What a difference a year makes! After rallying 160 points in two days last year and giving us the whole calendar year performance, 2013/14 started with a serious whacking as Chinese PMI numbers disappointed, however weak overseas  leads and too much too soon were equally to blame. The market tried a half-hearted rally mid-afternoon but continued to slide and at one point was down nearly 100 points for the day or 2%. Makes you feel that last week was a little window dressing perhaps! Anyway the big red blob was the finance sector today as the big four banks got hammered. 33 points of today’s fall of 92 points was in the top four Westpac Banking (A$27.97, -3.2%), Commonwealth Bank of Australia (A$67.53, -2.4%), National Australia Bank (A$28.97, -2.4%) and Australia and New Zealand Banking Group (A$27.82, -2.7%). Others to pile on the pain included Telstra (A$4.67, -2.1%), Woolworths (A$32.20, -1.9%), Wesfarmers (A$38.59, -2.6%), CSL (A$60.65, -1.5%), BHP Billiton (A$30.94, -1.4%) and RIO Tinto (A$51.73, -1.2%). One of the few places to hide were QBE Insurance Group (A$15.30, +1.4%) in financials whilst Suncorp Group (A$11.72, -1.7%), Macquarie Group (A$40.50, -3.3%) and AMP (A$4.24, -0.2%) all suffered the slings and arrows of outrageous fortune.

Property trusts were weaker with Stockland (A$3.42, -1.7%),GPT Group (A$3.76, -2.1%), Dexus Property Group (A$1.045, -2.3%) and Commonwealth Property Office Fund (A$1.085, -1.4%) hit as were industrials like Brambles (A$9.08, -2.8%), Transurban Group (A$6.64, -1.8%), Toll (A$5.19, -2.4%), UGL (A$6.62, -4.3%) and Seven Group (A$6.60, -4.3%). Leighton (A$15.89, +2.8%) was one of the bright spots in mining services with Monadelphous Group (A$15.33, -5.0%), Boart Longyear (A$0.625, -7.4%), Ausenco (A$1.755, -12.3%) falling into a pit of despair. Gaming stocks were also dealt a bad hand with Crown (A$11.82, -2.4%), Tatts Group (A$3.08, -2.8%), Aristocrat Leisure (A$4.16, -2.8%) and Echo Entertainment Group (A$3.04, -0.7%) all failing to deliver the chips.

Mining stocks were in the wars with BHP Billiton (A$30.94, -1.4%),RIO Tinto (A$51.73, -1.2%),Fortescue Metals Group Ltd (A$2.95, -3.0%) and Oz Minerals (A$4.01, -2.2%). Energy stocks also fell today with Origin Energy (A$12.18, -3.1%), Woodside Petroleum (A$34.75, -0.7%), Oil Search (A$7.57, -2.1%), Santos (A$12.30, -1.8%) and Caltex Australia (A$17.59, -2.5%) all walloped.

Gold shares had a better day led by rises in the shiny stuff due to physical demand continuing. Newcrest Mining (A$10.00, +1.3%), Kingsgate Consolidated (A$1.335, +5.5%), St Barbara (A$0.465, +3.3%), Silver Lake Resources (A$0.64, +7.6%), Evolution Mining (A$0.575, +0.9%) and Regis Resources (A$3.12, +8.0%) all did well.

Volume was pretty anaemic again today at just over $3bn.Big winners today included Regis Resources (A$3.12, +8.0%), Paladin Energy Ltd (A$0.945, +8.0%), Panaust (A$1.885, +3.3%), Virgin Australia (A$0.435, +2.4%) and Independence Group NL (A$2.29, +1.3%) whilst in the naughty corner were Senex Energy (A$0.555, -5.9%), Macquarie Atlas Roads Group (A$1.84, -5.2%), Sigma Pharmaceuticals (A$0.74, -5.7%), Monadelphous Group (A$15.33, -5.0%) and CSR (A$2.13, -4.5%).

