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Morning Bell 7 July

Sophia Mavridis
July 7, 2023

On Wall Street overnight, US equities closed in the red, with all three major benchmarks declining. This was after better-than-expected jobs data out in the US, raised concerns around the state of the economy and the path of interest rates. The S&P500 dropped 0.8% with all 11 industry sectors lower. Energy was down the most, while information technology was the best performer. The Dow Jones dropped more than 1%, marking the worst daily performance for the Dow and the S&P 500 since May. And the Nasdaq closed 0.8% lower. And the 2-year US Treasury yield hit a 16-year high.

European markets also sharply fell. The STOXX 600 tumbled 2.3%, again of the back of the US jobs report. Travel and leisure led the losses, followed by retail.

What to watch today:

  • Australian shares are set to sharply drop in line with losses across Europe and the US overnight. The SPI futures are suggesting a 1.26% fall at the open this morning.
  • In commodities,
    • Crude oil is in the green, regaining earlier losses after falling to as low as US$70, as growing concerns about a global economic slowdown and lower demand offset concerns over tight supply.
    • UK natural gas has dropped over 5%, extending its decline as markets assessed expectations of firm supply against rising demand.
    • Gold is at its lowest in nearly four months as evidence that the labour market remains tight strengthened the case for a hawkish Federal Reserve, which increased the opportunity cost to hold precious metals. So keep watch of gold miners such as Newcrest Mining (ASX:NCM) and Evolution Mining (ASX:EVN).
    • And iron ore remains close to a two-month high.

Trading Ideas:

  • Bell Potter maintains a Buy rating on Regal Partners (ASX:RPL), with the company expected to update the market on mid-year funds under management in mid/late July. They have increased their price target from $3.71 to $3.45, and at RPL’s current share price of $2.58 this implies 33.7% share price growth in a year.
  • And Trading Central has identified a bearish signal in OFX Group (ASX:OFX) indicating that the stock price may fall from the close of $1.90 to the range of $1.35 to $1.45 over 34 days, according to the standard principles of technical analysis.

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