4th June 2024

Morning Bell - Sophia Mavridis

US equities closed mixed overnight. The Dow Jones slid over 100 points or 0.3% to close the first trading session for June, while the S&P500 and the Nasdaq closed in the green, up 0.1% and 0.56% respectively. Weighing on the Dow was the release of weak manufacturing data in the US, which saw a pullback in banks, industrials and shares dependent on economic growth.

The local market started the new trading month in positive territory yesterday, after a red run last week as the financial and utilities stocks boosted the market to a green close. Tech and communications services stocks weighed on the market gains, with the rate sensitive tech sector ending Monday’s session down 0.7%. Our local rally on Monday followed momentum from Wall Street on Friday, as the US core personal expenditure data, which is the Fed’s preferred measure of inflation, increased just 0.2% for April, the slowest rate this year, indicating inflationary pressures in the world’s largest economy are beginning to ease.

What to watch today:

  • The Australian market is set to open lower this morning, with the SPI futures suggesting a 0.15% fall at the open.
  • In commodities,
    • The iron ore price hit a six-week low however the big iron ore miners in Australia posted notable gains on Monday, seemingly unaffected by the drop in the price of their major commodity. BHP, Fortescue and Champion Iron all posted gains yesterday.
    • The drop in the iron ore price was due to ongoing weakness in China’s housing market as indicated by the release of new-home sales economic data. Despite weakness in China’s property sector, the world’s second largest economy reported expansion in its manufacturing sector as activity in the manufacturing space increased at its fastest rate in almost 2-years for May, in a positive sign of slow economic recovery post-pandemic in the region.
    • Energy stocks also rallied in the aftermath of the OPEC+ meeting, where the global oil regulator further cut production outputs in an attempt to bolster the price of oil.
    • This morning, oil is trading 3.88% lower at US$74 per barrel as markets digested OPEC+’s latest move, while gold is up more than 1% at US$2,350 an ounce and iron ore is down 0.1% at US$117.52 per tonne.
  • And the Australian dollar is buying US$0.67, 104.27 Japanese Yen, 52.16 British Pence, and NZ$1.08.

Trading Ideas:

  • Bell Potter maintains a Speculative Buy rating on AMA Group (ASX:AMA), the largest accident repair group in Australia with approximately 127 vehicle repair shops. Bell Potter’s key focus for the company this half has been the refinancing of AMA’s senior debt facility which matures in October this year. They have lowered their valuation from $0.12 to $0.08, and at the company’s current price of $0.04, this implies 86% share price growth in a year.
  • And Trading Central has identified a bullish signal in BHP Group (ASX:BHP), indicating that the stock price may rise from the close of $44.81 to the range of $48.30 to $49.10 over 8 days according to the standard principles of technical analysis.