Stocks in the News

Amcor (A$10.11, -0.3%) announced today that it was acquiring Jiangsu Shenda Group for RMB350m. This will establish AMC as a market leader in eastern China. 40% of Chinese GDP comes out of this area.

In house stocks today Resource Generation (A$0.195, unch), which recently announced an entitlement offer backed by three independent investors, was steady as it announced an amended timetable for the issue at 22c .Looks promising and an interesting project in South Africa. Resource Generation is led by the very experienced and capable, Paul Jury. I know his brother very well! In other coal stocks REY Resources (A$0.06, +15.4%) announced today the sale of their Duchess Paradise Coal project for $21m.

High profile Phosphagenics (A$0.105, -19.2%) chief executive Esra Orgu has been suspended from her duties after the discovery of “irregular transactions” in relation to the company’s accounting records. Phosphagenics made the announcement to the ASX this morning after entering a trading halt on Friday. In the release the company, which is developing a portfolio of cosmetics for the international beauty industry, said it believed the amount of money unaccounted for was material.

Business sentiment among major Japanese manufacturers turned positive for the first time in nearly two years, a signal that companies are reacting positively to the weaker yen and Prime Minister Shinzo Abe’s policies to revive the stagnant economy. The Bank of Japan’s closely-watched quarterly ‘‘Tankan’’ survey for June showed that the index for major manufacturers rose to positive 4 from negative 8 in March.

Croatia has become the 28th member of the European Union, with crowds joining celebrations in the capital Zagreb. Still they have one in five unemployed and Croatia’s national debt officially classed as junk. They won’t be full Euro carrying members just yet. Thank goodness for that as corruption and organised crime are rife in Croatia.

An official Purchasing Managers’ Index dropped to 50.1, the lowest level in four months, from 50.8, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. A private PMI from HSBC Holdings Plc and Markit Economics was 48.2, the weakest since September. Readings above 50 signal expansion. Australia’s top-notch credit rating has been re-affirmed by Moody’s and it says a change of government is unlikely to change this view. In its annual review of the government’s rating today, Moody’s maintained its AAA rating with a “stable” outlook, saying the economy’s financial position was stronger than the outlook in most countries overseas.

Tomorrow’s News Today

RBA meeting tomorrow. I don’t expect to see any change from Uncle Fester. Suspect he will not want to stoke the house price termite mound and maybe wait to see how the effects of the Aussie Dollar falling will impact things! Certainly should encourage some of those overseas buyers looking to buy residency through buying a Melbourne or Sydney home!

Middle Class unrest is starting around the Globe. It’s a dangerous time. We now have Turkey, Egypt, Brazil and obviously the Zombie economies of Euro land providing large scale civil unrest. And now China looks set to join the fun.China ordered paramilitary troops to patrol around the clock in the western Xinjiang province after unrest killed at least 35 people in one of the region’s worst outbreaks of violence in four years.The stepped-up security, announced on the Ministry of Public Security’s website yesterday, comes before the fourth anniversary of clashes between Uighurs and Han Chinese in the regional capital Urumqi on July 5, 2009 that killed 200 people.

Japan’s banks emerged from the 2008 global credit crisis largely unscathed because senior employees did not speak English well enough to have got them into trouble, the country’s finance minister said.(I once heard a similar comment about Australian Banks too. Apparently they were not smart enough to see the benefits of CDS,CDO’s and Low Doc loans etc.) Just as well! Taro Aso, who also serves as deputy prime minister, said bankers in Japan had not been able to understand the complex financial instruments that were the undoing of major global players, so had not bought them.

Flash point Cyprus, it’s debt ratings have been downgraded to “default” after it announced it would delay paying back 1bn euros of bonds. Still a mess!

And in the UK ,there is a new man at the helm as Mark Carney takes over the Bank of England gig. First foreign head since the Bank was founded 319 years ago. He had better not stuff it up then. Ex Goldman’s man! The takeover of Europe is complete!

 

Clarence

XXX