Market Wrap

Well, that RBA rate cut was a bit like an Advent Calendar. You know what’s behind the door and let’s face it when you open it, it’s so disappointing. A piece of Chocolate and all you want to do then is open all the doors, sorry maybe that’s just me. Anyway the long awaited rate cut came to pass just in time for Xmas. The retailers will be happy as will the banks and this will drive more money into the most crowded trade in the market, yield stocks. However as rates plunged to levels not seen since the dark days of the GFC, it seems slightly worrying that we have had the Mining Boom and here we all are then, back where we started.

The market which started the day in an ebullient mood soon succumbed to realism and gave up its gains to be around 14 down before the announcement and then keeled over to finish near its lows. The World and his wife were predicting the cut, so everyone was already set last week after the dismal numbers that gave the head of the RBA reason to choke on his sushi at lunch time and finally cut rates. The little Aussie Dollar even rose after the announcement. Riddle me that one Batman?

Resource stocks were the bad boys today with Gold stocks taking a beating with Kingsgate  (A$4.69, -3.9%), Silver Lake Resources (A$3.27, -4.1%) Integra Mining (A$0.51, -4.7%) and Evolution Mining (A$1.78, -2.5%) all looking very unloved. Industrials were generally easier whilst there was a smattering of green in consumer stocks with Wotif.com (A$5.05, +3.1%), Myer (A$2.13, unch) and Tatts (A$2.99, +0.3%) all showing their green credentials. Energy stocks and Utilities were also down slightly with Banks reversing early gains to close down with Macquarie (A$32.50, -0.9%) especially weak. CSL (A$53.40, +0.9%) continued its march to higher ground with Woodside (A$34.08, -0.1%) drawing some strength from this Israeli move yesterday.

In defensives Telstra (A$4.32, -0.7%) were hung up and Woolworths (A$29.32, -0.4%) eased .Mining services continued their time in purgatory with Cardno (A$6.01, -2.4%) Monadelphous (A$21.46, -2.7%) and #ALQ# all falling again as did NRW (A$1.28, -2.3%). Might be a long summer for these guys!

Volume was again light and lacked conviction.

Stocks in the news

Today’s biggest big cap loser was Xero Ltd (A$5.50, -9.84%) after its stellar run in the last few days it was bound to crash and burn at some stage. Also finding the going tough was Silver Lake Resources (A$3.27, -4.1%) which gave the market an update on its Hollandaire project. Won’t do that again!

Mesoblast (A$5.61, -5.2%) One of our house favourites was unceremoniously dumped as no new news from Teva regarding drug trials weighed on the shares. Whilst Linc Energy (A$0.775, +6.9%) perked up following a couple of deals in the last few days which is helping the income side of the equation.Talked about this one this morning!Was my idea of the day!

GrainCorp (A$12.32, +3.2%) was better today following the increase in offer from US commodity company ADM. They now control nearly 20% of the company and sure look like they are in the box seat to finish this one off. Unfortunately the saga that is Sundance Resources (A$0.39, unch) looks set to take more turns than a contortionist in a fit with the Chinese seeking yet more time to check things over.This could still be going next Xmas at this rate!

Stockland (A$3.38, -0.6%) shares are largely unmoved after the company this morning warned its earnings will fall by 15 per cent if the Victorian market fails to show any improvement. As we noted earlier, the company said there had been no change in the Victorian housing market since October, and it appears unlikely any improvement will be seen soon.

The company in charge of Australia’s two biggest gold mines, American giant Newmont Mining, has joined the list of big miners to seek a change of leadership.

Newmont announced overnight that chief executive Richard O’Brien will step down after more than five years in the job, and will be replaced by an internal candidate, Gary Goldberg.

Gold miner Oceanagold (A$3.27, unch) is now is seeking to raise $93 million in a share placement to institutions. The deal, which is open until December 18, will offer the shares to Citigroup and Macquarie at $3; a discount of close to 10 per cent on the last traded price of $3.27.

Tomorrow’s News Today

Expect to see lots of coverage in the papers about how wonderful it is to have low interest rates. Maybe the banks will take note and actually cut the real rates too. Government will be out and about waggling their big stick and the Black Swan action hero will jump into action to encourage the evil banks to slash rates. Not a chance I am afraid. Expect to see the banks move at a glacial pace with a very fine impression of Penguins jumping off the ice flow. When one goes they all go but until then, lots of shuffling around and looking at the icy water! A few of the smaller penguins have jumped with ING lowering by 0.25% and the Bank of Queensland going with a 0.20%.

The Chinese stock market continues to fall and now is trading on a p/e of around 10.8 of reported earnings its lowest level since 1997 and its volatility has collapsed with 30 day volatility trading at 13.7 against a long term average of 17.2.

The ‘Zombieland’ markets will pause for breath and look to the US parliament to try to thrash out a deal everyone can work through to ensure they get re-elected. Sadly the US is now in the hole for $16.4 trillion and only $63bn away from the glass debt ceiling. We will hear more on this in the coming days. Expect reactionary markets to continue as the computers take over the asylum. I think Obama’s next plan will be ‘so cunning, you could put a tail on it and call it a Weasel ‘We shall see’.

 

Clarence

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