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End of Day Roundup

What happened today?

  • ASX 200 touched up 36.5 points. Bounces off support at 5400. China still a roller coaster that we all ride! 9% swing today. Greek default looms.

roller coaster

  • For the month the ASX 200 is down a whopping 5.5%. For the financial year the index is up 65 points or 1.2%
  • After yesterday’s rout on the market, and for that matter previous days too, it was encouraging to see some bargain hunters roaming the streets. Window dressing also seemed to kick off as we headed into the close. Volume was light and showed no real conviction either way but for the moment the sellers seem to be exhausted. And so we wait. It is going to be a nervous week ahead of the ‘Greferendum’ and tonight we should get the official word from the IMF on how they are going to treat the lack of money transfers to them. Good to see that a crowdfunding campaign has sprung up asking for funds to get the Greeks out of their next debt repayment.3 Euros gets you a postcard of Alex Tsipras, the Mouse that roared. If everyone in the EU bought one, at least this debt repayment would be made.

tick chart

     End of year window dressing as we head into the close

  • Stocks remained skittish and Iron Ore slipping 2% in China did not help. Resource stock eked out small gains but gold shares, the stars of yesterday were sadly back in the dog house following a stronger AUD hurting the local gold price. Evolution Mining (EVN)-4.5%, Northern Star (NST)-5.15% and OceanaGold (OGC)- 3.58% reversing yesterdays’ gains.
  • Financials pushed into positive territory towards the close although only just. Telstra (TLS) +1.15% was a winner today as were other industrials like Wesfarmers (WES) + 0.83%, Amcor (AMC) +0.51% and James Hardie (JHX)+ 0.23%
  • Looks like Woolworth sis trying to offload is boutique grocery business Thomas Dux for around $10-20m.Not sure they have a great track record in selling businesses. The last one they sold was Dick Smith  (DSH) + 2.46% which they managed to offload at the bottom of the market for $20m before it was re-floated back on the market at nearly $344m.True genius. No wonder Grant O’Brien is being shown the exit.
  • In the winners’ circle today were Kathmandu (KMD) + 25.6% as Briscoe Group from NZ has bought a near 20% stake and announced a takeover approach at around NZ$1.80 in cash and scrip.
  • Dairy company Murray Goulburn is expected to confirm its initial public offering priced at close to the bottom of the $2.10 to $3.20 a share range later this afternoon, after raising $500 million for the new Murray Goulburn Unit Trust.
  • Cudeco (CDU) + 21.43%  had a very positive day following a positive update yesterday before it was placed in a trading halt after a  general meeting vote knocking back the capital raising. The company looks set to announce a smaller raising and the shares are in suspense until Thursday.
  • In local economic news, the government has cut its price forecast for iron ore in 2015 by 10 per cent to $US54.40 a tonne, citing a weak outlook for the commodity’s main market, China’s steel sector. Not good news for Fortescue Mining (FMG)- 1.04% slipping again. They also cut the forecast for total Australian iron ore exports by 4 per cent to 733.2 million tonnes in fiscal 2014-15 and by 3 per cent to 795 million tonnes in 2015-16 citing slowing Chinese demand.
  • Much has been made of the issues at Slater and Gordon (SGH)- 5.82% this week. Cockroaches everywhere is the worry but it is worth looking at some of the other listed lawyers. You can see that Slater and Gordon have really outperformed until, well ,until they didn’t!

lawyers

  • For smart people they appear to have handled the blowtorch of some of the ‘shorters’ and sceptics very badly. Hopefully we can get some clarity in the next week or so especially as the UK business Quindells lodges their accounts.
  • Expect some of the good cheer from window dressing to disappear tomorrow as will tax loss selling.
  • Meanwhile in Asia, Shanghai swooned as the over margined retail mums and dads once again raced for the exits, before things picked up to be up 4.2% as we go to press.  At 10.20am in China the index was down around 5% as the margin sellers got the phone call no doubt. From there it has rallied back as the government announced that the state $493bn pension fund would be allowed to invest in equities up to 30% of its funds. Japan and the rest of the region pushed higher as the day wore on. Nikkei up 0.45% and Hong Kong up 1.48%
  • Back in China, margin debt on the Shanghai Stock Exchange fell for a sixth day on Monday to 1.36 trillion yuan ($219 billion), the longest stretch of declines since June 2014, while the benchmark gauge’s 10-day volatility reading jumped to the highest since 2008.
  • It is no coincidence that the growth of margin loans has coincided with the huge ramp up in the index. Following the 25% fall in the Shanghai it is only back to where it was three months ago!

As the Chinese say “may you live in interesting times” We sure are!

Clarence

xxx

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