(FRIDAY 17TH JUNE - 09.30 - JAMES GERRISH)...The DOW JONES added +64 pts overnight while the S&P 500 rose +0.18%. The buying came on the back of better than expected data on Jobless claims and housing numbers that beat expectations.
Fear was still obvious though with the Volatility Index up another 6% overnight largely on the back of concern coming out of Greece. The IMF and EU are wanting to help Greece but we've got a Government that is well and truly divided while citizens are vehemently opposed to harsh austerity measures. They've had decades of corruption, tax evasion and weak fiscal regulation and now it seems they're not prepared to take the steps to bring the books back into line. No wonder Germany is loosing patience with the whole thing!
Its not the size of the Greek bailout that's a concern and if it was something that could be contained to Greece, the market wouldn;t give it the time of day. The main concern is contagion and the bond market suggests this concern has legs. Obviously Greek bonds have sky rocketed with the Greek 2 and 10-year bond yields up 29 per cent and 17.9 per cent respectively. We've also got Portuguese yields up to 13 and 10.8 per cent and last night we saw Spanish yields push higher. The 2-year rose 13bps to 3.57 per cent and the 10-year rose 12bps to 5.65 per cent.
On our market this morning, SPI Futures are pricing in a rise of +9 pts, sending the index off 9 month lows that were hit yesterday. We were actually pretty bearish yesterday on the local market with the S&P/ASX 200 down 87pts and finishing on its lows at 4479. Thats just 2 points above the Japanese low of 4477 which is a key inflection point on the market. We should be better today.
Last night, commodities were under pressure and we're touching a key level of support in the CRB Index below. I actually think commodities will continue to be somewhat unloved in the very near term given the strength coming into the USD.
As we said yesterday, it may be worth while focussing more closely on sectors that will benefit from a drop in the AUD and some upward pressure on the Greenback. For this reason, we added QBE into the Aussie equities portfolio yesterday. I'm certainly not suggesting long term holders of BHP + RIO etc to exit those positions however I think they'll be some headwinds from the broader macro issues.
We're starting to cherry some positions this week with the addition of QBE + Vocus Communications. We've had some cash in the portfolio's over the last couple of months and we'll start to put some of it to work in the coming weeks.
A short note this morning given it was the Stockbrokers charity event last night and I'm pressed for time this morning!
AUSTRALIAN DUAL LISTED STOCKS
In New York, News Corp fell by US$0.09 to US$16.71, equivalent to A$15.84, A$0.10 below its last close on the ASX.
ResMed rose by US$0.23 to US$30.68, equivalent to A$2.91, A$0.04 above its last close on the ASX.
In London, Rio Tinto fell 31.5 pence to £40.8, A$0.48 lower in Australian currency terms.
BHP-Billiton fell 8.5 pence to £22.75, A$0.13 lower in Australian currency terms.
Henderson Group Plc fell 1.8 pence to £1.40, A$0.03 lower in Australian currency terms.
