Australian Market

A quiet start to the week with the market trying hard to rally from a down 20 start. Eventually we closed down 10 which considering the negative stories today was not too bad. It is Veteran’s day in the US so we will have to rely on our Euro Cousins for direction tomorrow. Volume was lighter than last week although  helped along by cum dividend trading in the banks and some panic selling in our favourite insurance stock ,QBE. The song remains the same across the market with defensives still very much in favour offering yield and no surprises. The good news today ,if there was any, was the market managed to keep its head above a crucial technical point of 4436 which at one stage looked like it may have  breeched. So despite the slings and arrows of outrageous fortune that were thrown at it today it is showing remarkable resilience. For now!

Resource stocks were mixed with a slight negative bias but nothing significant for #BHP#,#RIO# and #NCM# .Gold shares were milling about waiting for the next leg up in the Gold price before setting off higher again. Small resources were mixed with reports in the media suggesting how hard it was for small explorers trying to raise funds. Has it not always been so.

Banks were mixed with #WBC# again the standout followed by #CBA# and in the naughty corner were perennial disappointments #NAB# and #ANZ#. Has it not always been so!

Stories grabbing the headlines

  • ‘When trouble comes, they come not in single spies but in batallions’ .Well Shakespeare certainly knew his stuff when it comes to #QBE# .I suspect he may well be their next Investor Relations guru after the last few weeks. It was only fairly recently that the company had a love in over in the US and all came away impressed so it has come as something of a shock to say the least to find that things are pretty bad over there after all. If Superstorm Sandy was not enough, and it was as it appears to have cost them a cool $450m, they have been hit with  trouble in battalions as they have now had a downgrade of more than 30 per cent on its forecast insurance margin, a $500 million capital raising and a $1.1 billion run-off on a portfolio of claims in the US. The stock was massacred early before bouncing back from its lows around $11.00.This has certainly been a disaster of its own making regardless of Sandy. The management and board will need to focus on regaining trust for at the moment it is in short supply.
  • In other downgrade news #OSH#  and #STO# announced that the cost of their PNG LNG project has risen from US$15.7bn to US$19bn with RX the largest contributor to the blow out. Bad weather and work stoppages have added the rest of the cost. They also announced a increase in plant capacity from 6.6mmtpa to 6.9mmtpa which can be sold into the market.
  • Continuing on the downgrade theme, explosive maker #ORI# dropped a bombshell with news that profit was down 37% due to impairment on Minova, their underground products business ,which is under considerable pressure on margins in the US and China and  even surprisingly in Poland too..who would have thought that. Guess they have lots of underground coal operations there.
  • On the positive front #RHC# enjoyed a good day with Deutsche reporting that it could be a buyer of UK’s Spire Healthcare for up to $1.85 billion and despite the high price would be positive for earnings.
  • News that Greece has voted ‘ναι’ to more austerity measures, was met with a air of resignation, as the measures do nothing to help the economy restructure but just inflict more pain on the economy and test the patience of the unions and people. The ‘Zombieland’ finance ministers are meeting to seek ways to keep Greece solvent today…that should be an interesting meeting.
  • Once again defensives like #TLS#,#WBC# and #CBA# drew the crowds as they pushed higher. Other stocks like #MBN# did not fare so well as they continued to inhabit the dog house. #LYC# also joined the canine club today with news of their $200m capital raising at 75c ensuring that the stock sank like a stone below the issue price ,which looked a little petulant reaction from Institutions taking the stock and hoping for a quick turn. It does seem that most capital raisings go to the issue price at some stage before the weak holders exit and leave it to the true believers. Hopefully this is the case here. With cash now in the bank and the injunction on their temporary licence lifted, it should be producing in 2013 which is good news.
  • #CSL# run into some profit taking after its stellar run in the last few weeks whilst #IPL# fell continuing their poor run due to a outage at their acid plant in Mount Isa.
  • International events were glossed over and the news from Japan its economy collapsed at its fastest pace since the earthquake of 2011 were largely ignored here or at least balanced out by the improving situation in China which announced better export numbers with China’s overseas shipments increasing 11.6 percent from a year earlier.
  • In other news today #TEN# has finally come to its senses and cut its breakfast program, both viewers will be devastated as Paul Henry has been such a huge success. Not. There are some things that we are happy to claim as our own from across the ditch like Russ and Crowded House but Paul Henry was never going to join that list..Sorry but it’s time to go from the Big Brother House(sorry, wrong channel now!)..could have saved some decent journalists jobs if he had gone sooner!
  • And in more bad news for #QAN#, news that an Adelaide Liquidator is suing them for rats eating through his new Aston martin wiring ..I am sure there is some irony there..must be! This is hot of the heals of news last June that Rats were responsible for grounding a 767.Think there is some irony there too about rats and grounding planes but not going to go there.

Clarence

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