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What happened today?

          The ASX 200 closed up 13.2 Banks relatively the cheapest since 2012…well compared to their                       international peers anyway!

  • A thin volatile day of trading dominated by specific company events and the Sword of Damocles of Greece overhanging. Volume was just a tad over $4bn reflecting uncertainty. Tonight we should get more news from the latest “emergency” meeting. It feels like a bit like the boy who cried wolf, so many emergencies and crisis that we are all weary. For an event so important to financial markets the world waits with remarkable optimism. Scary to think that $4.5bn was taken out of Greek banks last week. For the day we had a 45 point trading range eventually closing at a measly 13 points up.

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  • There are two important words that come to mind. Contagion and Complacent. We have plenty of the latter and hopefully none of the former. Time will tell.
  • Anyway to our market and the big news over the weekend was the ‘scandal ‘ at IOOF (IFL) -13.3%.This story broke through the Fairfax press with revelations of inside trading ,front running and worse at the planning arm of IOOF. The market reacted with panic this morning with stock falling in a vacuum of information or statement from company and at one stage was down 20%.Eventually they got their act together with a denial and a statement that the stories were a result of an ongoing legal issue with a former employee and some of the facts were wrong. This was enough to pick the stock up and it ground out a 10% rally off the bottom.
  • The other big corporate news today was Seek (SEK) – 12.3% as it came clean on a profit downgrade following problems with the NSW TAFE education system IT integration. Seek’s new guidance implies FY15 net profit will be around A$188 million, below consensus of A$200 million. Unfortunately there was no way for the company to spin the disappointment and the stock finished slightly off its lows, bottoming at 1419c. For a growth stock, that is proving remarkably elusive.
  • Banks and other financials were happy to support the market today as were REITs and Telcos. Goldman Sachs has said that relative to their international peers they are the cheapest they have been since 2012.Good enough for me. Resource stocks were mixed with BHP -0.32 %, RIO+ 0.45% and Fortescue Metals (FMG) + 1.85% all down. Recent wall flower following their divorce South32 (S32) -3.57% remain much unloved and look horrible. No one likes a loser and they are starting to smell .Oz Minerals (OZL) – 5.3% and other base metals stocks also fared worse as investors concentrated on yield rather than growth (or lack of it)
  • Woolworths (WOW) -1.61% and Wesfarmers (WES) +0.17% swamped their Friday performance around as at least talk subsided on the pro and cons of Woolies. The market has now moved on a little with SEEK and IOOF.
  • Seems even the board of ERA, the Uranium producer have a half-life. To paraphrase Oscar Wilde,” To lose one director may be regarded as a misfortune; to lose three looks like carelessness. “Well ERA+ 10.45% lost three today as the fallout from majority owner RIO’s move on the cancelled expansion plans continues. Chairman and two non-executives fell on their swords today.
  • Food and Dairy is in demand with A2 Milk (A2M) +19.61 % rising today on news that two parties have expressed an interest in them. Only recently listed, it looks like Freedom Foods together with an unnamed international party, is part of the plan, announcing an indicative, non-binding, conditional approach.
  • The outstanding amount of margin debt on the Shanghai Stock Exchange fell to 1.479 trillion yuan ($238 billion) on Friday from a record 1.483 trillion yuan the previous day, the first decline since May 22.
  • China was closed today for the Dragon Boat Festival which may create a circuit breaker after last weeks’ 13% rout. Maybe we have been looking at the wrong country for too long. China is a much bigger factor.

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  • Melbourne will be at the epicentre of an historic “bloodbath” when it bursts, according to two housing economists, Lindsay David and Philip Soos. In a submission to the upcoming parliamentary inquiry into home ownership, the pair claim there is actually an oversupply of housing, just as there was in the US just before the market collapse that precipitated the global financial crisis. And the largest oversupply is in Melbourne, where they forecast available homes outstrip demand by 123,000.
  • Tonight could prove an interesting night for gold given the events in Brussels. One to watch if no deal reached.

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Have a great night

Clarence

XXX

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