Daily Market Predictions
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Soon, there will be the annual end of financial year tax driven selling. Some of the stocks that have fallen in price, could be subjected to further tax loss selling.
Summary of today's market sentiment (from the newsbreak):
THE stock market closed lower today despite a positive start as cautious investors took profits in late trading.
Despite early strength among big mining stocks on the back of higher base metal prices, the resources sector closed lower. Weakness among most of the main banks also weighed upon the bourse.
"We were lulled into a false sense of security," CMC Group chief dealer Brian Griffin said.
Mr Griffin said the market had had some very positive sessions of late and investors decided late today to "sell into strength" rather than in a falling market.
At the 1605 AEST close, the benchmark S&P/ASX200 index was down 10.9 points to 4091.1 while the all ordinaries fell 7.0 points to 4047.3.
On the Sydney Futures Exchange, the June share price index contract was 20 points weaker at 4085 on a volume of 15,480 contracts, according to preliminary calculations.
Summary of today's market sentiment (from the newsbreak):
THE stock market closed lower today despite a positive start as cautious investors took profits in late trading.
Despite early strength among big mining stocks on the back of higher base metal prices, the resources sector closed lower. Weakness among most of the main banks also weighed upon the bourse.
"We were lulled into a false sense of security," CMC Group chief dealer Brian Griffin said.
Mr Griffin said the market had had some very positive sessions of late and investors decided late today to "sell into strength" rather than in a falling market.
At the 1605 AEST close, the benchmark S&P/ASX200 index was down 10.9 points to 4091.1 while the all ordinaries fell 7.0 points to 4047.3.
On the Sydney Futures Exchange, the June share price index contract was 20 points weaker at 4085 on a volume of 15,480 contracts, according to preliminary calculations.
Oil backup over the 50 mark. Probably going to see a drop today as most other markets did. I dont think it will by too much though. Mabey 10-15 points at most. Resources are looking ok though, so which sector will it affect, no body knows.....
Financial markets could get into a state of downward flux when the latest Balance of Payments figures are released tomorrow morning by the ABS.
A CAD of around 7% (yet again) will tempt the foreign investors to sell down.
However, in the next few weeks, tax driven selling (not fundamentals) will cause some fluctuations.
As a partial offset, some of the $19 billion released from the finalisation of takeovers (WMR, Southcorp, Foodland and National Food) will be reinvested into the market (some will get repatriated overseas and some will go into other asset classes).
Some of the money from the WMR selling; could already be making its way into BHP today and the next few days / couple of weeks.
A CAD of around 7% (yet again) will tempt the foreign investors to sell down.
However, in the next few weeks, tax driven selling (not fundamentals) will cause some fluctuations.
As a partial offset, some of the $19 billion released from the finalisation of takeovers (WMR, Southcorp, Foodland and National Food) will be reinvested into the market (some will get repatriated overseas and some will go into other asset classes).
Some of the money from the WMR selling; could already be making its way into BHP today and the next few days / couple of weeks.
I had expected the markets (ASX and FX) to pull back a bit when the latest BOP figures were released around 11:30 am this morning. Looks like it did pull back, upon release of the sobering set of figures.
Deficit bulges to record
By Nicki Bourlioufas with AAP
31-05-2005
From: AAP
AUSTRALIA's seasonally adjusted current account deficit blew out to a record $15.648 billion in the March quarter from an upwardly revised $15.405 billion in the December quarter, the Australian Bureau of Statistics said today.
The increase of $689 million in the deficit on goods and services in volume terms (in 2001-2 prices) would make a negative 0.3 percentage point contribution to growth in the March quarter measure of GDP.
As a proportion of GDP, the current account deficit is around a record 7.2 per cent, prompting analysts to warn Australia is in danger of becoming a "Banana Republic".
The dollar plunged more than half a cent to US75.5 from over US76 cents, reacting sharply to the data.
"It looks like the current account deficit as a proportion of GDP will be around 7.2 per cent, slightly higher than the last quarter," said Shane Lee, economist at Citigroup.
"People in the market are thinking it will be a problem servicing the current account deficit as global interest rates are rising," said Mr Lee.
Net debt also soarded to a record $424.7 billion, up from the previous record of $421.4 billion in the December 2004 quarter. Australia's net foreign debt climbed one per cent to $425 billion.
