Trading Day

The S&P/ASX 200 slumped on the open, down over 160 points or nearly 4% and is now at 4115 points.

Other Asian markets are experiencing similar sharp losses, with the Nikkei 225 down 3.5% at 9319 points, and the Hang Seng falling further, down 4.5% at 20895 points.

Other risk assets are getting walloped, with the AUD now at 1.0485 against the USD. Gold has slipped slightly and is now at $1652 USD an ounce whilst WTI crude continues to fall, now down to $85.59 USD per barrel.

Movers and Shakers
It’s deep scarlet red across the board, with all sectors falling, the energy sector the worst casualty, down over 5%. The banks are all down between 2 and 4% with ANZ the biggest loser. Macquarie (MQG) is down over 8% capping off a dreadful week.

The resource twins BHP and RIO are the main suspects in pushing the index into deep negative territory, down 4.4% and 5.5% respectively. Cochlear (COH) and CSL – are down 1.36% and 2.6% respectively, although must be welcoming the writedown in the AUD.

Today’s Chart
Todays chart will be weekly, as I can’t bear to post the daily version.


Point to note – this correction has wiped out all of FY2010 gains, all of FY2009 gains and is at a six year low. I’m sure you’ll see a variation on that theme presented as a reason to buy in the days and weeks ahead. A final note – the market is down 17% from its May high, whereas the main Euro and US markets are only down 7-8% so far.

European and US equity markets stand on a precipice and are likely to experience further falls in coming days or weeks as the lagging macro data is absorbed by pundits and institutions. The Australian market will be going through some high volatility in the month ahead because of the full year earnings season (Australian companies only report twice a year), which will add to the overall market bipolar behaviour.

Local earnings season is upon us – today only Resmed (RMD) is reporting. Remember to bookmark the overall update here.

Comments

  1. Yes, the arse has really fallen out of it now. But what I find intriguing about the GFC is that whilst consumers stopped spending to pay down debt, the policymakers just kept digging deeper and deeper. It’s as if Joe Public has a clear understanding of the problem while the policymakers are oblivious to it.

    • I can’t speak for all of you, but as a ‘Joe Public’ type I can’t print money to cover my debts like some of those policy makers like to do.

      All jokes aside, I think you have an excellent point here. It worries me that the folks in charge seem to have little idea of what to do. It is all ‘move along, nothing to see here’…

      As for our political leaders… God help us if (when) it goes belly up.

    • +1

      I think the policy makers know, but would never say so. Any truth from them would drive the markets lower.

      They have to look after the bankers and all their political funding sources first. Then they’ll say “we never saw that coming”.

    • When ‘Joe Public’ doesn’t spend, the Government have a choice : start spending themselves to prop up growth, or suffer a massive shrinkage in GDP.

      When you use the crisis in South American or SE Asia as a yardstick, allowing the crisis to run its course will cause a 6-10% contraction. No Western government will survive that. Furthermore, their economies only returned to growth via export. If the entire world goes into recession at the same time, recovery via export will be impossible.

      It is estimated that the GFC created around 4 trillion dollar worth of bad debt. Those debt have effectively been offloaded off the bank’s balance sheet to various Governments around the world. It will take a long time to unwind.

      • Exactly Ronin.

        The total government sector and the total private sector CANNOT both de-leverage at the same time without a very large external surplus – which is something difficult to achieve when everybody is trying to slash their spending.

  2. Wow (astonishment not the shares) – On Wednesday my employer decided to dock my pay over the next month to the tune of 2/3rds. Long story but this surprise forced me to sell my meagre portfolio on Wednesday arvo when I got home (before close) for a net gain. Fast forward to right now and it turns out the HR witch actually saved me a wad of cash.

    A long time ago I was told by a psychic (another long story) that I would never be wealthy but I nor would I ever be broke. My last stroke of good timing was when Gold was circa $1500. I was forced to sell a substantial amount and a few days later I was hailed a prophet. So much so in fact that my local bullion dealer uses me as a bell weather (probably a bad thing on his part but hey, it’s his business).

    Also moved my Super to “cash” in August 2008 and nearly lost my job when I bragged about it to my Baby Boomer supervisor who watched the whole downward slide in dismay

    That’s my story

  3. What are the RBA on? Everything is ok in 2012, as the Greens work to halt or slow mining projects …. by magic everything is ok. Well it’s not!

    At some point they’ll need to say so. Didn’t they see what happened on the COMEX last night, or look at what could happen in the remainder of this year? This looks like the IMF forward predictions to me.

    http://www.rba.gov.au/publications/smp/2011/aug/pdf/0811.pdf

    http://www.theaustralian.com.au/business/economics/reserve-bank-slashes-economic-growth-outlook-amid-persistent-inflation/story-e6frg926-1226109007244

  4. I think the policy people understand well whats going on, the truth is they cannot do anything but make the issue worse.
    Anyway If they tell the truth the panic will spread with lightning speed. Who knows it might be better to get it over with more quickly.

  5. Damn!! You should have saved that “Blood Bath” for today Prince.

    We might need a few more along these lines if markets have their way…

  6. Probably not the best day for it but;

    – The CRB index generally bottoms in mid-August of each year of this bul market. This year is looking no different.
    – Key commodities have fallen below their 200 DMA indicative of good bull market buys – particularly oil.

    Contrarian, but i feel we are pointing to a bottom for commodites and am beginning on focusing on reducing my cash holdings.

    Is suspect the august bottom will again prove correct.