Morning Note - Focus back to European debt

by James Gerrish 08 September 2010

**08/09/10  -  8.20am  -  by James Gerrish** 

The market drifted lower overnight as traders decided to focus on European debt concerns with reports that banks are likely to need fresh capital. This prompted buying in the Gold market that pushed bullion to near record highs. This has now formed a longer term ascending triangle pattern which suggests a break up above $1265 is likely to see significantly higher prices (towards $1375).
 


Overnight, the DOW JONES lost -107 points or -1.03% to close at 10340. This was near the session lows however most damage was done in the first hour of trade before a trading range of about 50 points was put in place. In Europe, the FTSE 100 lost -31 points or -0.58% to close at 5407. It was interesting to see that commodities were actually higher on the session and this could provide some support locally. 

The RBA kept rates on hold yesterday as the market was widely expecting. Looking at the comments, they were more pessimistic than I would have thought focusing on slowing global growth. For mine, this pretty much stifles any suggestion of a rate rise next month and the only reason we'd see the RBA act before year end would be a spike in inflation. Personally, I don't think this will happen. 

There was more commentary out overnight about BHP's bid for Potash Corp with shareholders putting pressure on Kloppers to consider other acquisitions or share buy backs to improve earnings per share. The argument is that BHP's own shares are a better purchase producing returns of about 18% while the bid for Potash Corp, depending on price is likely to add 5-12% to earnings. There is also talk that China's Sinochem has put a team together to review Potash Corp with a view of launching a bid. CLICK HERE to see our view on the acquisition.
 
James Gerrish
(02) 9375 0117

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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