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ASX 200 closes down 23.9 at 5674. Resources rally but profit taking elsewhere. Index starting to roll over. China surprises with PMI at 53.8 an 11 month high. Dow Futures down 2.

Rolling over to target 5550?

  • Once again the failure to breach 5700 yesterday was worrying. Initial falls of around 57 points were made slightly more respectable by the mid-morning release of the Caixin/Markit PMI number at an 11 month high. In case you are wondering this is the old HSBC PMI who gave up naming rights recently but the methodology is still the same. If you can believe this number it would seem that the real underlying economy in China is on an uptick despite the volatility and losses in the stock market.
  • Our friend Davis Scutt at Business Insider, pointed out this chart. The transformation of the Chinese economy. Services are surging whilst manufacturing is falling in a heap.

  • This number was enough to reverse heavy losses to get to a high around 5700 again but interest and enthusiasm to push things ahead spluttered in the afternoon session before a late market on close rally, finally closing down 24. Resistance at 5700 growing.
  • It was the tale of two markets today with Resources recovering and Industrials slipping especially in the banking sector. The big four got hit around 1% on profit taking, Westpac’s (WBC) – 0.81% withdrawal from the pay day lending market and the cooling investor housing market. Insurers followed suit QBE -1.36% the worse effected, with Suncorp (SUN) -0.48% reversing some of yesterday gains. Results from Genworth (GMA) unchanged today, talked of continuing problems with the mortgage insurance business in the mining states of Queensland and WA.
  • As the kid on the El Paso ad says ‘Why can’t we have both’.

Seems we can’t!

  • Resources and industrials rallying or falling together, why must it be one or the other? This seems to have been a theme for so long now. Industrials (banks) rally and resources fall or vice versa. Good news though in spades for Fortescue Mining (FMG) +6.2% with news today that a couple of Chinese corporates are potentially looking at investing in their infrastructure. Although media speculation was hosed down by the company, it said it remained open to talks after Hebel Iron and Steel and Tewoo Group were mentioned in despatches. Energy stocks which escaped the rout yesterday caught up today with Woodside (WPL) -0.4%, Santos (STO) -0.98% and Liquefied Natural Gas (LNG) -9.97% being whacked again.

The ASX 200 Energy Index now lower than during the GFC

  • In other resource news Independence Group (IGO) +2.13% clarified their presentation on Tropicana site visit stressing that costs would be higher and grades lower on a more normal production profile. Perversely the stock rallied on this news!
  • In the industrials, consumer stocks fell away led by Woolworths (WOW) -0.7% and Wesfarmers (WES) -0.67%, with gaming stocks especially weak led by Echo Entertainment (EGP) -2.35% and Crown Resorts (CWN) -1.89%. Mining services were a surprising bright spot, Seven Group (SVW) +0.91%, Austal (ASB) +1.27%, together with Downer EDI ( DOW) +1.1%.
  • CSL -0.56% was hitting the highs today as it pushed to 10243 cents before some profit taking set in closing down.

  • Genworth Mortgage Insurance Australia (GMA) Unchanged, has reported a net profit of $113 million for the six months ended June 30 being a 25 per cent plunge from 2014 after the insurer lost one of its biggest clients, Westpac, in February. The group’s underlying net profits hit $133 million, which was steady from the prior corresponding period. The lenders mortgage insurance giant, declared an interim dividend of 12.5c per share and a special payment of 18.5c per share for investors.
  • Skilled Group (SKE) +3.8% announced their last results before being swallowed by Programmed Maintenance (PRG) +4%. Mining services has been a tough gig for a number of years now and today they revealed just how tough. Earnings before interest and tax, depreciation and amortisation dropped 35.1% to $22.8m. It could have been worse .More importantly though the board recommended a dividend of 9.5 cents. The meeting on September 25th will seal the deal with Programmed MD Chris Sutherland taking over the reins.
  • Origin Energy (ORG) -3.63% revealed it will take a one-off charge of about $270 million in its 2014-15 results as a result of its $NZ1.8 billion ($1.6 billion) exit from the register of New Zealand power supplier Contact Energy, after the completion of a book build process for the sale.
  • Aconex (ACX) +12.82% and CIMIC group have formed a multiyear strategic partnership. The deal provides support in the cloud for CIMIC in eight countries and an acquisition of INCITE Keystone a project collaboration platform owned by CIMIC
  • In a landmark decision the Federal High Court has chucked out the approval for the Indian backed giant Carmichael Mine in the Galilee Basin in Queensland. A huge victory for environmentalists. Of course at current coal prices it is debatable if they would have committed the vast swathes of capital required anyway but the ball now rests in the Environment ministers’ court as his dog ate his homework.
  • Talking lawyers Slater and Gordon (SGH) -3.25% continue to collapse. Let’s face it everyone loves to stick it to the lawyers. Short interest in the stock has reached a mammoth 42m shares.
  • In Asia, China fell away by 1.1%, Japan rose 0.46% and Hong Kong up 0.28%. Japan is emerging as the winner in the Asian earnings race as business is making hay whilst the sun shines on Abenomics and the weak Yen. Earnings per share, excluding some items, at 159 companies on Japan’s Topix index have beaten analyst estimates while only 97 missed,. By comparison, in the MSCI Asia Pacific index that excludes Japan, only 74 companies topped projections versus 96 that fell short.

The Nikkei. Showing none of the nonsense of China

  • China plans to set up “network security offices” staffed by police inside major websites and Internet companies, a move to strengthen the government’s grip on the world’s largest population of Web users. The Ministry of Public Security will add police officers at “critical” Internet companies to help boost defences against cyber-attacks and fight criminal activity, the state-run Xinhua News Agency reported, citing a ministry conference. They are tightening the screws with bans on short selling in the markets.
  • More large pharma deals in Europe tonight as Shire is looking at a  $30bn all-stock hostile takeover approach for Baxalta, the US drugmaker recently spun-out from healthcare group Baxter
  • In more UK news the Chancellor is peddling hard to justify the huge GBP 1Bn loss to taxpayers as they sell down the first tranche of Royal Bank of Scotland to mainly hedge funds. They now hold only 73% copping the loss and the flak from their GBP45bn investment in 2008-2009.The shares were sold aytt 330p way below the average of 502p that they bought them at. If they only got 330p for the remainder they would lose GBP15bn!

  • And finally Lexus has unveiled a ‘Hoverboard’ to make Marty McFly proud. Although unlikely to be in your stocking this Christmas due to the cost and high tech nature it does show case Maglev technology to defy gravity using liquid nitrogen and a magnetic surface. On a more serious note, the technology is being tested for mass paid transportation systems with a Japanese Maglev test train reaching a top speed of 375mph!

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