The market is up 34. The SFE Futures were up 22 this morning which may seem a little odd on the back of an 88 point fall on Wall St but it comes after a 72 point fall (-1.5%) in the ASX 200 yesterday which already took into account the failure of the US to strike a deal on the debt ceiling on Sunday.

The Dow Jones closed down 88 overnight and was down 145 at worst. Concern grows that lawmakers will not compromise and come to an agreement on how to reduce the federal deficit and raise the debt ceiling. They have until August 2 (next Tuesday). The gold price hit another record high — up $10.70 to $1612.20 and is now up 13% for the year. Greece’s credit rating was cut further by Moody’s and European stocks ended a four day rally. Metals were mostly down and the oil price fell 67c to $99.20. The Aussie dollar improved to 108.51c from 108.49c.

In the news today…

  • Obama speech — President Obama addressed the US at 11am our time this morning and said that no agreement had been reached, or looked like being reached.
  • Alesco Corp (ALS) up 5% first thing on the back their profit result this morning. Net profit came in at $13.6m — better than expected — with EBIT before significant items from continuing businesses reaching $36.5m, up 9% from $33.3m last year. Patersons has cut their recommendation to Hold from Buy on the back of today’s share price appreciation.
  • Whitehaven Coal (WHC) said production output increased 47% on last year to 1.5m metric tons in the June Q. WHC up 5c to 660c.
  • Orica (ORI) announced a trading update yesterday afternoon. They reiterated earnings guidance subject to the global economic recovery and exchange rates. ORI down 1c to 2634c. It was down 1.5% yesterday.
  • Oil Search (OSH) said revenue increased 42% in the 2nd Q thanks to higher oil sales and price. The average realised oil price during the 2nd quarter was $US123.28 per barrel, 13.5% higher than the 1st Q. OSH up 2% to 691c.
  • Lend Lease (LLC) has secured approval to develop a residential project in Hawaii worth $157m. LLC up 10c to 890c.
  • BHP Billiton (BHP) has received the green light from the US competition regulator to acquire Petrohawk Energy for $US15.1bn. BHP up 32c to 4337c.
  • The Future Fund has purchased a 5.05% stake in MAp Group (MAP) raising speculation that the fund could be part of a takeover offer of MAP after they complete their asset swap with the Ontario Teachers Pension Plan. MAP down 4c to 330c.
  • Macarthur Coal (MCC) quarterly production numbers fell 22.5% yesterday. Lucky they have been bid for. MCC down 1c to 1549c.
  • § Marathon Resource MTN) down 38% this morning after the South Australian government banned uranium mining Arkaroola region. MTN the most affected along with Alliance Resources (AGS).
  • Chief Executive of failed stockbroker Sonray expected to be sentenced for anywhere up to 6 years in prison.

ON EDGE – Despite the relief this morning that the US fall wasn’t bigger the point has to be made that the market is now a gamble. What do you do as a trader? Bet on the debt deal being done before next Tuesday causing an almighty ‘relief rally’. Or stay away in case they really cock it up and fail to do a deal, an event that has been universally declared by everyone from the ratings agencies to the IMF as a having disastrous implications for confidence in the global financial system and potentially a catalyst for a second Global Financial Crisis.

If that happened Gold would be your only safe haven in the short term and the US$ and global equities would take a pounding. Clearly the odds are on a resolution sometime in the next week….but the reality for most sensible investors is that you are not in the market to gamble on short term rises and falls, you can’t ‘invest’ your money in that, you are in the market to make money in the long term through considered stock selection.

Although a “no deal” outcome is low odds the US incompetence and the European uncertainty are preventing ‘investors’ from doing anything at all at the moment. And even if the US debt deal is done the debt hasn’t gone away, Europe is still in a shambles and other than a relief rally on yet another extension of a credit card facility, there is no fundamental improvement likely to inspire a significant or extended period of market enthusiasm.

Bottom line — an extension of the US debt ceiling, whilst it will take a chunk of the short term fear out of the market, is only ever likely to lead to a short term sentiment rally rather than turn the market for good. It is too cute to expect a long term bull market to start on the back of a short term problem being solved. Bigger things have to happen. So trade the sentiment improvement as a trader but we need something far more substantial than not cocking it up to reliably change the trend.

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