A perfect storm of negativity enveloped US markets at the close last night as fears of a divided Italian Parliament pushed the Dow down 216, so it was a creditable performance from our market today which started the day on its lows and rallied from there. No damage really and just shows the buy the dips mentality is still well and truly in force. Banks and Financials were the early casualties but were patched up and sent back out onto the fray and acquitted themselves with their usual bravery. Fears of the US sequestration and Uncle Ben’s talks in the next few days are still in the backs of people’s minds but investors happy to ignore the dark clouds for the time being. The feeling is that Ben will not abandon his chosen ones in Capital markets and will continue to pump stimulus and liquidity into the US economy forever. Let us hope so, rumblings of an end to QEIII were enough last week to really dent the market albeit temporarily and we do not want a re-run of that negativity.

Defensives like Telstra (A$4.59, -0.4%) fared better than some with QBE Insurance Group (A$12.75, -2.1%) in the naughty corner again after results today whilst Commonwealth Bank of Australia (A$65.47, -0.4%) were even up for part of the day. Resources remained under pressure with BHP Billiton (A$36.35, -1.5%) and RIO Tinto (A$65.57, -0.9%) leading them down and Golds were mixed despite the better underlying price overnight. Silver Lake Resources (A$2.23, -3.0%) fell whilst St Barbara (A$1.34, +2.7%) and Newcrest Mining (A$22.13, +1.9%) were in the winners enclosure and even long time canine club member Kingsgate Consolidated (A$3.62, +3.7%) starred. In other resource stocks Fortescue Metals Group Ltd (A$4.61, -2.9%) failed to recover whilst Atlas Iron (A$1.545, -3.4%) suffered after their results today.

Retail stocks took things badly with Myer (A$2.73, -3.2%), David Jones (A$2.70, -2.9%) and JB Hi-Fi (A$12.61, -0.7%) in the spotlight. Media stocks were in the black with Fairfax Media (A$0.545, +2.8%),Ten Network (A$0.33, +4.8%) and Seven Group (A$10.51, +4.6%) all showing a clean pair of heals. Maybe it was because I tipped them on Sky TV this morning, but I suspect not!
 In energy stocks Beach Energy (A$1.375, +0.4%) looked to be gathering some momentum after yesterday’s historic deal with Chevron in the Cooper Basin, Santos (A$12.67, +1.9%) improved however the rest of the sector was under some pressure with Oil Search (A$7.35, -1.1%),Woodside Petroleum (A$36.34, -1.8%) and Caltex Australia (A$18.18, -2.6%) all falling.

Despite the good rally off its lows the market succumbed to nerves later in the session as we head into the unknown a little. With ‘Zombieland’ back on the agenda no one wanted to be too heroic or chase things too hard and volumes remained on the lower side of what we have seen recently which suggests that there is certainly no real selling mainly mark downs and bargain hunters at the moment. It would be more worrying if the volume picked up on the down days and dropped on the up ones. This is not the case yet.

Stocks in the News Today

A number of companies reported today with Flight Centre (A$31.50, -2.4%) leading the way down at least! Numbers seemed to be ok but market wanted more… more! Profit takers were in.

Atlas Iron (A$1.545, -3.4%) has posted a first half loss of $256 million, caused by writedowns in the value of several exploration areas. The emerging Pilbara miner’s result for the six months to December 31 was down from a $6.08 million profit in the previous corresponding period.

Virgin Australia (A$0.41, -5.7%) first half profit has slumped by 56 per cent but it expects to improve its underlying performance despite challenging economic conditions. The airline made a net profit of $23 million in the six months to December 31, down from $51.8 million in the previous corresponding period.

Other big stocks to report included QBE Insurance Group (A$12.75, -2.1%) reporting a full-year profit of $761 million, up 8 per cent from last financial year. It has also announced it would be rationalising the business to save $US250 million ($A243.75 million) each year from the end of 2015.

Transfield Services (A$1.82, -5.9%) enjoyed a rollercoaster ride being down nearly 10% at one stage before the buyers emerged and helped halve the loss.

Oil Search (A$7.35, -1.1%) made a net profit of $US175.8 million ($A171.40 million) in the six months to December 31, down from $US202.5 million in the previous corresponding period.

In house stocks Buru Energy (A$2.30, +4.5%) had a better day, whilst Karoon Gas Australia (A$7.00, -5.0%) which had a great day yesterday fell in a heap today Ten Network (A$0.33, +4.8%) improved after the management shake up and news of bidding for sports rights emerged. Melbourne IT (A$1.875, -2.3%) had some results today and were left in cyberspace with the stock failing to click with investors .WDS (A$0.49, -10.1%) also reported today and were particularly underwhelming with an underperform recommendation now firmly in place.

Tomorrows news today

Italian Politics will dominate the Zombie markets tomorrow with news that the ‘Bunga Bunga’ party made a good showing and a party headed by a comedian got the most votes of any party. Scary and looks like a hung parliament with nothing getting done in Italy for a while. Nothing new there but it will put the focus back on the situation in Europe with the regions third largest economy now to be run by a clown!

Sequestration will be the word on everyone’s lips too as we approach the March 1st deadline. There is a view that a deal will be done much like the fiscal cliff turned out to be a Y2K event. Everyone believes that sense will prevail but the risk is that budget cuts did come in on Friday and this will knock an already fragile US economy and consumer. Ultimately the country does need to cut its spending as debt is now $16.6 trillion but these cuts may not be the most useful way to do that. I think the health care sector is the issue as costs spiral out of control.

The other big issue is the speech from Uncle Ben on the continuation of QEIII. Watch this space!

And it appears belatedly that the RBA has woken up to the Currency wars that are going on around the World. Assistant ‘Gov’ Guy Debelle has suggested that rates may come down to counter a high dollar. Doh! Missed it guys it’s too late… the damage has been done I am afraid. Everyone else has tried to trash their currency to get themselves out of the hole. Makes next Tuesdays RBA meeting a little more interesting none the less.

As we approach the end of our reporting season there is probably a few shockers left in the pipeline but generally things have been slightly positive and underpin the current level of the market. However it is hard to see what is going to kick it any higher from here in the short term, although you would have to think that longer term the election will start to become an issue. Let’s face it if companies can thrive and survive with the current inept Government, just imagine how things will be under the Abbott/Hockey team. Last time we had a change in who runs Australia, the index was at an all-time high.’ Kev 07’ remember that. Feels like a lifetime ago but feel that the market may run into the September election before the new boys discover that Nigella Lawson has been playing with the budget after all and things aren’t quite what they seem. But I digress.