Well that escalated quickly. One minute we were down a modest 20 points then all hell broke loose. In fairness it has been building of some time, so hardly a big surprise but what was the straw that broke the camel’s back. Was it the Dogs of War barking, the RBA warning(sorry Joe, this is down to you) or just the Russian bears doing their stuff in the woods. Whatever it was we saw big losses across the board with special attention paid to the financial stocks as the banks lost their immortality. After testing the 5500 level ,it broke free with a low of 5425 and closing at 5435,down 74.Rally towards the close helping. For the week the ASX200 is down 2% or 122 pts. Ouch! Would be nice to say this move happened on low volume but more worryingly it didn’t!. About $4.6bn which is better than recent days though. The RBA minutes running to 76 pages forecast lower GDP ,lower inflation and a transition to the mythical world of the new economy. Real problem is they are going to keep rates on hold. Market no likey. If unemployment continues its dangerous trajectory then banks will have to reassess their bad debt provisions. Banks hit a wall, big four down over 1.5% with recent reporter Henderson Group PLC. (A$4.15, -8.0%) copping a real shellacking whilst in resource land RIO Tinto Limited (A$66.43, +0.2%) tried valiantly to steady after the numbers last night but eventually closed slightly positive as rivals BHP Billiton Limited (A$37.74, -1.9%),Fortescue Metals Group Ltd (A$4.56, -3.4%),Atlas Iron Limited (A$0.65, -1.5%) and Arrium Limited (A$0.75, -2.6%) took a pounding.
In industrials REA Group Ltd (A$42.78, -8.6%) reported today and the emperor seems to be wearing a new fashionable nothing this year .Or at least a little see through at best .Disappointing some would say and the bears had a field day. Warning to others ,do not disappoint. Others falling foul were Woolworths Limited (A$35.67, -1.5%) and Wesfarmers Limited (A$42.44, -1.3%),Crown Resorts Limited (A$14.75, -2.8%) and the high flying property trust sector down heavily too.
So casualties for the day above and beyond included Henderson Group PLC. (A$4.15, -8.0%),REA Group Ltd (A$42.78, -8.6%),Flexigroup Limited (A$3.67, -4.7%),Liquefied Natural Gas Limited (A$3.32, -4.3%),#OFX#,Fortescue Metals Group Ltd (A$4.56, -3.4%) and Poseidon Nickel Limited (A$0.17, -12.8%) and #TON# in the species whilst bucking the trend were golds Regis Resources Limited (A$1.945, +6.0%),Oceanagold Corporation (A$3.17, +5.0%),Evolution Mining Limited (A$0.78, +0.6%),Newcrest Mining Limited (A$11.18, +1.7%),Norton Gold Fields Limited (A$0.14, +7.7%) and Beadell Resources Limited (A$0.54, +6.9%)(now in the small caps!)Aussie dollar lurched to 92.460 whilst digital tulip raced to $640 with gold at $1319 on the sound of beating drums.
Meanwhile in Asia, all the 2’s,Tokyo down 2%,HK down 0.2% and China up 0.2%.Easy to remember.
Stocks and Stories
RIO Tinto Limited (A$66.43, +0.2%) delivered last night with a profit above expectations of around $5.1bn as the company drastically reduced costs and exploration expenditure. Its all about volume and cost cutting for the iron ore miners. At least the big ones. Little ones it’s all about survival!
Rex Minerals Limited (A$0.29, -24.7%) shocked the market with a whole new approach to their SA project and it looks like a smaller scale. Sacked the MD too. Parachutes anyone.
REA Group Ltd (A$42.78, -8.6%) delivered an underlying net profit in the year through June rose 37 per cent to $149.88 million. Forecasts had been for an underlying net profit of $149 million for 2013-14, and revenue of $438 million. So pretty close but at 40 times earnings ,its stretch!
Henderson Group PLC. (A$4.15, -8.0%) increased its AUM to £74.7bn with inflows of around 5bn quid in 1H14.However they also said they have stopped taking over the world and will look to consolidate.Not what the growth bugs want to hear apparently.
Commonwealth Bank of Australia (A$80.13, -1.5%) has rearranged the chairs after the retirement and resignation of two execs due to some fallout from the Financial planning fiasco.
Crown Resorts Limited (A$14.75, -2.8%) Mr Packer has probably had better weeks with news out of Macau not being too rosy. VIPs leaving it seems as the ordinary punter now more sought after. Couple that with his perceived high risk foray into the home of the punt, Las Vegas ,it has made a few people nervous. Now it has not been a great idea to bet against him and I suspect that he has realised that as the VIP grows wings and wants to explore the world he will want to keep them in the packer/Crown universe. Vegas , Australia, Japan, China, gives them options.
Looking at fairytales, China’s trade surplus surged to a record in July as export growth unexpectedly accelerated and imports fell, suggesting global demand will help the government achieve its 2014 economic-expansion goal of about 7.5 percent. Overseas shipments increased 14.5 percent from a year earlier, beating all estimates that had a median projection of 7 percent. Look there’s a pig, it’s flying, whatever next.
Someone has stolen Maquaries ‘Mojo’ with news that a thief has stolen a Holey Dollar form a glass case at the State Library.Security? Nah, cameras though!Shareprice has taken a huge dive recently down around 10% from its top.
RBA now forecasting growth of a little more than 2 per cent in year to March 2015. Still they reckon that the Carbon tax being repealed will take 0.75pc off inflation ..trouble is the price of fags is going to add 0.25% to this every year for the next three years! So no change!
Tomorrow’s News Today
Obama has his G’Dubya moment. Never going to end well with a speech that includes the three words they fear most. “My Fellow Americans” .It’s all about Iraq, Russia, Ukraine etc. May you live in interesting times as they say.
Argentina has asked the international court of justice in The Hague to take action against the United States over an alleged breach of its sovereignty as it defaulted on its debt.
Now this significant for all those hopeful start-ups in China looking to do a facebook… Chinese authorities have imposed fresh restrictions on the country’s mobile instant messaging services, including the hugely popular WeChat, in a move to curb unsanctioned political news and debate and “safeguard national security”. Might take the gloss off. Sometimes we need reminding that China is not an economy like ours! Suspect they know what Metadata is too!
Looks like Malaysian airlines is being taken over by state-run Khazanah Nasional It will offer 27 sen for each share in the company it does not own, amounting to nearly 1.4 billion ringgit ($470 million) to take the troubled airline private. Phew.
This is good. Super Mario president of the ECB, said that the Bank had “intensified preparatory work” on quantitative easing as a potential new weapon in its battle against deflation and economic stagnation. ”Whatever it takes” apparently not working!
Record amounts of money being redeemed from Junk Bonds at $7.1bn in a week. Rats deserting the sinking ship. Getting used of higher rates elsewhere.
Have a great weekend. Good luck if like me you are running the City to surf