Market wraps 27th March 2024

Morning Bell - Grady Wulff

Wall Street extended its losses into Tuesday’s session as a morning rally quickly faded in afternoon trade with the Dow Jones ending the day down 0.08%, the S&P500 lost 0.28% and the tech-heavy Nasdaq fell 0.42%. Orders for long-lasting goods in the US rose 1.4% in February in data out yesterday which beat economists’ expectations of a 0.8% rise, which investors may have taken as a sign that inflation remains elevated in the US thus adding support for rates to remain on hold for a little while longer, especially after the slight uptick in CPI in the latest reading out of the US.

Krispy Kreme shares soared 39% on Tuesday after the donut giant announced it would expand its partnership with McDonald’s, while Tesla rallied 5% in a rebound for the EV maker after a few months of negative sentiment from markets in 2024.

In Europe overnight, markets closed slightly higher in the region as investors continue digesting key central bank moves in the region. The STOXX600 rose 0.3%, Germany’s DAX rose 0.67%, the French CAC added 0.41% and, in the UK, the FTSE100 climbed 0.17% on Tuesday.

Across the Asia markets, it was mostly a green session across the board on Tuesday with South Korea’s Kospi hitting a 2-year high as investors assessed the latest batch of economic data. Japan’s annual B2B service inflation remained at 2.1% in February indicating companies continue passing on rising costs to customers. Singapore’s manufacturing output increased 14.2% in February from January’s 6.7% decline which boosted the local index to a 1.31% close on Tuesday and Hong Kong’s Hang Seng rose 1.1% yesterday.

The local market started the week higher before retreating 0.41% on Tuesday taking lead from Wall Street’s losing session on Monday and on the back of local market sell-offs which were hardest felt by tech stocks on Tuesday as the sector closed the session down 1.55%.

Westpac consumer confidence data for March also released yesterday weighed on the market sentiment as the reading for this month came in at -1.8% which is a sharp decline from the 6.2% reported in February and above economists’ expectations of a drop to minus 1.6% which signals consumer sentiment in market conditions is sliding and we are feeling the full bite of the currently elevated rates.

Earlier in the week commodity-related stocks weighed on the key index, however, a rebound in the price of oil, iron ore and gold saw investors buy back into the miners yesterday. While the opposite story can be told for rate sensitive stocks like technology and real estate which started the week on a high note after a less-hawkish RBA statement was released last week, before these sectors declined on Tuesday.

Biotech company Mesoblast soared 45% on Tuesday after the company announced the US FDA has approved Mesoblasts’ Phase-3 study clinical data after extensive consideration therefore meaning Mesoblast can submit the proposed Biologics License Application for Rem-e-stemcel-L for treatment of child patients with steroid-refractory acute graft vs host disease.

What to watch today:

  • Ahead of the local trading session here in Australia for Wednesday, the SPI futures are anticipating the ASX to open the day down 0.24% tracking Wall Street’s turbulence overnight.
  • Taking a look at commodity prices, oil has slightly retreated again overnight to trade 0.1% lower at US$81.87/barrel, gold is up 0.3% at US$2177.38/ounce, and iron ore is down 0.9% at US$110.50/tonne.
  • AU$1.00 is buying 65 US$0.65, 99.04 Japanese Yen, 51.73 British Pence and NZ$1.09.

Trading Ideas:

  • Bell Potter has initiated coverage of leading Australian engineering group, Monadelphous Group (ASX:MND) with a buy rating and a price target of $15.40. Bell Potter’s analyst sees strong revenue growth in the company’s FY24 guidance and the EC pipeline revenue is forecast to continue growing in the second half with a step up in construction contracts won in FY24 to date valued at over $750m scheduled to be completed over FY24-FY25.
  • And Trading Central has identified a bullish signal on Northern Star Resources (ASX:NST) following the formation of a pattern over a period of 12-days which is roughly the same amount of time the share price may rise from the close of $13.93 to the range of $15.80 to $16.20 according to standard principles of technical analysis.