Market Wrap

Well, my call on the bounce this morning was so wrong it’s not funny. The market tried to rally after yesterday’s ton fall but it was ambushed after about 20 minutes and just kept falling to go through my target of 5000. Well and truly through. Although we did see some bargain hunting towards the close as we rallied slightly off the bottom to close around 79 points down at 4983. However feeling slightly better about my Sell in May call as we have fallen 4% in two days! Another day of unwinding the defensive yield trade positions that the overseas guys have been pushing. These crowded trades can get ugly when they unwind quickly and the last two days the rush for the exit in banks has been a stampede. Big falls again today with Australia and New Zealand Banking Group (A$27.68, -1.6%), Commonwealth Bank of Australia (A$68.77, -1.3%), National Australia Bank (A$31.29, -1.3%) all down and out in Beverley Hills, but Westpac Banking (A$29.32, -2.0%) got walloped. NAB is still cum dividend so there is more pain to come I suspect in this one. There was no sector spared today as the sword went through the market, defensives like Woolworths (A$33.46, -1.5%) and Wesfarmers (A$41.00, -2.3%) were savaged as was Telstra (A$4.87, -1.6%). These stocks have had great runs and the fall in the Aussie dollar has precipitated the overseas guys exiting stage left pursued by a bear.

In fact the only piece of green grass in my sea of red ink on the market map was poor old Newcrest Mining (A$15.12, +3.9%) as Gold bounced a little. Others that have been hurt recently also rallied with some of the mining services like Monadelphous Group (A$16.04, +3.4%), Als (A$8.74, +1.0%) making gains but the losers were in the majority. The biggest doggy today was poor old Echo, after last night’s placement by Jamie Packer at 3.20 the stock fell to trade way under that price. You do wonder what the attraction is of buying these placements especially when Packer is selling. Other big losers included Domino’s Pizza Enterprises (A$12.15, -9.1%), Ainsworth Game Technology (A$3.95, -8.6%),iiNet (A$5.55, -9.0%),M2 Telecommunications Group (A$5.26, -4.5%) and G8 Education (A$2.34, -3.7%). In fact anything that was showing good gains for the year has been whacked in the last few days. Think that points to profit taking by international funds as my number one reason.

Some of the bubble net stocks took a tumble today led by REA Group Ltd (A$27.90, -5.6%), Carsales.Com (A$9.52, -4.3%), Flight Centre (A$36.63, -3.4%) and Seek (A$10.18, -3.2%). Other analogue media stocks fared slightly better as Fairfax Media (A$0.60, +2.6%) held up, Ten Network (A$0.265, -1.9%) sagged a little and so did Seven West Media (A$2.10, -1.9%).

Resource stocks found few friends but did outperform the defensives slightly, BHP Billiton (A$34.36, -1.5%), RIO Tinto (A$54.51, -1.1%), Fortescue Metals Group Ltd (A$3.54, +0.3%) and Iluka Resources (A$11.10, -2.3%) all in the spotlight, whereas Gold had shining day with solid gains across the board. Of course they are coming off a pretty battered base but still nice to see, Kingsgate Consolidated (A$1.55, +8.8%), Silver Lake Resources (A$0.765, +11.7%) and Regis Resources (A$3.84, +6.1%) getting off the mat. But it really was the previous safe havens that have borne the brunt of the selling, even healthcare stocks weren’t immune. CSL (A$59.69, -1.9%), Cochlear (A$65.21, -2.8%), Primary Health Care (A$4.93, -3.1%), Sonic Healthcare (A$14.04, -1.9%), Sigma Pharmaceuticals (A$0.80, -2.4%) all in accident and emergency.

Turnover was healthy but not as big as yesterday. Looks like we are seeing the implosion of the carry trades where you borrow in a low interest economy and buy the yield economy.. Borrow Yen buy Aussie. Maybe it’s over! In the CNBC top ten carry trades of all time we are No 1!!

Stocks in the News

We have talked about Echo Entertainment Group (A$3.03, -11.9%) but the placement of Packer’s stake at $3.20 has taken the take-over appeal out of the stock and may indicate that he thinks he has a second licence for Sydney in the bag.

Biggest weekly loss since late November 2011. Those were the days, then you could buy all the four banks for around $100!!Now $156.Were over $170! See how they run!

Sirtex Medical (A$10.69, -0.3%) has seen one of its rivals fall to a predator as BTG has bid for Theraspheres for $200m.Should do wonders for the SRX valuation if anyone cares… not today though!

Japan which suffered a tsunami like reaction yesterday was positive today for a while until it all unravelled again from 3% up to 2% down in the blink of a haiku. Yet another 1000 point trading range! That’s now a 1961 point trading range in two days. WOW! In the words of Sir Humphrey, ‘Abenomics’ is starting to look “very courageous Prime Minister”.

Tomorrow’s News Today

Bank holidays in the US and UK on Monday so long weekends all round overseas.

ECB’S WEIDMANN WISHES JAPAN `GOOD LUCK IN THEIR EXPERIMENTS’..probably not what you want to hear!

This comment from BOJ head Kuroda on Wednesday only helped with the confusion in Japan. He said that ‘gains in yields could be expected as the economy improved’, after saying previously that the central bank aimed to lower interest rates. After that we have seen huge volatility and today he opined, that he’ll “keep strengthening communication with the market and that the unprecedented stimulus announced by the central bank is sufficient”. Clear as mud! Problem he has if yields improve but there are no gains in the economy! But he has probably thought of that, right?

Spain’s banks face €10bn more provisions… Central bank presses lenders on ‘extend and pretend’ loans.

Scary the reaction in World markets to Uncle Ben’s pronouncements this week. It could get really ugly when they pull the life support system for real.

And if the World really is in for some turbulence after the massive run of complacency, maybe, just maybe there is a bounce in the gold price. US should be fun tonight. If I wake up tomorrow and its down 10 I will eat my hat!

And in more serious news the EU has made an abrupt U turn on the issue of olive oil on restaurant tables. Seems the public is quite happy with how things are. Phew, EU solves the big issues!

Have a good weekend

Clarence

Xxx

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