Australian Stocks: What Happened Today?

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By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

US Senate majority leader, Harry Reid spooked US markets with his comments that Fiscal Cliff negotiations had made “little progress”. Thanks Harry. The positivity of the Greek deal yesterday failed to excite Wall Street despite the stronger lead from Europe ending in another night of cliff induced vertigo. The XJO, like other Asian markets struggled to gain much traction and despite a push higher over the last few hours of trade, finished in the red down 9.5 points or 0.21% to 4447.

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)

We need to keep in mind that volumes are still extraordinarily light in Australia and offshore and that it doesn’t take much market influence (a mediocre portfolio buy or sell) to sway the market in either direction. Today the ASX turned over $3.8B worth of stock. We were buyers of the ANZ Bank ((ANZ)) yesterday as the short term technicals look interesting as well as the completion of the company’s DRP selling meant the stock should find support here. This was the first time I really took notice how little genuine volume was actually being put through the market. I, one retail broker feeding lines of stock that could hardly be considered substantial, were causing Algos (Algorithmic Trading Systems) to jump around in a global bank with a market cap of $64B. Go figure. When 30% of the entire turnover based on value can be attributed to Algos this means only 70% of the volume going through the market on most days is actually a result of investors buying or selling positions. What this means is that without the Algos (I am not promoting their use by any means) there would be VERY little activity in our market and that the lack of volume means price action is becoming less reliable as an indicator of market sentiment.

The ACTUAL news last night was the positive US economic data, Greg went into detail on this this morning but the fact the market chose to trade Harry’s useless comments instead of recognising the continuing positive trend in the US recovery. This is the real issue after all isn’t it?

The ABS posted its Q3 read for construction activity which showed an advancement of 1.7% which was bang on the consensus target. The market barely took notice given it was largely inconsequential.

Mining services company NRW Holdings ((NWH)) was the big mover of the day after comments at the company’s AGM warned the market to expect a decrease in profit in FY12. NWH closed the day down 17.8% to $1.48.

Aristocrat Leisure ((ALL)) posted a 70% increase in FY12 profit, following the broader trend in gaming stocks recently and finished the day up 6.6% to $3.05.

BHP Billiton ((BHP)) staged a nice recovery to close close to its highs at $34.00 after being down as much 41c. Rio Tinto ((RIO)) copped the brunt of the miners’ selling and closed down 1.9% to $56.70.

DOW futures are pointing to a slightly more negative lead, currently down 9 points.
 

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 costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.

708capital is a holder of AFSL. No. 386279

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Disclosure of Interests: 708capital receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. 708capital and its associates may hold shares in the companies recommended.

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