Well the big green blob was back today on my market map. The banks were once again sought after despite the heavy falls on Wall Street on Friday. Resources were weaker with BHP Billiton (A$34.09, -2.3%), RIO Tinto (A$53.80, -2.5%) and Fortescue Metals Group Ltd (A$3.26, -2.7%) all suffering as Iron Ore fell.

After a pretty anaemic start and down 30 the market had a great rally to be positive around lunchtime but continued Asian weakness, disappointing consumer sales and just more sellers than buyers put the kibosh on the rally and the market fell in the afternoon to finish down 35 points. Japan was especially weak down another 3 or 4%.

News over the weekend of better than expected Chinese economic numbers was not enough to put the lead back in their pencils. And so the great switch continues to slosh around from Banks one day to banks the next. Seems traders cannot make up their minds. Westpac Banking (A$29.00, +2.0%), Australia and New Zealand Banking Group (A$27.85, +1.1%), Commonwealth Bank of Australia (A$66.92, +0.1%) and National Australia Bank (A$29.30, +1.0%) all attracting fans on account of the underlying yields. Other financials did not quiet generate the same excitement with QBE Insurance Group (A$15.66, -2.2%), Macquarie Group (A$41.66, -3.5%), Henderson Group PLC. (A$2.63, -3.3%), IOOF (A$8.14, -2.2%) and ASX (A$36.92, -1.3%) all weaker. Looks suspiciously like the banks caught a few people short and there was a bit of a squeeze on. Perhaps tomorrow we will see the reversal of today’s trend.

The big defensives were also on the nose today with Telstra (A$4.66, -1.7%) particularly hit as the asbestos issue continues to plague them. Despite denials that it is anything other than business as usual the market is running scared of liability issues.

In fact it was hard to find many in positive territory today, Newcrest Mining (A$15.12, +4.2%) were better as were Kingsgate Consolidated (A$1.88, +15.3%) following production upgrades. Consumer Discretionaries were mixed with Wesfarmers (A$39.36, +0.3%) and Woolworths (A$32.71, -0.9%) going in opposite direction. Media stocks had a weak day as APN News & Media (A$0.275, -3.5%), Fairfax Media (A$0.61, -1.6%) and Seven West Media (A$2.12, -3.6%) all fell.

Biggest losers today were Bluescope Steel (A$4.96, -5.9%), Senex Energy (A$0.565, -7.4%), Aristocrat Leisure (A$4.10, -5.7%), Linc Energy Ltd (A$1.47, -6.1%) and M2 Telecommunications Group (A$5.14, -5.2%) whilst the winners today included Cardno (A$5.52, +2.6%), Evolution Mining (A$0.845, +5.0%) and Bradken (A$4.71, +1.1%).

Volume was not too shabby given it was a Monday at around 4bn but a close near today’s lows does not bode well for the rest of the week.

Stocks in the News

Transpacific Industries Group Ltd (A$0.785, -11.8%) was in the spotlight today as the now ex CEO delivered his last profit warning before falling on his sword, meanwhile the downgrade from Cochlear (A$52.88, -18.1%) fell on deaf ears and the stock gave up its darling status taking other healthcare stocks like ResMed Inc. (A$4.98, -4.0%) with it.

National Australia Bank (A$29.30, +1.0%) was the next of the banks to announce some capital management issues and is going to carry out a $300m buy back to negate the DRP. Looks like growth options are limited and the consumer is keeping things tight on the borrowing front still.

Telstra (A$4.66, -1.7%) announced this morning that it thought the asbestos issue with its cables was not going to lead to material financial losses.

Kingsgate Consolidated (A$1.88, +15.3%) was one of the few resource stocks to do well today after an update from its Thai operations was welcomed by the market. In other house stocks, Karoon Gas Australia (A$5.43, -4.4%) ran into trouble following a presentation.

Home prices remain subdued, despite continued strength in auction sales and clearance rates, suggesting the probability of a boom in either house prices or housing credit remains low.

China’s factory activity has slowed for the first time in seven months in May as both domestic and external demand softened, a private survey showed, adding to concerns that the world’s second-largest economy is losing momentum.

Tomorrows News Today

News that low paid workers are to receive a 2.6 % increase was on the high side and industry said that it would place additional pressure on many employers who are doing it tough.

RBA meeting tomorrow but expectations of a further cut in rates seem to be easing.

Turkey looks like the new flash point for civil unrest as protests grow around the country against ruling leader PM Erdogan tries to bring things under control. He is blaming looters and social media!

News out today that show the strength of the Chinese economy in Macua. Gambling revenue in China’s gambling enclave rose 13.5 per cent in May from a year earlier, boosted by an improving domestic economy and a week of national holidays that spurred visits from wealthy Chinese. May revenue was 29.6 billion patacas ($3.85 billion).

Looks like RIO will be going for a IPO after failing to find a trade buyer for its diamond business. Really are Mums and Dads that silly to buy something that no one who knows their stuff wants.. we shall see!

And Super Mario has said that Europe is on track! Gradual improvement forecast.. meanwhile in the real world, Euro Unemployment has reached 19.4 m people!!

Clarence

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