(WEDNESDAY 28TH SEPTEMBER- 07:56 - JAMES GERRISH)...A strong bounce on the local mkt yesterday with the ASX 200 up 140pts or +3.64% to close at 4004. Overnight, stocks were significantly higher in Europe with the French CAC +5.7% and German DAX up 5.3% while the FTSE 100 added 4%.
The optimism flowed through to the start of trade in the US where we saw the Dow Jones up +325 at its best but a late sell off saw the DOW JONES finish up +146 pts while the S&P 500 added +1.07%. Locally, SPI FUTURES are up +28pts this morning.
The moves are still very much news driven and the buying came on the back of renewed optimism that a deal was being hammered out by EU leaders. Leading the charge has been the German Chancellor Angela Merkel who has put Germany's full support behind Greece whilst for its part, Greece is making a 'super human effort' (as they put it) to cut costs & raise revenue.
What we do know is that the Greek parliament passed legislation overnight to increase property taxes which was a key element towards reaching budget targets.
A news report in the Financial Times that came out late in the session did prompt some selling after it claimed that some countries want private bondholders to take a bigger write-down than the 21% already agreed.
I guess the main take out here is that there still remains some negotiating to do to solve the issues...Dah! Not really breaking news and I think last nights trading action is probably going to be typical of what we'll see over the next few weeks. Volatile but broadly better with the major mkts coming off lows as investors realise that Europe does have the financial capacity (and intent) to deal with their current woes and by beefing up the European Financial Stability Fund we should see added confidence in markets.
As we wrote last Friday, "We retain our view that the market is basing out given the technical structures that we're seeing + the extreme bearishness across the board"
COMMODITIES
Have taken a pounding in recent sessions but actually got bid higher overnight. GOLD rebounded strongly as did the suite of base metals while Oil was up more than 5%.
INCOME FOR RETIREMENT
We wrote a piece on generating income for retirement yesterday which I think is pretty relevant at the moment. Its main purpose is to re-focus investor attention away from the day to day volatility in the markets and look at what you're actually trying to achieve by holding shares. For the vast majority of you, its likely to be the provision of income in retirement so its important to position your portfolio to achieve this. See yesterdays Note below if you missed it.
MODEL PORTOFLIO UPDATES
None this morning other than we'll be looking to sell some calls against the new positions we took in the Buy Write Portfolio last Friday. We'll see how the mkt trades today before making a decision on timing.
Comsec initiated coverage recently on Computershare (CPU). This is a stock we hold and are obviously bullish on its prospects. CLICK HERE if you want to see Comsec's analysis.
AUSTRALIAN STOCK PRICES OVERNIGHT
In New York, News Corp rose by US$0.14 to US$16.48, equivalent to A$16.65, A$0.04 above its last close on the ASX, ResMed rose by US$0.77 to US$29.51, equivalent to A$2.98, A$0.05 above its last close on the ASX. In London, Rio Tinto rose 232.0 pence to £31.97, A$3.66 higher in Australian currency terms, BHP-Billiton rose 128.5 pence to £18.76, A$2.03 higher in Australian currency terms, and Henderson Group Plc rose 2.2 pence to £1.12, A$0.03 higher in Australian currency terms.