Net debt and the current account deficit have clocked up successive record levels since the September 2004 quarter.
The balance on goods and service actually fell $22 million to $7.1 billion, but the income deficit rose three per cent to $8.4 billion.
The bureau said the deficit is likely to strip 0.3 percentage points from Australia's economic growth rate, which will be released in figures tomorrow. The bureau said goods exports dropped one per cent or $296 million, but lower goods imports also dropped marginally, down $65 million.
The fall in goods credits was driven by a five per cent drop in rural goods. Rural goods exports actually lifted one per cent, or $163 million. Capital goods imports slipped four per cent, or $409 million, while intermediate and other merchandise goods imports fell one per cent.
This was largely offset by consumption goods imports, which soared five per cent or $575 million.
Deficit bulges to record
By Nicki Bourlioufas with AAP
31-05-2005
From: AAP
AUSTRALIA's seasonally adjusted current account deficit blew out to a record $15.648 billion in the March quarter from an upwardly revised $15.405 billion in the December quarter, the Australian Bureau of Statistics said today.
The increase of $689 million in the deficit on goods and services in volume terms (in 2001-2 prices) would make a negative 0.3 percentage point contribution to growth in the March quarter measure of GDP.
As a proportion of GDP, the current account deficit is around a record 7.2 per cent, prompting analysts to warn Australia is in danger of becoming a "Banana Republic".
The dollar plunged more than half a cent to US75.5 from over US76 cents, reacting sharply to the data.
"It looks like the current account deficit as a proportion of GDP will be around 7.2 per cent, slightly higher than the last quarter," said Shane Lee, economist at Citigroup.
"People in the market are thinking it will be a problem servicing the current account deficit as global interest rates are rising," said Mr Lee.
Net debt also soarded to a record $424.7 billion, up from the previous record of $421.4 billion in the December 2004 quarter. Australia's net foreign debt climbed one per cent to $425 billion.
Net debt and the current account deficit have clocked up successive record levels since the September 2004 quarter.
The balance on goods and service actually fell $22 million to $7.1 billion, but the income deficit rose three per cent to $8.4 billion.
The bureau said the deficit is likely to strip 0.3 percentage points from Australia's economic growth rate, which will be released in figures tomorrow. The bureau said goods exports dropped one per cent or $296 million, but lower goods imports also dropped marginally, down $65 million.
The fall in goods credits was driven by a five per cent drop in rural goods. Rural goods exports actually lifted one per cent, or $163 million. Capital goods imports slipped four per cent, or $409 million, while intermediate and other merchandise goods imports fell one per cent.
This was largely offset by consumption goods imports, which soared five per cent or $575 million.
Can't find value in the market? You're not looking
By Alan Kohler, The Age
June 1, 2005
A lot of analysts and investors say they can't find any value in the market at the moment. Well, they're not looking hard enough.
After a 13 per cent correction, peppered by some huge maulings, the small cap end looks a cornucopia of value. Likewise many resource stocks - both large and small. Many of the maulings have been deserved, such as Multiplex, but many have been overdone, such as Newcrest. In general, good value is easy to find.
One reason for the bearish sentiment and the overreaction to profit downgrades is that there is a cash drought - the institutional supply of funds has largely dried up. Broker opinion tends to follow the money rather than the other way around. Institutions are withholding cash; therefore there must be no value to be found.
In fact, fund trustees and managers are rebalancing. After a 27 per cent run up between May 17, 2004, and March 21, 2005, they had become, as a group, overweight in equities and most have, or think they have, a duty to stick with standard allocations.
The rebalancing is now almost over. With the amount of cash pouring into super funds, simply by sitting on the money they quickly reduce investment asset percentage weightings in favour of cash.
In addition, trustees and fund managers have been looking for excuses to dump stocks where possible. Many hapless chief executives who have provided such an excuse have been knocked over in the rush. The four big takeovers soon to be concluded and worth a total of $18 billion - WMC Resources, Southcorp, Foodland and National Foods - will complete the process.
Institutions will soon start moving back into the sharemarket and - lo! - there will be value. Brokers will exclaim that shiny nuggets absolutely litter the landscape - you just have to bend over and pick them up. Fund managers will agree because they want to get their equity mandates, and therefore fee incomes, up. There might even be a buying panic.
