Australian Stocks: What Happened Today?

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By Max Ludowici, Equities & Derivatives Advisor, 708 Capital

The scoreboard:

–          The ASX200 closed down 10 points or 0.23% to 4623

–          The AUD fell sharply lower at midday.. Currently reading 1.0451 vs the USD

–          Total volume for the day was $8.3B. Less the influence of premarket options exercise ($3.3) gives a real volume figure of $5B.

It was a rollercoaster ride on the final major trading day for the year as the ASX reversed early gains at midday after an 11^th hour vote was pulled by House of Representatives speaker John Boehner who was unable to muster majority support  to avert a possible fiscal cliff disaster.  The vote was supposed to extend Bush era tax cuts on incomes below $1m and allow higher tax rates for incomes above $1m. Boehner and Obama remain at loggerheads over the threshold at which the tax hikes will come into effect. Obama wants higher taxes on income above $400,000 where Boehner remained fixed on only agreeing to increases above $1m.

The market is all too aware that time is running out to resolve the crisis as most politicians will take holiday from today. Our market jagged 40 points lower on the news before financials and defensives regained traction and slowed the fall in the final two hours of trade. The news sent DOW futures plunging 220 points on the failed vote and remained down around 200 for most of our session.

The finale of this soap opera is anyone’s guess really. The market has a nasty habit on ‘selling the fact’ so perhaps a fall in the US market is likely even if a resolution is reached before the year end. We do know that there won’t be another House of Reps vote before Christmas so any immediate resolution remains up to Senate leader Harry Reid and President Obama. It looks as though the market is in for a good old country and western standoff. Perhaps the pollies have set the market up for one of the greatest bull traps in history. The way the US futures were looking most of the day, Iam not sure why Aussie market thinks they’re only bluffing?

If we put this noise to the side, the GDP news out of the US overnight and the reason for our market’s rise early on was due to a shock upward revision in 3Q GDP in the US from 2.7% to 3.1%.  Existing home sales also rose 5.9% in November from October, the biggest jump since 2009 and in contrast with analyst expectations of a rise of 2.3%. Both data sets are genuinely encouraging and illustrate a US economy genuinely in uptrend.

Bring on 2013, as a US economy hitting its straps and a centralised communist government willing to throw seemingly unlimited dollars on the world’s second biggest economy hopefully make the lingering GFC of ‘07 and Euro Crisis of ‘12 a distant memory.

Cliff uncertainty drove our market lower but saw cyclicals take the brunt of the fall with defensives showing good resilience. Westpac Bank ((WBC)) Commonwealth Bank ((CBA)) and ANZ Bank ((ANZ)) all showed gains of between 0.5-1%.

The big miners were the largest drag on the market. Rio Tinto ((RIO)) falling 0.90% and BHP Billiton ((BHP)) down 0.92%.

Gold struggled again today as it took another substantial hit overnight and continued slide throughout our session to $1641oz. (current pricing). Newcrest Mining ((NCM)) fell 2 cents to $22.47 and closing in on 3 year lows.

Those who remember the little animal chocolate, Yowie ((YOW)) will be pleased to hear it’s about to hit shelves again with a new and improved (child friendly) design and new listing on the ASX. YOW hit the boards today up 19,400% (reconstructed) as it unveiled a new US based production facility and a new confectionary range due out in Q1 2013. Hooray!

DOW futures are pointing to a disastrously weaker opening, currently down 195 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.

708capital is a holder of AFSL. No. 386279

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This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs and therefore before acting on advice contained in this document you should consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

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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