The market is down 47. The SFE Futures were down 52 this morning.

US and Canadian markets were closed overnight for the Labor Day holiday. European markets were well down — Germany’s DAX down 5.3%, UK’s FTSE down 3.6%, France’s CAC 40 down 4.7%. Bank stocks led the fall – the European banking sector fell almost 6% to a 29-month low. Deutsche Bank down 8%, RBS down 12.3%. IMF chief Lagarde, repeated her warning that European banks need extra capital to withstand any contagion from the eurozone debt crisis. The oil price lost $2.85 to $83.60 and the Gold price was up $25.90 to $1902.80. The Aussie dollar fell to 105.42¢ from 105.94¢.

Today’s news …

  • QR National (QRN) says they will build a $900m rail line to a proposed coal export terminal on Australia’s northeast coast as demand rises sharply from emerging Asian economies. The plan could see exports from Gladstone approach the size of Newcastle, the world’s largest coal export harbour, in less than four years. QRN down 3¢ to 323¢.
  • Aquila Resources (AQA) says they will spend $368m on their Washpool coking coal project in Queensland after confirming the project’s technical and economic feasibility. AQA has also taken part in a deal with QR National to construct the first stage of a new export terminal near Gladstone.  AQA down 2.1% to 563¢.
  • National Australia Bank (NAB) is rumoured to be in talks with NBNK Investments to merge U.K. operations as part of a joint bid for over 600 branches of Lloyds Banking Group. The deal, which involves NAB’s Clydesdale Bank and Yorkshire Bank units, could create a new U.K. lender with 971 branches and over £40 billion in deposits. NAB down 2.1% to 2230¢.
  • Lend Lease (LLC) announced that its Syntheo Joint Venture with Service Stream has secured a $174m contract from NBN Co for the rollout of passive fibre network in Western Australia over an initial two year term, with an option of a further two years at a total value of $484m. LLC down 1.9% to 774¢.
  • Gunns (GNS) has rejected a settlement offer from the Tasmanian state government of an unknown amount to settle the balance of its contracts and to pay off its debts to the state-owned Forestry Tasmania. GNS last year announced it would abandon native forestry logging in Tasmania, effectively halving the native forestry industry in the process. GNS unchanged at 21¢.
  • The number of home loans approved rose 1% in July, below economist’s forecasts of a 1.5% rise. Deutsche Bank say that house prices will remain flat this year as potential borrowers hold back from taking on bigger loans to secure properties.

Quote of the morning from a colleague to a client, “You’re Super Fund is evaporating before your eyes…..sorry about that”. How glad we are that our portfolios are sitting in 100% cash this morning…because who would be in this market?

So, When Do We Buy?

This is the big game now. Our job now is to consider the possibility every day as things unfold, and anything can unfold. At the moment we find it hard to see the catalyst in the US; they seem destined for an economic malaise. But Europe could just pull it out of the bag because the Germans do have the cash and all that’s going wrong at the moment, which will be spotlighted by the Thursday Court case, is that they appear unwilling to share it with Europe.

There is an argument that the consequences of a euro collapse and a “you’re on your own” dictate from strong to weaker nations would involve a polarisation of currencies. Some would collapse. Others like the Deutsche mark would soar….and that would kill the German economy’s ability to export…and they are an export economy. On top of that there is unknown fall out (as we are seeing overnight) for all European banks, including German Banks, and a decision by Germany to go it alone will have to include the nationalisation/bailout of some of their own banks. Basically the Germans have to commit to the Euro and Europe and the day they do is the day a market rally will start (it may not be long lived but the market will like it).

We will be looking for events like that on a daily basis, looking for a moment to get back in, looking for an opportunity to trade. On the face of it though…it’s not today. The German Court case is pivotal to short term equity performance…that will be interesting.  Read more at Marcus Today.

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