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European and US markets rallied overnight after US PPI data came in lighter than expected. This built on optimism after US CPI on Wednesday was also less than anticipated. The data supports signs that inflation is cooling, therefore boosted economic sentiment, and raising hopes of a less aggressive path ahead. However, markets are still expecting a 25-basis point rise by the Fed this month. It was the fourth consecutive day of gains for the major averages, with the Dow Jones added 47 points or 0.14%. The S&P500 closed 0.85% higher, while the tech-heavy Nasdaq advanced 1.58%.

European markets also closed higher after the US inflation reading, as well as a drop in UK gross domestic product. UK GDP pulled back slightly, amid the focus on ongoing inflation, particularly after strong wage growth data was announced this week.

What to watch today:

• Our local market is set for a positive start, following the US overnight, with the SPI futures suggesting a 0.61% rise at the open this morning.
• Looking at commodities,
  • Crude oil is trading higher as OPEC maintain a positive outlook on world oil demand, raising its growth forecast for 2023 and predicting a slight slowdown in 2024. This is driven by strong fuel consumption in China and India.
  • Gold is slightly in the green, holding at its highest level in one month, as renewed evidence of softer inflation has boosted sentiment. So watch gold miners today.
  • And iron ore is strong, trading 1.83% higher at US$111.50 per tonne, sharply rebounding from a one-month low, amid hopes of strong demand. China’s hot metal production averaged 2.5 million tonnes per day in June, which was the highest level since October 2020, therefore suggesting that steel mills in are returning to full capacity in China, the world’s top iron ore consumer. So keep watch of iron ore stocks today including Fortescue Metals (ASX:FMG), Rio Tinto (ASX:RIO) or BHP.

Trading Ideas:

• Bell Potter maintains a Speculative Buy rating on Pharmaxis (ASX:PXS) and value the drug developer at $0.10. At PXS’s current share price of $0.05, this implies 96.1% share price growth in a year.
• And Trading Central have identified a bullish signal in Northern Star Resources (ASX:NST) indicating that the stock price may rise from the close of $13.14 to the range of $13.55 to $13.70 over 15 days, according to the standard principles of technical analysis.