The average market dividend yield is currently 3.9 per cent, which grosses up to just above 5 per cent after franking credits. This is the same as the 10-year bond yield. Many stocks are yielding more than that.
With the 10-year bond rate at 5.1 per cent, the only reason you would pass up a 5.1 per cent effective dividend yield from a company that is reinvesting, say, 30 per cent of its profit (which means it will definitely produce at least some capital growth), is because you are scared.
Scared of what? Falling profits - rising bond yields - America.
The current run of economic data, including yesterday's retail sales, suggest that there could well be some pressure on profits this year, but Eric Betts of Nomura points out that "the vast majority" of companies are likely to hold their dividends. "There could even be an upside surprise," he reckons.
And Australian stocks are being priced as much on dividend yield as earnings at the moment.
Bond yields are historically low, it's true, and the yield curve is inverted (that is, long bond yields are lower than cash rates) which is unusual. But what if the next move in cash rates is down? After yesterday's run of data a few more economists jumped on the "next rate hike is a cut" wagon. Maybe it will be.
And then there's America. Adrian Blundell-Wignell and Alison Tarditi at Citigroup have produced some fascinating research comparing the current position of the US and China with that of the US and Japan during the 1960s and '70s.
Their conclusion is that the key to whether Chinese industrialisation induces a commodity "supercycle" is US productivity. That's because in order for China to keep growing at its present rate through exports, the West (that is, America) has to buy them. For that to happen, US real incomes need to keep rising.
Blundell-Wignell and Tarditi show that a US productivity collapse between 1970 and 1985 basically brought Japan's extraordinary growth to an end.
But in 1970, exchange rates were fixed and the US economy was closed.
Now the thing to watch again, they say, is US productivity, and there is little reason to doubt the Fed's forecast of 2.6 per cent growth in it.
Which means there is no reason to get off the China-US-supercycle theory and run away from good, cheap stocks.
Unit holders of General Property Trust vote on the proposal to internalise management of the trust tomorrow. If it's a close vote, and it only gets up because of Westfield's grubbily acquired vote, then a truckload of excrement is likely to hit the proverbial fan.
As it should. Westfield has been sold three of GPT's best properties at less than market value to secure its vote for the deal. This blatant bribe taints the whole proposal and makes it appear that GPT directors lack confidence that unit holders would vote for it because it's a good deal. That's a pity, because the deal looks fine. It's the tactics that are not.
By Alan Kohler, The Age
June 1, 2005
A lot of analysts and investors say they can't find any value in the market at the moment. Well, they're not looking hard enough.
After a 13 per cent correction, peppered by some huge maulings, the small cap end looks a cornucopia of value. Likewise many resource stocks - both large and small. Many of the maulings have been deserved, such as Multiplex, but many have been overdone, such as Newcrest. In general, good value is easy to find.
One reason for the bearish sentiment and the overreaction to profit downgrades is that there is a cash drought - the institutional supply of funds has largely dried up. Broker opinion tends to follow the money rather than the other way around. Institutions are withholding cash; therefore there must be no value to be found.
In fact, fund trustees and managers are rebalancing. After a 27 per cent run up between May 17, 2004, and March 21, 2005, they had become, as a group, overweight in equities and most have, or think they have, a duty to stick with standard allocations.
The rebalancing is now almost over. With the amount of cash pouring into super funds, simply by sitting on the money they quickly reduce investment asset percentage weightings in favour of cash.
In addition, trustees and fund managers have been looking for excuses to dump stocks where possible. Many hapless chief executives who have provided such an excuse have been knocked over in the rush. The four big takeovers soon to be concluded and worth a total of $18 billion - WMC Resources, Southcorp, Foodland and National Foods - will complete the process.
Institutions will soon start moving back into the sharemarket and - lo! - there will be value. Brokers will exclaim that shiny nuggets absolutely litter the landscape - you just have to bend over and pick them up. Fund managers will agree because they want to get their equity mandates, and therefore fee incomes, up. There might even be a buying panic.
The average market dividend yield is currently 3.9 per cent, which grosses up to just above 5 per cent after franking credits. This is the same as the 10-year bond yield. Many stocks are yielding more than that.
