Todays Market Action

Another day, another smack-down as jitters remain after last week. The market never really attempted even a half-hearted rally with a low for the day around 4662 and closing around that level. Despite a small rally in the Dow on Friday, our market was bashed again as we had lots of Ex Divs, lower Aussie dollar, a profit downgrade from AMP (A$4.34, -12.9%) , a lacklustre start from newcomer iSelect Limited (A$1.56, -15.68%) and the Chinese markets falling 3% or more all helped us start the week on a red note. The media is whipping itself in a serious frenzy of headline negativity as we push to a 2013 low. Volumes were fairly anaemic again and end of year stuff taking precedence.

Golds were put to the sword despite a small rally in the gold price and the falling dollar. Silver Lake Resources (A$0.605, -11.0%), St Barbara (A$0.42, -12.5%), Kingsgate Consolidated (A$1.44, -4.0%), Regis Resources (A$3.08, -4.6%) and Evolution Mining (A$0.58, -10.1%) all badly mauled again. Other resource stocks also suffered as Fortescue Metals Group Ltd (A$2.92, -4.3%) fell as did BHP Billiton (A$31.35, -3.4%) and RIO Tinto (A$51.54, -2.1%). Financials tried to shrug off the despondency but even the attractive yields were not enough to keep their heads above water with National Australia Bank (A$28.68, -1.0%) the worse and Australia and New Zealand Banking Group (A$27.38, -0.1%) the best.

Of course it didn’t help they AMP (A$4.34, -12.9%) fessed up to issues with their wealth protection business and fell like a rock, followed by QBE Insurance Group (A$15.48, -2.1%), Suncorp Group (A$11.73, -3.2%) and Insurance Australia Group (A$5.38, -1.1%). Telstra (A$4.50, -1.1%) also succumbed to the red pen as did other defensives like Woolworths (A$31.75, -0.8%) and Wesfarmers (A$38.03, -0.5%). Some of the better performers today were US dollar earners like CSL (A$59.29, +2.4%) and Brambles (A$8.97, -1.2%) together with Amcor (A$9.86, +0.2%) and CSR (A$2.17, +1.9%).

Mining services were easier today as Monadelphous Group (A$16.83, -3.8%), Rcr Tomlinson (A$2.18, -2.7%), Ausenco (A$2.07, -4.2%), Boart Longyear (A$0.695, -6.1%) and Seven Group (A$6.92, -4.0%) all fell hard.

Energy stocks also were under the kosh today with Woodside Petroleum (A$34.26, -3.5%) leading the falls followed by Oil Search (A$7.86, -0.9%), Santos (A$12.37, -2.4%), Origin Energy (A$12.44, -2.2%) and Caltex Australia (A$20.45, -3.7%).

Big winners today were Metcash (A$3.61, +4.9%),CSL (A$59.29, +2.4%), Slater & Gordon (A$2.73, +2.2%) and Westfield Retail Trust (A$2.99, +2.7%) but in pooch corner were Linc Energy Ltd (A$0.94, -18.3%), Sirius Resources (A$1.95, -17.02%) ,AMP (A$4.34, -12.9%), Panaust (A$1.80, -9.1%) and of course Newcrest Mining (A$9.53, -7.9%) as the shorters shred the share price. Still amazed the MD has a job!

As we wind down for the current year it looks like more downside is looming.

Stocks in the News

AMP (A$4.34, -12.9%) was the next cab off the rank to issue a downgrade as it struggled in its wealth protection business particularly in May! Their underlying profit is now expected in the $415m to $435m range. Stock got walloped and credibility is now a little tarnished.

Metcash (A$3.61, +4.9%) shrugged off a slightly negative report today that they were losing market share to the big two. Metcash, which owns supermarket banners such IGA and Franklins supermarket chains, said it suffered a 2.3 per cent fall in sales in its core food and grocery business to $9.1 billion.  It achieved a 35 per cent earnings growth, to $47 million, in its liquor business. The company promised the review of its food and grocery operations as it recorded revenue of $13.1 billion for the year to April 30 and a reported net profit after tax (NPAT) of $206 million.

New entrant iSelect Limited (A$1.56, -15.68%) made an unhappy start to life as a public company as the issue fails to excite. Expect the rise of the Meerkats had something to do with it. Seems the barriers to entry into this market aren’t that huge after all. A few cheeky fluffy creatures that can talk and a big UK parent with some capital and ambition should do the trick.

Yet another confession to hit the market this afternoon as (A$4.73, -0.4%) announced an update. Doh!

RIO Tinto (A$51.54, -2.1%) has announced that it is going to keep its diamond business after all as bids were below what they expected and they see better shareholder returns by keeping the company in house.

Leighton (A$14.95, -1.1%) was in the news today with a good contract win in the Pilbara worth $2.8bn.

Stocks in our universe today to register rises included Universal Coal PLC (A$0.057, +7.5%) which presented at lunchtime today to our advisers. Whilst favoured stocks like Buru Energy (A$1.205, -7.3%) and Karoon Gas Australia (A$5.15, -1.3%) suffered from the sliding markets.

The Victorian Supreme Court today ruled in favour of Tatts Group (A$3.09, -0.6%) and TABCORP (A$3.17, -0.6%) in their joint legal action against the Victorian Treasurer Michael O’Brien, challenging his determination that they each pay health benefit levies of about $42 million for the 2012/13 financial year. The companies say they operated gaming machines in Victoria for only 46 days of the financial year, losing the right to operate poker machines in venues other than Melbourne’s Crown Casino on August 15, 2012.

Australian bond yields have raced to 15-month peaks amid a rout in global debt markets, while investors sharply scaled back wagers on another cut in domestic interest rates in the face of a declining local Dollar. Heavy selling in very illiquid conditions saw Australian 10-year bond futures tumble 22.5 ticks to 96.00, implying a yield of 4 per cent.

Tomorrows News Today

Good to see that the Euro Bankers can’t agree on who pays for future bailouts. As the Cyprus model gains more traction as the preferred model it should send a shudder down the spine of anyone with a deposit account in one of the problem countries. Expect the flight to London Property to continue!

Interesting that the Bank of International Settlements came out and suggested that Central Banks have now done their bit and it is now up to Governments to take up the heavy lifting on the economies. Fat Chance of that. It would require actually doing something!

The UK and China have formally established a currency swap line, an important step in London’s attempt to become a global centre for trading the offshore Renminbi and one of Mervyn King’s final acts as governor of the Bank of England. The BoE and the People’s Bank of China signed the agreement over the weekend.

And finally it was nice to see that Starbucks had paid tax in the UK for the first time in four years. It has only ever reported a profit once in 14 years. But then again judging by the taste of its coffee that is hardly surprising!