The market is up 12. ASX 200 Futures were down 30 this morning. The Dow Jones finished down 140 overnight. The Dow was down 248 at worst. 

US 10-year bond yield spiked to 2.66% in early trade but managed to stabilise and close flat at 2.55%. The A$ also bottomed at 91.48c but has rallied to 92.59c. 

The Federal Reserve’s commitment to taper its quantitative easing program and concerns about China’s banking system and a possible credit crunch were the main drivers overnight.

China’s Shanghai Composite down 5.3% yesterday. Markets continue to speculate that the People’s Bank of China (PBOC) is purposely backing away from injecting cash into the banking system to retrain the banks after years of excessive lending. Some brokers have downgraded Chinese GDP numbers this week with some talking 5% growth. 

Worst sectors — basic materials, financials, energy, industrials, technology. Metals down — copper down 2.17%, nickel down 3.17%, aluminium down 1.26%, lead down 1.29%. Spot iron ore up $2.00 to $116.60. Gold was down $10.20 to $1281.80 but is up a touch this morning in Asian trade.

ANNOUCEMENTS & STORIES

  • Goodman Fielder (GFF) — Has issued a profit upgrade. The company expects a significant increase in the second half after a turnaround in its bakery business and the stabilisation of its dairy and grocery divisions. It sees second-half pre-Items earnings up 15%-20% from the first half. Earnings are expected to be in the range $195 million to $200 million. GFF is up 4.23% to 74c.
  • AMP — Fell 12.85% yesterday after a surprise earnings downgrade that fuelled concerns about systemic problems within the life insurance industry. AMP expects a lower profit of $415 million to $435 million for the first half as poor claims and lapse rates were evident in its wealth division. The lower profit figure has cast doubt on whether the company will hold their 12.5c dividend. Morningstar says it was disappointed with the surprise downgrade but has kept its accumulate recommendation with a fair value price of 600c. AMP is down 1.61% to 427c.
  • Metcash (MTS) — Closed up 4.94% yesterday after a better than expected profit result. The company posted a profit of $281m up 6.9%. MTS is up 3.6% to 374c.
  • Russian credit crunch — Russian bond yields have spiked as well – tensions between the US and Russia are rising.
  • Chinese credit crunch — There are also low odds suspicions about a Chinese bank crisis with Fitch Ratings estimating that there are $240bn in short term loans in the Chinese shadow banking system that need refinancing at the end of this month and that some banks may not make it and will need support.
  • Tax loss selling — happening this week. Small companies get hit hardest. The bottom feeders will be looking to buy into small stocks that have been thumped in low liquidity into the tax year end.

Peter Fray

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