The market is down 58. The SFE Futures were down 73 this morning.
The Dow Jones closed down 10 overnight and was down 145 at worst having jumped 139 points first thing on news that a deal to raise the debt ceiling had been reached on Sunday. Disappointing manufacturing data took the Dow down as much as 145 by midday. It recovered in the afternoon to end down 10 points — its seventh straight down day. The economic data overnight followed surprisingly weak US GDP numbers last week. The debt deal was described by one Nobel laureate Professor as a disaster for a depressed economy and former Russian PM Vladimir Putin accused the US of living beyond its means and being a parasite on the global economy. The German market fell nearly 3% and France 2.3%. Metals were mostly down on the LME, the oil price fell 81c to $94.89 and Gold fell $9.50 to $1620.40. The Aussie dollar fell to 109.72c from 110.16c.
In the news today … bit thin.
RBA MEETING TODAY – Expect rates to remain on hold despite last week’s inflation number being higher than expected (3.6%). 4 out of 25 economists expect a rate rise. The rest expect them to hold.
- Navitas (NVT) — Solid Result — FY profit jumped 20.5% to $77.39m with revenue increasing 15.6% to $643.8m. They declared a final dividend of 12c fully franked compared to 10.7c last year. CEO Rod Jones said the company would continue to expand their new and existing markets where value can be added. NVT down 6c to 379c after hitting a high of 390c.
- Bendigo and Adelaide Bank (BEN) announced Rural Bank and Australia Post will join forces to provide deposits and loans through regional post offices. BEN down 1.2% to 882c.
- Rio Tinto (RIO) says it has completed the divestment of its talc business to Imerys for an enterprise value of $US340m. RIO down 1.6% to 8018c.
- Macarthur Coal (MCC) says they don’t consider the $4.7bn takeover bid by Peabody Energy and ArcelorMittal to be hostile. MCC will continue their discussions with both interested parties and others. MCC up 1c to 1584c.
- Kathmandu (KMD) up 6% to 187c after telling shareholders to expect better than expected earnings due to good performances at their new stores and favourable weather conditions.
- Silverlake Resources (SLR) has requested a trading halt. Last traded at 209c.
- The price of homes fell 0.1% in the 2nd Q from the 1st Q. The House price index for Sydney was up 0.4% from the 1st Q, and fell 0.7% from last year.
- Building approvals fell 3.5% in June to 12,069 units, which compared to an upwardly revised 12,513 units in May.
The US DEBT DEAL has fallen flat in the stock market. The US market opened up 139 and fell from there being down 145 at one point. A long way from the 190 point rise the Dow Futures implied when our market closed yesterday afternoon. The main issues post the deal:
- Will the ratings agencies downgrade the US AAA credit rating?
- What impact will the spending cuts have on US growth?
The revision to the 1st Q US GDP growth number from 1.9% to 0.4%, the weaker than expected 2nd Q GDP growth number of 1.3%, overnight manufacturing numbers in the US (lowest in 2 years) and some comments from a Princeton Nobel laureate Professor that the deal is a disaster that will damage an already depressed economy and make the deficit problem worse haven’t helped the US market or the digestion of the debt deal and have raised questions about US economic growth.
Even Putin is in on the act saying the US is living beyond its means and is a parasite on the global economy. US Bond yields have hit the lowest in a year in a sign that the US economy is not about to recover and as the US focus mellows Europe will comes back into focus with the German market down almost 3% and the French 2.3% as the EU and IMF have a look at Portugal.
All in all … the US debt deal has failed to provide the catalyst for a change of sentiment. We rallied 73 points on the ASX 200 yesterday effectively in error as the SFE Futures suggested a 73 point fall today. We are down less than that but the Glass is still half empty. Both investors and traders should remain realistic rather than unjustifiably optimistic.
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