank (ASX:CBA).

Overseas, European and US equities declined, following the release of a stronger-than-expected jobs report and its implication for monetary policy moving forward. The latest jobs report saw that hiring in the US remained elevated in May, however the sell-off was likely a reaction to fears that the Fed will be tightening monetary policy. The benchmark 10-year Treasury yield climbed after the report, above 2.9%. Investor fears around higher rates are around the possibility that it could cause an economic slowdown that could lead to a recession, and higher yields also discount the value of future earnings, making some stocks, like tech, less attractive. The Dow Jones closed 1.05% lower, the S&P500 down 1.6% and the Nasdaq down 2.5%.

What to watch today:

  • Following Wall Street, the Australian share market is set to fall 0.44% at the open this morning, going by the SPI futures.
  • Today watch the share price movements of Liontown Resources (ASX:LTR), which is due to release an update to the market on its lithium agreement with Tesla.
  • In economic data, today investors may be trading cautiously, with all focus on the RBA’s policy meeting tomorrow, as well as the European Central Bank meeting on Thursday.
  • In commodities:
    • The oil price rallied after OPEC delivered a modest increase in output, deciding to increase production by 648,000 barrels per day in July and August, instead of 432,000 barrels per day previously. This was seen as insufficient to compensate for Russia’s lost supply, as the European Union’s ban on Russian oil kicks in. And Russian output has dropped by 1 million barrels per day since the invasion of Ukraine.
    • On the other hand, the gold price extended losses, following the US jobs report, while seaborne iron ore is rising higher.
  • Companies going ex-dividend today include ALS Limited (ASX:ALQ), Champion Iron (ASX:CIA) and Incitec Pivot (ASX:IPL).

Trading Ideas:

  • Bell Potter maintain their Buy rating on Accent Group (ASX:AX1), with a $2.20 price target. The company is a footwear and sports clothing retailer and are investing in its store rollout and customer engagement, particularly for vertical brands. Bell Potter sees these higher margin sales to likely become a major driver of margin improvement and earnings growth. And AX1 last closed at $1.34, implying 64.8% share price growth in a year.
  • Trading Central have identified a bullish signal in AMP (ASX:AMP), indicating that the stock price may rise from the close of $1.12 to the range of $1.24 to $1.26 over 21 days, according to the standard principles of technical analysis.

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