Once again our market struggled after the opening bell to hand on to its gains. News that Consumer confidence went bust for the second straight month well and truly upset the apple cart. After opening 20 points better we reversed all engines and closed down around 15 points. Financials were a little sick as the dream run that they have enjoyed starts to turn a little sour. Good underlying support though on a yield basis will keep them hanging in there. The usually green blob of banks was decided red today with Commonwealth Bank of Australia (A$71.70, -1.1%), Australia and New Zealand Banking Group (A$29.30, -1.1%), National Australia Bank (A$32.71, -1.1%) and Westpac Banking (A$31.19, -0.9%) all suffering, whilst Macquarie Group (A$45.60, -0.2%) defied gravity, Property trusts also joined in the fun falling away too as Mirvac Group (A$1.75, -2.8%), Stockland (A$3.87, -2.8%), Westfield Retail Trust (A$3.32, -1.8%) and CFS Retail Property Trust Group (A$2.16, -4.0%) all down as well as insurers such as QBE Insurance Group (A$15.23, -1.1%), Suncorp Group (A$12.67, -0.3%). AMP (A$5.48, -1.3%) and Insurance Australia Group (A$5.56, -0.7%).

Resource stocks bucked the trend with BHP Billiton (A$35.27, +1.3%), RIO Tinto (A$56.30, +1.8%), Fortescue Metals Group Ltd (A$3.63, +3.4%) all showing good gains as the rotation from Banks and defensives to the bombed out material stocks continued somewhat half heartedly though.

In retail land, consumer sentiment on the negative side was a kiss of death, together with Myer (A$2.68, -3.2%) sales numbers, ending thoughts of gains for David Jones (A$2.72, -1.4%), JB Hi-Fi (A$16.34, -0.5%) and Super Retail Group (A$11.67, -0.6%). Defensives Wesfarmers (A$42.89, +0.3%) and Woolworths (A$34.50, -0.1%) had a quiet day wandering down the aisles listening to some muzak.

Mining services were again flattened today. Yesterday we saw a slight positive reaction from Boart Longyear (A$0.67, -14.1%) and their update but today the gloves were off after analysts moved to downgrade the stock. If this sector was credit worthy it would be rated junk at the moment. Monadelphous Group (A$15.97, -3.8%), Bradken (A$4.66, -1.7%) and Cardno (A$5.47, -0.5%) joined the casualty list as well as NRW (A$1.035, -7.6%).

In the winners circle today were Mesoblast (A$6.02, +9.5%) following a positive announcement yesterday, Iluka Resources (A$11.79, +5.7%) after a AGM without a downgrade, in fact they used words like ‘encouraging’ and ‘pick up’ in the same sentence. Finally!

The biggest losers today were Perseus Mining (A$1.055, -8.3%), Newcrest Mining (A$14.87, -4.7%), Southern Cross Media Group (A$1.345, -4.3%), Newcrest Mining (A$14.87, -4.7%) and Watpac (A$0.55, -25.7%) which downdated the market with news from the Construction group following a now all too predictable path. Looks like all the tradesmen and builders are chasing Sydney real estate to renovate these days as there is no real work left!

Stocks in the News

No major downgrades today, which is rare these days. However the exit of KKR from the register of Seven West Media (A$2.10, -7.9%) at 2.12 had an unnerving effect on the stock and punters who took the stock were bailing faster than Thor Heyerdahl on a Kon Tiki tour!

In house stocks today it was nice to see some green on the screen for Buru Energy (A$1.715, +7.9%) and with analysts back from Alaska, Linc Energy Ltd (A$1.45, +3.6%) also had a more positive move on optimism on their Umiat project.

In takeover news, the old RAMS home loan business has received a takeover approach from Resimac to acquire RHG (A$0.405, +9.5%), in a proposal with former Babcock & Brown banker Trevor Loewensohn. The conditional proposal values the target at about $130 million.

Newcrest Mining (A%14.87, -4.68%) were pretty slow off the mark to report a ‘slight’ change to their NSW Mining licenses as reports emerged in the Media around mid day, that they had lost 3 exploration licenses around their Cadia Hill project in NSW, due to problems at ICAC and the former mines minister Ian MacDonald.

Consumer confidence fell for the second month running on the WBC/Melbourne Institute numbers .The report’s index of consumer sentiment slid 7.0 percent in May, following a decrease of 5.1 percent in April and a rise of 2.0 percent in March.

Telstra has told its workforce that it is planning sweeping changes to the way it manages its operations, in a restructuring that is expected to generate another significant reduction in its employee headcount. Telstra (A$5.14, +0.2%) shares also took heart from more losses from Vodafone as they cement their place as undisputed champions of mobile and data!

The Hong Kong markets had a delayed opening today as the ‘Black Rain’ warning closed down the joint. Apparently ‘Black Rain’ is as bad as it gets in HK on the weather front. Markets opened at 3pm Aussie time.

The Bank of Japan has got itself a fresh supply of ink and paper and is now spending money like a drunken sailor to quote Mr. Hockey. According to a statement today they are going to “conduct money market operations so that the monetary base will increase at an annual pace of about 60-70 trillion yen (between $597 billion and $696 billion).”

It also committed to buying 50 trillion yen ($498 billion) worth of seven-year government bonds annually and to buying 30 billion yen ($298 million) worth of exchange-traded funds and the same or more worth of real estate investment trusts.

Tomorrow’s News Today

All eyes tonight on Benny and the Inkjets as he front the lawmakers to tell them how he is going to “taper” the markets off their stimulus hits.

Feeling a big sorry for Gina today as she is reported to have lost $7bn in wealth this year. Still miles out in front of her rivals on the rich list but $7bn are a lot of money.

And talking of feeling sorry, I am starting to shed a small tear for Nathan who is having his own “Annus Horribilis”. Not only has he been losing money faster than most but the tax man is after him, his wife is selling their family home and he has had to flog his beloved horse empire. A Meteoric rise and fall. Paul Barry is already sharpening his pencil for this biography.

ABARE has reported that Mining and energy projects worth about A$150 billion ($147 billion) have been delayed or cancelled in the past year in Australia as investments peaked and commodity prices declined. Sobering indeed. I believe the cost of a cappuccino in Perth has plummeted to $3 from $6.

Goldman Sachs has upgraded its target for the S&P 500, forecasting that the U.S. benchmark index will climb a further 5 percent to 1750 by year-end, from an initial estimate of 1625, supported by robust dividend growth and an improving macroeconomic environment in the U.S. And they should know they are pushing it there!

Clarence
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