Australian Market

Today was the day that the market finally snapped and started to play catch up with the US. After a couple of days of downgrades and bad news, the index succumbed and dipped below technical support and kept going. The next target would appear to be 4350  as the pullback continues. There was some talk in the markets of an Asian seller which may explain why it was so weak when most commentators were calling it a slight negative day. Financials led the way with #WBC# leading the charge down followed by the perennial underperformer #NAB#.#CBA# was the best of the banks but even this one fell victim to the negative sentiment. The big disappointment this week(so far) has been #QBE# which followed yesterday’s rout with another big fall today after brokers downgraded their expectations. We remain negative on this one with a price target of $9.00.

#MQG# also fell heavily today as support crumbled and the recent run looks to be ending. Expectations seems to have run ahead of reality and with continued lacklustre capital markets it is hard to see where they are going to get the growth from. It appears that the announcement that they are teaming up with Mark Bouris and Yellow Brick Road is an admission that there is a lack of positive drivers in their more traditional businesses.

Once again defensives like #TLS#,#WOW#,#CSL# and health care stocks fared better than most.

Volume was better at $4.2bn and the ASX 200 finished down 68 points or 1.5% as both volume and selling worryingly accelerated into the close. Not a good day at all really.

Stocks in the news

#BHP# has got a four year extension on going ahead with its Olympic Dam expansion. Just shows how powerful BHP are and I suspect that if they delay in 2016 they will be able to extend again.

#IPL# also had their day in the sun today with news it had lifted its annual profit by 10% and increased its dividend 11%.The strength in the number seems directly attributable to the explosives business with fertiliser on the nose due to a higher dollar and a fall in commodity prices.

In some rare good news in the media sector #SWM# rallied hard after comments at the AGM today. In his first AGM Don Voelte talked about cost cutting measures and importantly stated that no business was sacred to Seven and that everything was under review. The West Australian newspaper continue to gather readers despite their East Coast counter parts losing readers faster than you can say Gina Rinehart. The company importantly also stated that they expected operating earnings before interest and tax (EBIT) of $250 million for the first half of the fiscal year.

In other media news #TEN# has decided to cull their newsreaders including some industry veterans like Bill Woods and Ron Burgundy. In an effort to cut costs further they have now decided just to run the logo and the word ‘Seriously’ 24 hours a day and hope viewers are intrigued enough to tune in and watch. Certainly will be cheaper and a possible improvement on their current schedule. And former owner decided to put the boot in with Lawrence Freedman suggesting that there was only room in Australia for two Commercial TV stations and I do not think he was referring to TEN as one of them.

Some  house stocks bucked the trend today with Childcare provider #GEM# pushing higher and consolidating their recent good run whilst #IXR# a junior Iron Ore player also had a good day. In the negative camp, #DWS# had a pullback after comments at the AGM suggested an October pullback in their business would affect their numbers materially.

And #LYC# ,which only days ago had their injunction lifted and raised $200m at 75 cents, was a casualty as recent punters panicked when the stock dropped below the issue price and ran for the fire exit, simultaneously, trampling everyone in their stampede for the exit.

Another casualty of a placement was #CDU# which moved to raise $30m at $4.30.Those that were patient were better off waiting as the stock collapsed trading as low as $3.93 before trying to rally. Certainly at the moment the market seems to be very nervous about any capital raising and is punishing those that are running out of money. I would imagine that the ‘strong support’ CDU had from overseas will not be quite so keen next time.

#COK# also had a miserable day today as players digested yesterday’s news that the WICET project is behind schedule and not due now until 2015.The company tried to spin a positive light on this news but unfortunately the market was not buying.

#ROC# had some good news today with the announcement of completion of their Beibu Gulf exploration program and the discovery of an oil pay in one of the targets. This now brings it to 3/3 for this program and will help them with their overall development plan.

On the economic front news today from the NAB monthly business survey showed that conditions in October fell to minus five on their index from minus three in September. Another sign of the weakening economy although analysts are divided on whether there will be a rate cut from the RBA in December.

News overnight that Greece has been allowed to push their austerity program out by two years did nothing to help the markets especially with the ‘Zombieland’ Finance ministers agreeing to meet again on the 20th November to discuss further. The situation appears to be getting worse again in Europe with stories that the Spanish Government has even stopped paying pharmacists in Valencia to the tune of 500mm Euros.

And finally when we think it’s a quiet day here, spare a thought for the Athens exchange which is now doing around 74 m Euros worth a day. And with Hellenic Coca Cola leaving for sunnier climes it is sure to get a lot worse. As they say, last one out, please turn off the lights.

Clarence

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