(TUESDAY 14TH FEBRUARY- 07:48- JAMES GERRISH)...The US MKT was HIGHER overnight with the DOW JONES up +72pts while the S&P 500 added +0.68%. European mkts were HIGHER (FTSE up +0.91%, German DAX up +0.68%, French CAC up +0.34%) while locally, the SPI FUTURES mkt is pricing a FLAT open off -2pts when trading kicks off here this morning.
Yesterday, the ASX 200 closed HIGHER adding +39pts or +0.94% to 4285. The Aussie Dollar was trading around 107.38 this morning.
OVERSEAS MKTS; A lot has happened in the last few days that we need to be across.
Greece - Yesterday morning, the Greek Parliament backed the austerity measures that will unlock bailout funds and enable them to make good on their loan repayments - and avoid default (if they carry through with the agreement)
The bill was supported by the majority of the two largest political parties (socialist Pasok & conservative New Democracy) with 199 votes for and 74 against, while 27 abstained.
In addition to the austerity measures, the legislation also encompasses the bond swap deal with the private bond holders. This should unlock the 130 billion euro of bailout funds however there are still a couple of hurdles to overcome this week. There is a meeting of Eurozone Finance Ministers who need to support the deal (we expect they will) on Wednesday then we'll need to see deal passed in parliaments around Europe later in the week.
I'm not sure the mkt is overly convinced that this is the silver bullet for the Greek woes and the rioting leading into, and during the vote didn't exactly do a lot for confidence.
We also have Greek elections in the next 2 months and the EU have been adamant that all parties needed to be 100% behind the austerity package - therefore who ever gets into power the deal will be honored.
Overall, it seems both major parties have the weight of numbers behind the package and the deal is a real positive for Greece (and mkts) - but of course there will always be skepticism until we actually see the plans being implemented post elections. It might take a little while to sink in that a messy default + contagion to other European nations is off the table.
Italy - whenever we get a deal in one European nation, it seems the mkt turns its attention onto the next weakest link - arguably Italy. We've been tracking Italian Bond yields as a proxy for this theme but overnight we actually saw yields come down, as has been the theme since December. They successfully got away 12 billion euros in T Bills at lower yields overnight and are progressing with their funding task (helped by the LTRO of the ECB).
Italian 10 year yields
US - there was an interesting chart by www.chartoftheday.com sent out on Friday which has appeared in a number of mkt reports since then, but worth reproducing here for those that haven't seen it.
• The Dow made another post-financial crisis rally high Thursday as it approached the 13,000 level.
• To provide some perspective to the current Dow rally that began back in early October 2011, all major market rallies of the last 111 years are plotted on today's chart.
• Each dot represents a major stock market rally as measured by the Dow. As today's chart illustrates, the Dow has begun a major rally 28 times over the past 111 years which equates to an average of one rally every four years.
• Also, most major rallies (78%) resulted in a gain of between 30% and 150% (29.8% to 150.5% to be exact) and lasted between 200 and 800 trading days (9.5 months to 3.2 years) -- highlighted in today's chart with a light blue shaded box.
•
As it stands right now, the current Dow rally (hollow blue dot labeled you are here) would be classified as well below average in both duration and magnitude.
OUR MKT; The reaction to the Greek vote yesterday morning was pretty subdued initially but as the US FUTURES started to tick higher, we saw some buying in stocks locally. The index finished +39pts higher yesterday in a pretty strong session really. We're likely to be fairly flat this morning as we've priced in most of the overnight move yesterday.
Reporting is well underway locally with another round of companies updating the mkt today including; BOL, CDD, GWA, OKN, PDN, SAI, SGN. (PDN the one we're really interested in with expectations of NPAT of -19.7m & FY EPS of -1.8c) - so a loss but a smaller loss than the pcp.
A couple of interesting theme's yesterday in stocks we like with Bradken (BKN) going ex-divi by 19.5c and actually rising 3c on the day - great performance. At the smaller end of the spectrum, we like Challenger Energy (CEL) which has started to move yesterday ahead of a drilling program while we added to some existing positions in Santos.
Newcrest (NCM) had an impressive session yesterday up +3.2% and breaking its downtrend resistance line on a better than expected revenue number for the 1H. We're neutral to negative Gold short term because of a lack of inflationary pressures (at the moment - this will change) so we struggle to get keen on NCM at current levels.
Fortescue Metals (FMG) - had another good day yesterday on news reports of Teck Resources who appear to be the mystery buyer of 2.89% of the stock through a nominee account.
COMMODITIES; For a full list of overnight prices, CLICK HERE
AUSTRALIAN DUAL LISTED STOCKS
In New York, News Corp rose by US$0.27 to US$20.12, equivalent to A$18.74, A$0.09 above its last close on the ASX.
ResMed rosel by US$0.14 to US$29.87, equivalent to A$5.44, A$0.01 below its last close on the ASX.
In London, Rio Tinto rose 73.5 pence to £38.46, A$1.08 higher in Australian currency terms.
BHP-Billiton rose 25.0 pence to £20.83, A$0.37 higher in Australian currency terms.
Henderson Group Plc rose 4.5 pence to £1.28, A$0.07 higher in Australian currency terms.
