The market is up 86. The US has reached a debt deal. The rally compares to the Futures this morning down 3 on the back of Wall St down 96 on Friday. The Dow Jones Futures are up 190 as we write pointing to a US market rally tonight.

The Dow Jones closed 96 on Friday. US stocks recorded their worst week in a year with the S&P 500 down 3.9%, the Dow down 4.2% and the Nasdaq down 3.6%. The VIX volatility index ended the day up 6.4% but was up as much as 9% – at its highest level since March. The index gained 45% last week. Economic data failed to inspire but it is all about the debt deal being done this morning. The gold price hit a new record up $14 and oil fell $1.74 to $95.70. The Aussie dollar is now buying US110.16, up from 110.04c on Friday.

In the news today…bit thin.

  • Macarthur Coal (MCC) has rejected a $16-a-share, $4.84 bn offer from Peabody Energy and ArcelorMittal.  The JV requested that MCC agree to hold no talks with other potential suitors. MCC made a counter offer that could lead to a valuation of up to $5.68bn if the companies managed to acquire more than 90% of the company. MCC up 22c to 1577c.
  • Telstra (TLS) has submitted the details of its structural separation with the ACCC for approval. The separation of Telstra’s retail and wholesale operations are a key part of the implementation of the national broadband network (NBN). TLS up 1c to 300c.
  • Atlas Iron (AGO) is confident they will claim a 19.9% stake in Centaurus Metals, after the biggest shareholder in Centaurus gave their blessing to a deal that will see them accept a discount rate after recent share price jumps. AGO up 4% to 421c.
  • Leighton Holdings (LEI) has secured a contract valued at $150m to help build a 36km freight rail line in Sydney. LEI up 2.2% to 2158c.
  • Kingsgate Consolidated (KCN) has agreed to a $75m deal to buy the Bowdens silver project in NSW from Silver Standard Resources. KCN up 1c to 889c.
  • Boart Longyear (BLY) has refinanced bank debt with a facility for up to $US250m. BLY up 3% to 417c.
  • Talk that the Bank of Queensland (BOQ) and the Bendigo & Adelaide Bank (BEN) are talking about a merger again. BOW up 2.5% to 825c and BEN up 2.8% to 909c.
  • § The AIG/PwC Performance of Manufacturing Index fell 9.5 points in July to 43.4 as the sector continues to suffer because of the strong Australian dollar and increased overseas competition. A reading below 50 indicates a contraction in activity.
  • Chinese PMI number OK – The Chinese PMI Manufacturing index (compiled by National Bureau of Stats & Federation of Logistics and Purchasing) came in at 50.7 in July – better than consensus of 50.2 and at odds with the downbeat HSBC number reported last week.

Stupid Question (no questions are stupid) — Had a question from a subscriber this morning … along the lines: Who bails out governments if they default? Who provides the funds or who takes the haircut imposed? What happens to our deposits, savings, super if the central banks fail?

Reply — My short take … this is not a forecast merely a “what if” reply) the central banks will perpetually print money to solve the problem (as they are doing) and ultimately that will mean they never default but it will manifest itself in weaker currencies, lower growth, inflation, stagflation (a la Japan) and weaker asset markets.

You will pay the price through lower asset markets (equities/house prices) but my guess is that the integrity of our deposits in the major banks will be defended to the death and may even benefit from higher interest rates. The integrity of our savings/super invested in the markets on the other hand will be subject to market forces and left undefended … and that’s where you would be vulnerable under this doomsday scenario were it to happen.

Bottom line … if you think everything is going this way, get out of market priced assets, cash in the bank should be OK — if going really oblong buy physical gold, get a gun to defend it and as Mark Faber suggested … get a lot of baked beans.

But ultimately… you would never position for this so far in advance of it happening (too radical a move on current evidence) … you’d position gradually as it unfolds.

For a free 5 day obligation FREE TRIAL of the MARCUS TODAY newsletter Click Here. You will receive our renowned and popular Daily email about the stockmarket with all the stuff you need to know ahead of the trading day including:

  • Overnight developments, news, comments, rumours, broker recommendations and ideas from Marcus and his Team.
  • Our Recommended Portfolio which is actively managed on behalf of subscribers …no “set & forget”. Everything you need to effortlessly managed your own long term investment portfolio. It includes Income Portfolio recommendations.
  • Daily Technical Trading ideas and data, including daily scans of the ASX 300 for stocks changing trend.
  • Stock Database – all the numbers with comments on the top 300 stocks and more.
  • Educational section – Marcus’s Educational and Entertaining articles.

We also offer a FREE END OF DAY EMAIL — Click here — A free summary of the day in the market.

Subscribe to MARCUS TODAY — Click Here.  We are sure you will enjoy and profit from what we offer…we have one of the highest re-subscription rates in the financial newsletter industry.

t on the border of the Republics of Congo and Cameroon will likely improve as a result of drilling at the site. SDL up 0.5c to 52.5c.