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Welcome to Scotland! well at least 2016.

welcome toscotlan

ASX 200 falls 7.1 points to 4925.1 as the rally withers on the vine. Resources and energy stocks were smashed again. Eight straight days of losses. China moves to stabilise the yuan and its stock market up 1.2% but Japan back on line down 2.63%. RBS hits the panic button and US futures go nowhere, down 63.

Another volatile day as the rally petered out. Another high volume day too with over $5bn traded. After hitting a high of 4983 around mid-day, the index fell heavily and closed once again down for the day. Whether it was the worries on China or the hysteria induced by RBS suggesting that investors ‘Sell everything’ it was a worrying and very disappointing move again. The market weakness may also have been triggered by the news at Essendon Football Club today. Bookies not happy.

Chinese markets were actually better as authorities move to stabilise the currency. Rhetoric from authorities in China suggest policy makers are determined to ensure the stability of the yuan. Large depreciation is ‘ridiculous’ apparently. They have just misunderstood recent moves according to the chief economist of the central bank, Ma Jun. Lots of talking heads doing their thing on media outlets around Asia to calm nerves. Is it working yet?

Our market was always going to struggle with the resource headwind but early moves from banks and industrials was pretty positive until it wasn’t.

Stocks and Sectors.

  • Naturally resources were once again in the bears sights. BHP-3.4%, RIO-3.33% and Fortescue Metals (FMG) -3.3%. Other miners joined in with Sandfire (SFR) -4.62%, Western Areas (WSA)-6.82%, Oz Minerals (OZL) -3.36% and Independence Group (IGO)-2.68%. Gold stocks were in profit taking mode after falls in the bullion price, Newcrest (NCM) -1.64%, OceanaGold Corp (OGC)-3.25%, Evolution mining (EVN) -2.11% and Zimplats (ZIM) -9.51% in the doghouse.
  • Energy stocks were taken out into the paddock and shot today. Woodside (WPL) -1.99% was let off relatively lightly as opposed to Santos (STO) -8.1%, Oil Search (OSH) -4.15% and Origin Energy (ORG) -4.71%. Beach Petroleum (BPT) -10.47% appointed a new CEO. Welcome to Scotland Matthew Kay. The market did not seem that impressed. New CEO, just sell it seems.
  • Financials tried really hard to push ahead today. However, the early optimism faded on RBS forecasts and National Bank (NAB) -0.26% and Australia and New Zealand Bank (ANZ) -0.4% both fell away to negative territory. Insurance Australia (IAG) +1.99% was a stand out in the sector
  • Healthcare stocks were a patch of green in a sea of red. Ramsay Healthcare (RHC) +0.94%, Sonic Health (SHL) +0.34% and Cochlear (COH) +0.9% all to the good.
  • Speculative stock of the Day was Holista Colltech (HCT) +168.75%. In trials in December the company has validated a global scientific breakthrough in, wait for it, reducing the GI of white bread. The successful trial was conducted by a leading Australian University and confirmed that Holista’s proprietary GI lite formula made from extracts of Okra is a winner. The global white bread market is worth US$170bn.

Corporate News

  • James Hardie (JHX) -0.69% announced they were on track to meet their revised profit forecast of between $230-250m despite US housing market uncertainty.
  • In shock news today the CEO of Dick Smith has resigned. After trousering a small fortune, no actually a big one, and a salary of $1.8m a year he has decided that the administrators basically cannot afford his expertise anymore and is moving on. It seems though he did forget to sell any of his shares so maybe he is a little traumatised by the company demise.
  • Whitehaven Coal (WHC) -5.65% new Maules Creek mine has contributed to a more than doubling in the coal miner’s production during the December quarter, as it remains on track to meet increased production guidance for the full year. The miner said it produced 4.9 million tonnes of saleable coal during the December quarter, up from 2.3 million tonnes a year earlier. The mine was operating at an annualised rate of 8.5 million tonnes in December.
  • ERA Unchanged reported production of 669 tonnes of uranium oxide in the December quarter, 12 % more than in the same period in 2014. Total production for 2015 was 2005 tonnes, 72 % higher than the 1165 tonnes produced the previous year.
  • Gindalbie Metals (GBG) -57.14% after its partners in the Karara iron ore mine are considering withdrawing funds and support for the $2bn project. Gindalbie has a stake of about 48 % in Karara Mining Ltd. with Anshan Iron and Steel holding the remainder. Anshan is also Gindalbie’s largest shareholder, with a 36 % stake.

Economic News

  • RBS have issued a ‘Sell Everything‘ warning. Always good for headlines and as the year progresses we will probably see them change their minds and say ‘Buy Everything’ but in the meantime, it is headline news.
  • They issued their first warning back in November, citing China as the epicentre of the crisis, as debt driven expansion has reached saturation. They expect US markets to fall by 10-20% with the UK especially vulnerable.
  • Global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings. This is particularly ominous given that global debt ratios have reached record highs.

Easy to forget that these ‘smartest guys in the room’ were almost bankrupt in the GFC and had to be bailed out.  So if they didn’t spot the signs last time, why are they so certain this time?

Not wishing to miss out on the fun or the spotlight Goldman Sachs has written of a $20 a barrel oil price.

Other investment banks are looking at hiring the sandwich board man.

 

  • The number of annual Chinese visitors to Australia has surpassed the 1 million mark for the first time amid rapid growth from the nation’s most lucrative inbound tourism market.
  • Australian Bureau of Statistics figures show the number of Chinese visitors rose by 21.6 % to 1.0012 million in the 12 months to November 30, having more than doubled over the past five years.
  • The Chinese are the biggest buyers in the world of off-road recreational vehicle. Seems camping is a big hit with Chinese tourists too. They spend more than double what a Kiwi spends here.
  • Consumer confidence has fallen on the back of turmoil in global financial markets with the ANZ-Roy Morgan index falling 1.9% for the week ending January 10th.

In Asia

  • China has kept the yuan’s reference rate stable for the third day in a row, seeking to reassure markets spooked by last week’s run of weaker fixings.
  • The monetary authority set the reference rate, which restricts onshore moves to a maximum 2% on either side, at 6.5628 a US dollar, little changed from 6.5626 on Monday. That’s also 0.3% stronger than the onshore yuan’s official closing price of 6.5822.
  • China’s PBoC has dealt yuan bears a double blow in Hong Kong’s offshore market as intervention closed the discount to the onshore rate and made it more expensive to borrow and short the currency.
  • The yuan traded in Hong Kong’s rose as much as 0.7%, temporarily erasing a gap with the onshore yuan exchange rate in Shanghai that widened to a record 2.9% last week.
  • The cost of borrowing China’s currency overnight in Hong Kong’s interbank market jumped by 53 percentage points to 66.82% more than five times the previous record reached on Monday. Comparable rates with tenors of up to a year all surged by records to unprecedented levels

  • The Chinese are the biggest buyers in the world of off road recreational vehicle. Seems camping is a big hit with Chinese tourists too. They spend more than double what a Kiwi spends here.
  • Japan posted a current account surplus for the 17th consecutive month in November. The excess in the widest measure of the nation’s trade was 1.14 trillion yen ($9.7 billion) in November, up from 440.2 yen billion a year earlier, the Finance Ministry said Tuesday in Tokyo.

Ahead in Europe and US

Tonight could be the night when Oil slips below $30.

  • FTSE unchanged.
  • DAX -2.50 points.
  • CAC -20.50 points.

And finally Rupert Murdoch has announced his engagement to Jerry Hall. No words. 

Have a great night

Clarence

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NT Markets

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