With the 10-year bond rate at 5.1 per cent, the only reason you would pass up a 5.1 per cent effective dividend yield from a company that is reinvesting, say, 30 per cent of its profit (which means it will definitely produce at least some capital growth), is because you are scared.
Scared of what? Falling profits - rising bond yields - America.
The current run of economic data, including yesterday's retail sales, suggest that there could well be some pressure on profits this year, but Eric Betts of Nomura points out that "the vast majority" of companies are likely to hold their dividends. "There could even be an upside surprise," he reckons.
And Australian stocks are being priced as much on dividend yield as earnings at the moment.
Bond yields are historically low, it's true, and the yield curve is inverted (that is, long bond yields are lower than cash rates) which is unusual. But what if the next move in cash rates is down? After yesterday's run of data a few more economists jumped on the "next rate hike is a cut" wagon. Maybe it will be.
And then there's America. Adrian Blundell-Wignell and Alison Tarditi at Citigroup have produced some fascinating research comparing the current position of the US and China with that of the US and Japan during the 1960s and '70s.
Their conclusion is that the key to whether Chinese industrialisation induces a commodity "supercycle" is US productivity. That's because in order for China to keep growing at its present rate through exports, the West (that is, America) has to buy them. For that to happen, US real incomes need to keep rising.
Blundell-Wignell and Tarditi show that a US productivity collapse between 1970 and 1985 basically brought Japan's extraordinary growth to an end.
But in 1970, exchange rates were fixed and the US economy was closed.
Now the thing to watch again, they say, is US productivity, and there is little reason to doubt the Fed's forecast of 2.6 per cent growth in it.
Which means there is no reason to get off the China-US-supercycle theory and run away from good, cheap stocks.
Unit holders of General Property Trust vote on the proposal to internalise management of the trust tomorrow. If it's a close vote, and it only gets up because of Westfield's grubbily acquired vote, then a truckload of excrement is likely to hit the proverbial fan.
As it should. Westfield has been sold three of GPT's best properties at less than market value to secure its vote for the deal. This blatant bribe taints the whole proposal and makes it appear that GPT directors lack confidence that unit holders would vote for it because it's a good deal. That's a pity, because the deal looks fine. It's the tactics that are not.
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AOX *should* open up reasonably today after US markets firmed well overnight on Greenspans latest upbeat forecast.....
China's share market has made a more positive move over the last 5 days too...
Fingers x'ed ... ;o)
Happy trading,
AJ
China's share market has made a more positive move over the last 5 days too...
Fingers x'ed ... ;o)
Happy trading,
AJ
While the markets wrestle with the slowing economy, a pair of economic reports in the week should ease fears of inflation ”” if the economists' predictions are correct.
On Tuesday, the Labor Department will release May's Producer Price Index, a measure of wholesale prices and an indicator of inflation. The PPI is expected to drop 0.2 percent for the month, compared to a 0.6 percent hike in April. "Core" PPI, without volatile food and fuel prices included, was expected to rise 0.2 percent, compared to a 0.3 percent increase in April.
Labor's Consumer Price Index, which measures retail prices, comes out Wednesday. May's CPI was expected to climb just 0.1 percent, compared to a 0.5 percent jump in April. Core CPI was expected to come in at 0.2 percent, which would actually be an increase from April's flat reading.
The predictions point to a moderation in prices, meaning that inflation is likely in check for now. If those figures come in higher than expected, however, the prospect of inflation will likely spook investors and drive stocks lower.
In addition, no fewer than five Federal Reserve governors will be giving speeches around the country this week. With Wall Street giving the Fed such close scrutiny lately, their comments will be closely watched and could move the market if they hint at any changes in interest rate policy.
On Tuesday, the Labor Department will release May's Producer Price Index, a measure of wholesale prices and an indicator of inflation. The PPI is expected to drop 0.2 percent for the month, compared to a 0.6 percent hike in April. "Core" PPI, without volatile food and fuel prices included, was expected to rise 0.2 percent, compared to a 0.3 percent increase in April.
Labor's Consumer Price Index, which measures retail prices, comes out Wednesday. May's CPI was expected to climb just 0.1 percent, compared to a 0.5 percent jump in April. Core CPI was expected to come in at 0.2 percent, which would actually be an increase from April's flat reading.
