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Morning Bell 7 August

Grady Wulff
August 7, 2023

Mixed jobs data sparked a sell-off on Wall St on Friday with the key indices closing lower for the session and the week. While the number of jobs added in the month of July fell short of expectations at 187,000, unemployment ticked lower to 3.5% and average hourly wages came in above expectations rising 0.4% for the month and 4.4% annually.

The release of US CPI data will be a key event this week in helping the Fed determine its next rate move following the stronger-than-expected jobs data.

On Friday, the Dow Jones fell 0.43%, the S&P500 shed 0.53% and the tech-heavy Nasdaq dropped 0.36%. For the week the Nasdaq and S&P500 fell over 2% each and the Dow Jones lost 1.1%. On the earnings season front, Amazon rallied 5.5% on Friday after releasing solid second quarter results including a return to double-digit revenue growth and boosted second half guidance. Booking holdings, the parent company of Booking.com, Agoda and other travel companies, rose 7.9% on strong results amid the ongoing surge in travel demand.

Apple also weighed on Wall St on Friday after the tech-giant slid more than 4% following the release of earnings results that included iPhone sales stalling more than expected in the latest quarter.

Over in Europe, markets closed slightly higher on Friday as investors continued digesting corporate earnings results alongside the Bank of England’s rate hike decision. The STOXX-600 rose 0.3% on Friday, Germany’s DAX added 0.37%, the French CAC rose 0.75% and, in the UK, the FTSE100 gained 0.47% on Friday.

Rolls Royce shares rose 6% on Friday after the company reported a strong recovery in profit.

The local market fell in morning trade on Friday on the back of the global sell-off on Thursday before rebounding to close Friday’s session up 0.19%. Healthcare took the biggest hit on Friday as CSL Limited (ASX:CSL) and ResMed (ASX:RMD) weighed on the sector.

Gold miners also lost ground on Friday as the price of the precious commodity trade down over 1% last week. The 2023 favourite technology sector boosted the market into positive territory at the session’s end today with the sector climbing 0.92% at the closing bell.

What to watch today:

  • Ahead of the local trading session here in Australia the SPI futures are anticipating the ASX to open the first session of the new trading week down 0.15%.
  • On the commodities front this morning oil is trading almost half a percent higher at US$83.20/barrel, gold is up 0.15% at US$1945/ounce, iron ore is down 1.84% at US$106.50/tonne and coffee is trading down 2.06% at US$161/pound amid concerns of oversupply.
  • Trading volumes were also especially light last week so the market was likely down due to investors taking a pause ahead of the ramp up in reporting season locally this week.

Trading Ideas:

  • Bell Potter has increased the rating on City Chic Collective (ASX:CCX) from a hold to a buy and significantly increased the price target on the plus size fashion company from 42cps to 70cps following the company’s divestment of its Evans business and EMEA inventory which helps reduce the company’s high inventory build that has been dampening performance in recent times. Bell Potter sees the divestment as providing a clearer pathway to profitability for City Chic.
  • And Trading Central has identified a bullish signal on South32 (ASX:S32) following the formation of a pattern over a period of 69 days which is roughly the same amount of time the share price may rise from the close of $3.94 to the range of $4.31 to $4.39 according to standard principles of technical analysis.

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