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Morning Bell February 2

Sophia Mavridis
February 2, 2022

Yesterday local shares rose 0.5% after the RBA, in its first meeting of the year, formally ended its quantitative easing program, as inflation rises faster than expected. This was the bond buying program introduced in late 2020, as an emergency measure during the pandemic, which kept bonds anchored near record lows, to help keep borrowing costs for households and businesses low. And as expected, the central bank also held the interest rate at 0.1%.

Yesterday 10 of the 11 industry sectors closed with gains. However, the market was weighed by losses in materials, as the price of iron ore declined.

This saw BHP (ASX:BHP), Rio Tinto (ASX:RIO) and other mining stocks among the worst performers. Meanwhile ASX tech stocks were the top performers, as the Nasdaq rebounded and Block (formally known as Square), officially took over Afterpay. Appen (ASX:APX) lead the gains, up almost 8%. Block (ASX:SQ2) and Zip (ASX:Z1P) were also among the top 10.

The most traded stocks by Bell Direct clients yesterday included BHP (ASX:BHP) and Vanguard ETFs (ASX:VAS) and (ASX:VGS).

European stocks started February on a positive note, and US stocks rose for the third day, extending the market’s comeback from the sell-off we saw in January. The Dow was up 0.8%, the S&P500 up 0.7% and the Nasdaq up 0.8%.

Aussie shares are set to open higher. The SPI futures are suggesting a 0.68% rise at the open this morning.

What to watch today:

  • Amcor (ASX:AMC) will report its results today.
  • Prospects of rising demand as economies recover, and concerns over tight supplies continue to support the oil market. Oil prices are at 2014 highs and increased 17% in January, which is the strongest gain since February 2021. The price of oil is currently trading higher, above US$88 a barrel.
  • Gold prices also edged higher for a second consecutive session, trading above US$1,800 an ounce. Gold lost almost 1.7% in January, mostly due to a general dollar weakness.
  • The copper price also rose amid a weaker dollar.
  • Iron ore has rebounded. Spot prices of iron ore are up with rising imports from China. The seaborne iron ore price is over 7% higher, trading at US$138 a tonne.
  • Today at 12:30pm AEDT, the RBA Governor Philip Lowe will speak on the year ahead. The RBA has said that until annual wage growth nears 3%, interest rates won’t be lifted. Annual inflation is between the RBA’s 2-3% target but aren’t too convinced it will stay there. In terms of interest rates, the central bank is not in a hurry to make changes.

Trading Ideas:

  • Bell Potter maintained their BUY rating on Bathurst Resources (ASX:BRL) and have increased their price target from $0.98 to $1.25. BRL last closed at $0.77, implying 57% share price growth in a year.
  • Trading Central have identified a bullish signal in De Grey Mining (ASX:DEG), indicating that the stock price may rise from the close of $1.18. So we may see higher prices at least in the short term.

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