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ASX200 closes up for a second day. Up 35.5 points to 5172.China swoons then rallies up 0.3%. US futures rise 160.Miners and energy stocks strong.

Another highly volatile day with a 120 trading range after early falls erased, as China rallies after rate cuts and stimulus efforts. We are still poised on a knife edge and the past two days of extreme volatility remain etched in our psyche. However, markets get tired of extreme moves and eventually things settle down and consolidate before the next move up or down. It is a bit like catching your breath. Today was that day. We are still hostage to overseas markets, but there is a glimmer of hope for something less dramatic in the days to come.

index 26.8

A significant move today back up to the previous support line

BHP + 2.57% was the standout performer as the company seems to have almost guaranteed a higher dividend for the future. This yield is proving irresistible to bargain hunters and yield junkies. At almost 7.6%, and paid in US dollars, it appears an offer too good to be true. The market loves certainty, and we only have to look at the history of Telstra (TLS) + 0.51 % to see what a guaranteed yield will do to a share price.

tls 26.8

Telstra the guaranteed yield play

Once again banks and financials were the solid performers up over 1% with CBA rights (CBAR) + 12.77 %. But the real action seemed to be in some of the more exposed blue chips like Amcor (AMC)  3.14+ % ,BlueScope Steel (BSL) + 5.67% and James Hardie (JHX) + 1.85 % .These all produced good results and are now the go-to stocks for any recovery. Wealth managers were also strong, in volatile times people want the security of a trusted name to look after their money. Perpetual (PPT) + 2.61 % Magellan Financial Group (MFG) + 0.54 % and BT Investment (BTT) + 1.95% all showing good gains. Computershare (CPU) + 3.59 % also showed a clean pair of heels. Big trading volumes are good for business after all.

Some big moves today in discretionary spenders with Flight Centre (FLT) + 4.57 %, Billabong (BBG) + 14.55 %, Kathmandu (KMD) + 3.01 % and Corporate Travel (CTD) + 0.76 % all doing well.

Even energy stocks were up today with Oil Search (OSH) + 4.92 % leading the bounce back but even Santos (STO) + 3.64 % were finding support. On a yield basis alone they should be finding a level. In other resource stocks gold bugs will be disturbed that the performance was not better given the storm that has just past. Gold is supposed to be a haven in these sorts of events but has hardly lived up to that reputation and so once again may disappoint longer term. Even during the Greek crisis we saw hardly a blip in the gold price. Traders will start to question its use. Base metal miners were slightly better too, Sandfire (SFR) + 2.11 %, Sirius (SIR) + 0.76 % and Independence Group (IGO) + 0.63 %.Meanwhile, Syrah Resources (SYR) +-2.92% announced a significant shortfall to the retail component of the recent rights issue. The 13.5m shares will be offered for sale via a book build procedure as they were fully underwritten.

In the casualty ward, today were Greencross (GXL) – 13.51 % as the sudden departure of the CEO raised alarm bells. Looks a little overdone as the new man at the helm is the CFO and the ex CEO is retiring and handing over in an orderly fashion.

Following stunning results yesterday Blackmores (BKL) + 10.57 % continued to leap ahead after the analysts briefing and joined the $100 club easily .It was only a year ago the stock was $27.  CSL -0.21% first then BKL. Must be a theme here. Asaleo Care (AHY) + 6.17% also had a positive reaction to the results today, and a 10% buy back for the toilet roll and nappy maker.

In other corporate news, Steadfast Group ( SDF ) + 1.01 %  is signaling an increase in its earnings per share this new financial year, after delivering a 38 % rise in underlying net profits to $56.7 million for the year ended June.

Pact Group (PGH) – 3.19 % announced numbers today with a 17% jump in profits to $67m and a final dividend of 10 cents up 5.3% on last years .Acquisitions continue to drive profits.

Seven Group Holdings (SVW) +0.21 % has swung to a full-year net loss of $359.1 million after its earnings fell $621.6 million from its $262.5 million profit a year earlier. The result was weighed down by $721 million in write-downs for the company’s stake in Seven West Media, industrial services businesses WesTrac China, AllightSyke and Coates Hire and its listed investment portfolio. Underlying net profit was down 19% to $204 and once again the comments were for a ‘challenging’ outlook. That word again.
Results too today from Worley Parsons (WOR) + 6.27 % as they warned that things had deteriorated since May a they halved their final dividend and reported a loss of $54.9m.Cost cutting has had a huge effect on their business as employee numbers had fallen by 4200 the year, and they have closed nine offices. A final dividend of 22 cents v 51 cents last year.

In Asia, the Chinese market has recovered from early falls to head into the lunch time lull with a gain of 0.8% and then kicking higher to be up 2.7% as our market closed.This is encouraging but with China all the action seems to be in the last hour. Interestingly the huge margin debt that Mum and Dad traders took on is falling faster than their market. China’s margin debt has plunged by 1 trillion yuan ($156 billion) from its June peak as traders close out bets using borrowed money. Outstanding margin loans on the Shanghai and Shenzhen exchanges fell to about 1.25 trillion yuan on Monday from a record high of 2.27 trillion yuan on June 18. Their market has now lost USD5 Trillion or half its value since June.

gdp 26.8

Authorities have also launched an investigation into the top five brokers in China for ‘failure to review and verify the identity of clients in accordance with the rules”. This is the latest attempt by authorities to support the market and stamp out unsavoury activities.

European markets will open cautious after the Dow but as the day wears on and no bad news jumps out, they will try to push higher. Expect the Dow to recover slightly tonight and we may continue higher tomorrow.

Early calls for European markets

FTSE 6057 down 25

DAX 10028 down 100

CAC 4531 down 34

And finally spare a thought for the fans of crypto currencies and the alternative supposedly to Fiat money. The Bitcoin.

Not such a safe haven after all




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