Another weak lead in from the Overseas markets set the scene for today’s rout. However the real damage is being done in our time zone by the Nikkei which at one point was down over 800 points as the pullback becomes official. The Japanese market has now fallen the required 20% from its high. It is still up nearly 20% for the year, so volatility is the name of the game as ‘Abenomics’ takes root. Tomorrow we get more flesh on the bones of the grand plan to rescue the Japanese economy. Our market was hit hard and fast but after being down to around 4650 we saw a good rally in the banks to help things slightly .The yield stocks are starting to attract solid buying with banks like Westpac Banking (A$28.18, +2.6%) doing very well after announcing they had bought back US$3.75bn in US debt. Along with WBC,National Australia Bank (A$28.37, +1.1%),Commonwealth Bank of Australia (A$65.77, +1.0%) and Australia and New Zealand Banking Group (A$27.01, +1.7%) all enjoyed gained as did Telstra (A$4.59, -0.4%). Defensives back in favour, yet other financials did not fare so well as Macquarie Group (A$40.92, -1.2%), Suncorp Group (A$11.65, -1.8%), AMP (A$4.90, -2.0%) and QBE Insurance Group (A$14.71, -0.3%) all fell. However the biggest losers were the resource stocks like BHP Billiton (A$32.12, -2.6%) and RIO Tinto (A$51.57, -2.4%) which have been hit hard as the Aussie Dollar has rallied back well above 94 cents. Newcrest Mining (A$11.41, -4.4%) of course also fell so some things never change as energy stocks joined in too with Woodside Petroleum (A$34.49, -0.5%), Santos (A$12.48, -2.0%), Oil Search (A$7.67, -1.0%), Caltex Australia (A$21.53, -2.3%) giving up ground. Consumer discretionary stocks were also hit as the unemployment numbers showed a very benign state of affairs steady at 5.5% and a smidge of new jobs created. Market leaders like Woolworths (A$31.58, -1.1%) and Wesfarmers (A$37.14, -0.2%) were hurt as were the retailers David Jones (A$2.34, -1.7%), Myer (A$2.20, -1.8%) and JB Hi-Fi (A$15.50, -0.3%), although not to the same extent.

Healthcare stocks seemed to hit a brick wall today with CSL (A$58.16, -0.1%) no longer the safe port in the storm together with Ansell (A$17.53, -3.0%) which has held up very well recently. Media stocks also fell foul today with Fairfax Media (A$0.515, -4.6%) leading the falls followed by Seven West Media (A$1.99, -3.4%), Ten Network (A$0.26, -1.9%) and APN News & Media (A$0.25, -5.7%). And despite the rally in the Gold price we again saw selling in Gold stocks as Kingsgate Consolidated (A$1.665, -3.5%), Silver Lake Resources (A$0.85, -1.2%), Regis Resources (A$3.58, -3.8%) and others fell away. Stronger dollar doesn’t help these guys I guess.

Biggest losers today were Skilled Group (A$2.10, -10.3%), Lynas (A$0.45, -9.1%), Fairfax Media (A$0.515, -4.6%), Evolution Mining (A$0.785, -4.8%) and UGL (A$6.38, -4.5%) whilst in the winner’s circle we had Hutchison Telecommunications (Australia) (A$0.041, unch), Macquarie Atlas Roads Group (A$1.90, +4.4%), Westpac Banking (A$28.18, +2.6%), Xero (A$12.60, +1.61%) and Whitehaven Coal (A$2.20, +1.9%)

New entrant Virtus Health (A$6.25, +0.48%) also enjoyed continued support post IPO and made a modest gain again which is pretty good in this market.

Stocks in the News

Lynas (A$0.45, -9.1%) today announced that they have instigated a cut back on production and a long hard look at costs as the rare earth market remains subdued.

Suncorp Group (A$11.65, -1.8%) today announced that they had sold their troubled property assets to Goldmans at 60c in the dollar. The group will book a post-tax loss of between $470 million and $490 million in the June half as a result of the deal with Goldman and provisions it is taking on the balance of the portfolio, but this is a major desk-clearing deal for CEO Patrick Snowball, who inherited an $18 billion ‘‘bad bank’’ loan portfolio when he took over as chief executive of the insurance and banking group in September 2009.Some analysts are still predicting that they will pay a special dividend this year.

Westpac Banking (A$28.18, +2.6%) announced they had  become the latest lender to buy back a big chunk of taxpayer-guaranteed debt, in a sign of the improving conditions on funding markets. The bank today said it would shell out $US3.75 billion to buy back bonds issued under the government guarantee scheme, which threw the banks a lifeline at the peak of the financial crisis.

In the BBY universe of stocks, Linc Energy Ltd (A$1.16, -6.1%) continued to fall despite going into the ASX 200 on June 21st.. at this rate of falls they won’t last long in the index!

In economic news we saw the Unemployment numbers out today which will give the RBA cause to pause on its rate cuts. Ostensibly there seems no reason to cut after those numbers.

We also saw the World Bank cut its global forecasts today on Zombie slowdown and Asian growth concerns. They are positive on the US and Japan though so that’s something!

Tomorrows News Today

Looking forward to more volatility from Japan tomorrow as Abe announces more details of his cunning plan.

The big games in town are in Currencies. We continue to see equity volatility as a result. Japanese Yen bouncing hard has put pressure on market and in Brazil the REAL is at a four year low. Brazil has reduced a financial transactions tax on currency derivatives to zero after its currency, the real, hit four-year lows against the dollar on Wednesday. The measure was the second such move in a week to dismantle currency controls as the government sounds a rapid retreat from its earlier “currency war” against foreign capital inflows.

And now it looks like some FX markets are being fixed too!

 

Clarence

XXX

 

Talk Tuesday!!