Morning all,

One of the great paradoxes at the moment is the strength of the US market against the doldrums that is the Australian market. Once again overnight US companies beat earnings expectations…admittedly those expectations were significantly lowered in the last few months making the task somewhat less Herculean but none the less in thin markets we have the Dow approaching 13,000 again. So why is our market such a dog! The answer lies with BHP,RIO and other big resource stocks. There is a view that the best is past and that the only way to sustain profits is to increase production so ensuring prices slip. This is not good news for these capital intensive businesses which have also tend to NOT reward shareholders with large dividends. So Invetsors have questioned the need to be in them..and rightly so…is this going to change soon?..I doubt it..until we get these big resource stocks thinking about shareholder returns ,they will languish and the heavy lifting of our market will be left to our sparkly banks and Telcos! Overnight though the UK quoted BHP did actually rise 2% so someone likes them..maybe it’s just Australians that don’t!(research piece enclosed for those interested).

Expect our market to push higher today after positive leads from overseas, got it wrong yesterday..wasn’t to be three in a row!..the Aussie is pushing up against the Euro to dizzying heights and stronger against the US as well so this will help sentiment and that European holiday!!Zombieland has been strangely quiet and that has allowed the focus to shift  back on actual company earnings which is never a bad thing…ours are to come!!

Once again though expect light volumes as Investors still clinging to the sidelines. All the action is chasing yield stocks and I expect that to continue…TLS and Banks/Utilities the focus!

Uncle Ben released the Beige book..it’s called fifty shades of Beige!!…how can anything so important be Beige..not sure ..anyway all the comments were Beige in fact!

  •   FED SAYS LOAN DEMAND `GREW MODESTLY’ IN MOST DISTRICTS
  • *FED SAYS MANUFACTURING EXPANDED `SLOWLY’ IN MOST DISTRICTS
  • *FED: HOUSING MARKET REPORTS `LARGELY POSITIVE’

There does seem to be some disconnect at the moment between bond markets and equity markets..as there was this time last year before it fell in a heap! Equities pushing higher on thin volumes, VIX falling to three month lows ,Gold falling and Bonds still at ridiculous levels!

All by myself..I wanna be all by myself…

In a world of their own…blue line is the US S&P! see what I mean..thanks to Tyler for this one..

www.zerohedge.com

If this goes according to the script then we may see some weakness in Equity markets occur in the next week or so…

Things to make me go all Cadel!

1.Started to get into the Tour de France after a good friend of mine explained a few intricacies of the race..fascinating tactically!Shame Cadel couldn’t overcome his stomach bug last night and looks to be out of it..Team Sky look untroubled!

2.London Olympic opening ceremony is being cut so people can catch the last train home..wouldn’t it be better to lay on some extra trains..oh and 007 to open the games…shaken and not stirred!

3.US home starts rise to highest level since 2008!VIX (fear index) falls to 16.1 down another 2% last night.

4.Spain still heading down the financial drain! House prices declined at their fastest pace since the start of the crisis..bond yields up near 7%..bad loans increased for the 14th straight month!!There’s no rain in Spain just a torrential downpour!

5.UK outlook weakens as Housing market confidence falls..bring on the Olympics…

6. Looking ahead for Thursday, note that we have a rather heavy bond auction schedule from Spain and France. Great optimistic quote from Moaning Mertle.. ‘ can’t be sure the European project will work, optimistic Europe will succeed’.

7.US reporting season.. : Earnings in the US have exceeded analyst estimates at 73% of the 63 companies in the S&P 500 that have reported so far. However profits have slumped 4.6%.

8.Deutsche Bank and HSBC now being investigated in the LIEBOR scandal…

9.Looming copper surplus forecast unwinding as mines stop production due to strikes and ageing infrastructure.. The global surplus will total 18,500 metric tons, according to the median of 22 analyst estimates compiled by Bloomberg, 85 percent less than a January forecast of 124,000 tons

10.Syria is just getting worse..not sure the UN peace plan is working…this is going to spill over into oil prices at some stage..Plus Israelis were targeted in a bomb attack yesterday as well…Russians still love the Syrians!!

 

And finally…

All happy families resemble one another but each unhappy family is unhappy in its own way-Tolstoy….perhaps he was talking about Zombieland!

Have a good day..back on TV tomorrow afternoon at 5.30 on a new program Market Moves..looking forward to it!

 

Clarence

XXX

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