The predictions point to a moderation in prices, meaning that inflation is likely in check for now. If those figures come in higher than expected, however, the prospect of inflation will likely spook investors and drive stocks lower.
In addition, no fewer than five Federal Reserve governors will be giving speeches around the country this week. With Wall Street giving the Fed such close scrutiny lately, their comments will be closely watched and could move the market if they hint at any changes in interest rate policy.
The dollar hit a 9-month high in the currency markets as remarks by Alan Greenspan regarding the U.S. economy and the interest rates, additionally the ECB, the European Central Bank, may cut rates. The dollar finished yesterday at 1.20 against the Euro, a nine-month high for the dollar which had been as low as 1.32 vs. the euro.
Wednesday will bring the consumer-price index numbers for May. The report in April showed that there was a sharp rise, due mainly to energy and food costs. Additionally this week look for earnings announcements from Circuit City, Best Buy, Bear-Sterns, and Goldman-Sachs.
The U.S. trade deficit expanded to $56.96 billion in April as oil prices continued to surge and consumers continued to spend.
Wednesday will bring the consumer-price index numbers for May. The report in April showed that there was a sharp rise, due mainly to energy and food costs. Additionally this week look for earnings announcements from Circuit City, Best Buy, Bear-Sterns, and Goldman-Sachs.
The U.S. trade deficit expanded to $56.96 billion in April as oil prices continued to surge and consumers continued to spend.
I think we'll see a very strong day today. Even though it is a friday, alot of confidence is back in the market and overseas markets have shown this. Base metals are up fairly significantly, and resources(apparently) are back in the saddle and going for a ride.
Mabey we could break the current high today? Its only got around another 20 points to go.
Mabey we could break the current high today? Its only got around another 20 points to go.
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Well, I'm tired of seeing the 15th June date for this thread (sorry el Ninjo!!) so here's my tip for Monday's AOX move .... UP 30 ticks!
It is great to see how strong the Euro markets have bounced back last night, after the London bombings. I thought the immediate plunge following the tragedy was a bit of knee jerk reaction so to see such market strength return so soon is heartening to say the least...
Good luck to all.
AJ
It is great to see how strong the Euro markets have bounced back last night, after the London bombings. I thought the immediate plunge following the tragedy was a bit of knee jerk reaction so to see such market strength return so soon is heartening to say the least...
Good luck to all.
AJ
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I follow your thinking there Aussiejeff and have closed my short position and am now on the sidelines.
HOWEVER, on both an intraday and closing basis the XJO has just made a lower high and now a lower low. So I won't be convinced about any rally until new highs are reached.
HOWEVER, on both an intraday and closing basis the XJO has just made a lower high and now a lower low. So I won't be convinced about any rally until new highs are reached.
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Metinks the market will climb another 20 pts or so today.
My strategy is range trading ATM. Plus pick up the odd divvy or two if they present at opportune times. Generally small margins and profits per trade but hopefully a case of "numerous small profits = positive annual outcome"!
We'll see..... ;o)
Cheers,
AJ
My strategy is range trading ATM. Plus pick up the odd divvy or two if they present at opportune times. Generally small margins and profits per trade but hopefully a case of "numerous small profits = positive annual outcome"!
We'll see..... ;o)
Cheers,
AJ
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Looks like XJO's set to fall. This price movement is so volatile within a small range that it looks like its going to either shoot up or down.
Personally I think it will go up short term before dropping again big time.
Personally I think it will go up short term before dropping again big time.
GreatPig
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If you keep saying that enough, you're bound to be right one dayDTM said:
GP
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GreatPig said:If you keep saying that enough, you're bound to be right one day
GP
Sorry, forgot to mention that I'm a short term trader and when I say its going to drop, it means by more than 15 points during the day.
Have been right most times...
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GreatPig
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Yesterday the XJO closed below my trendline of the last few months, and if the XAO stays down at all today, then it will also close below the trendline.
Are we perhaps in for another drop similar to the March-April one, or worse?
If you look at Mr Guppy's GMMAs, the up-trend appears quite strong, but of course it lags significantly.
Cheers,
GP
Are we perhaps in for another drop similar to the March-April one, or worse?
If you look at Mr Guppy's GMMAs, the up-trend appears quite strong, but of course it lags significantly.
Cheers,
GP
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