Australia | Nov 29 2012
By Max Ludowici, Equities & Derivatives Advisor, 708 Capital
The XJO put in a solid day of trade following positive leads from the Street overnight as Cliff talks once again stole the show. Both Obama and House of Reps. speaker Boehner said they were optimistic that a deal could be struck over the budgetary issue. The XJO finished the day on its highs up 30 points or 0.7% to points on better than recent volume of $3.5B despite trailing the futures by 10 points for most of the day.
You must now have observed that this is a nightly saga where equity markets around the around the world are totally dictated to by mere words from individual US politicians. This type of weak headline-driven price action makes trading markets incredibly difficult so for those traders out there trying to make sense of things, don’t be too hard on yourself because this is as tough as it gets.
Take some solace from the fact Goldman Sachs chief Lloyd Blankfein described Obama’s fiscal cliff plan as “very credible”, we all know brokers have a vested interest in injecting confidence into markets but this is actually a pretty important development. Both because it means Obama actually has a plan and also because it shows Republican support for the Democrat’s plan. Obama taking the stage to confirm they were actively working on a ‘plan’ may be the next step to putting the issue to bed. Don’t expect the volatility to end before there a signatures on paper though.
On the data front, Aussie Q3 Capital Investment data showed capex had risen by 2.8% q/q (in real terms) in Q3 ahead of expectations of a 2% rise. More importantly total nominal capex in 12/13 was revised 3% lower from the previous estimate. The peak of the mining capex cycle is beginning to bite, BHP Billiton ((BHP)) chief said it was even behind us at the BHP AGM today, so don’t be surprised to see this number decline going forward. Anyone care to bet on an interest rate cut next Tuesday?
Mining services took a beating today following NRW Holdings’ ((NWH)) profit downgrade and sell off yesterday which has now fallen 28.9% in two days. Mining consumables (far more resilient than pure services and capital equipment suppliers) company Bradken ((BKN)) got sold down 7.1% to due to worsening sentiment in the sector. Other players in the space: Cardno ((CDD)), Macmahon Holdings ((MAH)), Ausdrill ((ASL)) all ended the day lower.
Otherwise it was a strong day for across the board with stocks in the defensive and cyclical sectors both ending the day well.
US futures closed the overnight session up 80 odd points then reopened intraday down 5 or so points. They are now tracking up nicely and are currently reading in the green up 18 points
(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)
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.
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