Market wraps 3rd April 2024

Morning Bell - Grady Wulff

Wall St closed lower for a second straight session, extending on the negative start to the second quarter as bond yields rose and the latest release of economic data dented investor expectations of an interest rate cut out of the Fed in June. The Dow Jones lost 1%, the S&P500 fell 0.72% and the tech-heavy Nasdaq declined 0.95% on Tuesday. Inflationary pressures are climbing from manufacturing data coming in stronger-than-expected for March and the price of oil has risen to a 5-month high.

Key economic data out in the US overnight indicated job openings rose by 8000 in February from January which was hotter than market expectations, while factory orders in the US rose 1.4% in February from a 3.8% decline in January which was also above market expectations. These two pieces of data indicate inflation in the region may remain stickier for longer than expected.

In Europe overnight, stocks closed lower across the region as major markets opened for the first time in April after the Easter long weekend. The STOXX600 fell 0.76% weighed down by retail stocks falling 2.1%. Germany’s DAX lost 1.13%, the French CAC fell 0.92% and, in the UK, the FTSE100 ended the day down 0.22%.

Across the Asia markets on Tuesday, regions closed mixed as investors assessed the release of key economic data out of South Korea and Australia. Hong Kong’s Hang Seng rose 2.18%, while China’s CSI300 index fell 0.42% and South Korea’s Kospi index added 0.2% following the release of key inflation data out in the region indicating inflation remained steady at 3.1% for March.

The local market started the holiday-shortened trading week in the red, with the ASX200 ending the session down 0.11% after touching a record high mid-session as losses among healthcare, industrials, telecom and REIT stocks offset gains among the miners and materials stocks in afternoon trade. The retreat from the midsession record high was on the back of a sluggish session on Wall St on Monday after hotter-than-expected manufacturing data released in the US curbed expectations of a rate cut out of the Fed in the very near future.

Online luxury retailer Cettire fell over 14% yesterday after Bell Potter downgraded the stock to a hold rating from a buy, while Austal soared 10.5% after confirming it had received a takeover offer.

Healthcare star Mesoblast soared a further 71% on Tuesday adding to the 217% rise over the last month, in the aftermath of the US FDA approving the company’s phase three clinical trial data for BLA submission last week.

Uranium producer Paladin Energy jumped 4.74% yesterday after the company announced it has achieved the milestone of first production at its Langer Heinrich mine in Namibia. Production guidance is now expected out of the company before July given production is now underway.

The price of gold also hit a fresh record high on Monday following the release of fresh US inflation data. The gold price rally is due to many factors including global central banks like China buying up bullion, rising geopolitical tensions and a weaker USD.

What to watch today:

  • Ahead of the midweek trading session here in Australia the SPI futures are expecting the ASX to open the day down 0.38%, tracking turbulence on global markets overnight.
  • On the commodities front this morning, oil is trading 1.33% higher at US$85/barrel, uranium is up 4.12% at US$88.50/pound, gold is up 0.66% at US$2265/ounce and iron ore is trading 0.5% higher at US$102.50/tonne.
  • AU$1.00 is buying US$0.65, 98.74 Japanese Yen, 51.81 British Pence and NZ$1.09.

Trading Ideas:

  • Bell Potter has increased the rating on Paladin Energy (ASX:PDN) from a speculative buy rating to a strong buy rating and have increased the 12-month price target on the uranium miner from $1.60 to $1.65 following the first uranium production drums being filled with uranium concentrate at the company’s restarted Langer Heinrich Mine in-line with its March quarter guidance. According to the analyst, a line-of sight to first revenue and cashflow removes the need for the speculative rating on the uranium producer.
  • And Trading Central has identified a bullish signal on Nexgen Energy (ASX:NXG) following the formation of a pattern over a period of 40-days which is roughly the same amount of time the share price may rise from the close of $12.99 to the range of $14.60-$15.10 according to standard principles of technical analysis.