Australia | Nov 21 2012
By Max Ludowici, Equities & Derivatives Advisor, 708 Capital
The market traded flat all day as investors took little lead from a choppy session overseas. The XJO see-sawed between single digit gains and losses, ending the session down 17 points or 0.4% to 4391. Investors were disappointed by Bernanke’s negative comments surrounding the fiscal cliff in a key speech overnight. Bernanke threw water on what was shaping up to be quite an encouraging move to the upside following the second consecutive month of positive housing data. This was the final key speech from Bernanke ahead of the December FOMC meeting and investors were hoping to latch onto some inspiring comments from the Fed Chairman.
Housing starts were up 3.6% for the month of October and followed a strong spike in September of 15%. The recovery in the US appears to be gaining momentum and this will likely be reaffirmed following a rebound in activity post the Sandy clean-up.
David Jones ((DJS)) closed down 16 cents or 6.2% to after reporting weaker than expected Q1 sales. An increase of just 0.3% and comments from the company that Q2 sales are likely to follow a similar trend was enough to push traders out of the stock after a week of gains in anticipation of a stronger sales result. A gain of 0.3% was hardly a Herculean feat after 2 years of consecutive negative sales growth. The hype surrounding the www.clickfrenzy.com.au sales marathon (which David Jones snubbed, then ambushed, only to have its own server crash) and the effect of a number of consecutive interest rate cuts had analysts excited that sales would turn around more than was reported and follow the likes of Myer ((MYR)) who reported 0.8% sales growth for Q1.
Fortescue Metals Group ((FMG)) traded lower all day losing 11 cents or 2.7% to at the close following a 1.8% slide in the spot iron ore prices. This was prompted by reports that China will incentivise local iron ore producers by reducing taxes as a means of encouraging more domestic production.
In the end healthcare was the soggiest sector on the day, falling 2%, with energy losing 1% on the overnight reversal of the oil price. Egypt has not, as yet, managed to broker a cease-fire in Gaza so it remains to be seen what the oil price does tonight.
News hit the wires late in the session that the eurozone and IMF had failed to reach agreement on what to do about the Greek budget, thus denying Greece of its bail-out tranche payment for at least the time being. Another meeting will be held on Monday. The sticking point remains the two-year extension the eurozone is happy to grant Greece for the reduction of its public debt/GDP level from 189% to 120% (2020-2022) but the IMF is firmly against without another bond restructure.
As at 4.30pm local, the Dow futures are down 60 points, no doubt reflecting disappointment in Europe.
This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.
708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no cost consultation and portfolio review or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We cannot assist investors who aren’t classified as Sophisticated Investors or have verified assets over AUD$2.5m.
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