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What happened today?
- The ASX 200 closed down 123.4 points as the Black Greek Swan event hit hard. $40bn knocked off the market.
- We felt the full force of the Greek moves over the weekend as news of the impending Greek default ran through the Asian markets like wildfire. Nowhere was safe – banks leading the way with 3% falls across the board. Big resources pitched in too, with falls of a similar magnitude everywhere with South32(S32) -4.66% continuing to slide. Gold stocks have bucked the trend on safe haven buying. Gold in Aussie dollars is up around 7% this year and, with a combination of lower costs and less competition from a cooling labour market, things are looking positive. Surprisingly though the gold price was steady and the Aussie dollar picked up a little on perceived safe haven buying.
- News that the Greek banks will be closed until after the referendum on the weekend did not help matters and the stock market will be closed too. The government now has a limited time span to frame the question for the people, ‘Yes’ means that they may stay in Europe but the government will probably resign given their stance. ‘No’ will mean what? No one is sure. This all could be a storm in an ouzo glass but memories of Lehman are still raw for financial markets so better to sit on the fence and avoid buying.
- The only bright spots were Newcrest Mining (NCM) +1.16%, Evolution Mining(EVN) + 3.58%, Northern Star (NST) + 5.43% and OceanaGold Corp (OGC) + 6.69%.
- Slater & Gordon (SGH) – Has had another terrible day, down 25% after admitting to some errors on its UK accounts. The errors are not material and have no impact on the cash position but no-one likes to hear about errors in accounts and it was a pretty unfortunate day to announce bad news. Recapping our position from Friday…”On that basis, without making a fundamental call, this is not a situation we want clients to be in so we have to become disciplined. If you don’t hold it we don’t think you buy it until the issue is cleared up. If you do hold it I’d set a stop loss at the low it hit yesterday (485c)…maybe 480c there and your call if you use a closing or intraday price. So we’ll hold it unless it dumps under there again. If it does we still like the story but the accounting issue is too delicious for the media to ignore, so we will only buy it again for the portfolios when the focus moves on and the share price is trending up again.” We said we’d be disciplined so even though we think the longer term prospects of the company remain positive, we have to pull the pin. As we said Friday, it’s simply a safety mechanism to limit the damage from a further price fall, or months of underperformance, and we’ll look again when the trend improves and the story dissipates. We will be selling on the open tomorrow…UNLESS there is a major positive announcement before market opens or exceptionally positive news overnight on Greece which lifts all the “boats”. Not likely to see that, so we will reluctantly let it go tomorrow.
- In other news today GWA – 5.11% released a downgrade. The $650 million fittings and fixtures group said that it expects trading EBIT for 2014-15, before significant items, will be approximately $67 million to $69 million. A minor miss but slightly worrying given its exposure to the housing market. Certainly seems that there is some serious issues with analysts’ forecasts across the board at the moment.
- One stock that did buck the trend was QMS Media (QMS) +9.23%, a new entrant to the market today. Not the best day to start life but good to see supporters in the stock.
- Australia has become a founding member of the Asian Infrastructure Investment Bank, a Chinese initiative aimed at improving living standards for millions of people across the region. Treasurer Joe Hockey formally signed-up to the $US100 billion ($A131.21 billion) bank with other countries during an official ceremony in Beijing on Monday.
- A very soggy close to the financial year with volume low at $5.5bn, considering the falls and not much to really show for the 14/15 tax year. Around 30 points! And we still have tomorrow to come.
- Asian markets took the Greek swan dive badly with moves from China over the weekend cutting rates again to try to prop up the market, initially seeming to work with appositive opening, then succumbing to the inevitable. As I am writing this theShanghai market is down 1.1%! At one stage it was limit down 9.7%. Its worst 3 day fall since 1996.
- US futures market were predicting a big fall on the news of around 260 pointsand Europe will obviously take the whole debacle badly. The disruption to financial markets will be a load on the mind of Yellen as moves to raise rates in September may well slip into 2016 as the Greek tragedy develops.
- Puerto Rico wasn’t one to feel left out as it announced its own close-to-a-default today. Although far less dramatic, it has the power to really disrupt US treasury and bond markets as if they don’t have enough to contend with. Suspect there will be a few urgent board meeting at the Hamptons this weekend.
- At the end of the day Greece was always a poor country. Now they are about to find out how poor they really are.
To quote Donald Rumsfeld
“There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.”
Says it all really.
We await further developments tonight.