Posts Tagged ‘RSPT’

CFD Trading: Seasonal Weakness and Contracts for Difference (CFDS)

Friday, July 2nd, 2010

CFD Trading: Seasonal Weakness and Contracts for Difference (CFDs)

Seasonal Weakness – Historical Patterns

The markets have certainly been weak lately, falling to new lows day after day into the end of the financial year. This drop is not unusual, with seasonal weakness showing up during June each year. Maybe it is investors realising losses before the year end or raising funds to prepay interest on investment loans that has this downward effect on the market. If we take a look at the history of seasonal tendencies then this year is right on track with previous years and the pattern they play out. Look at the chart below which shows the regular pattern of the markets that have occurred historically. Weakness through May and June is normal and not something unusual at all. Even the bounce in mid June played out as expected from studying these historical patterns.

S&P ASX 200 Seasonal Chart

On the bright side however, July and August look much stronger from a seasonal perspective. Newly invested funds and superannuation are often put to work in early July, giving the stock market a lift at this time. But is it different this year?

Currently global growth is suffering and governments world wide are loaded with debt. Are we going to see a strong rally through July as we have in the past?

The best clues to this will be the price action going forward. Seasonal patterns are what “typically happen”, but are not a guarantee of future performance. If there is a significant deviation from this road map then that is sign of a bigger cycle in play and that the challenges facing the world’s economy may be more serious than first thought.

Consider 2008 (brown line on the chart below) when the July – August rally failed to materialise, and falls continued into early July, before moving sideways through August and gathering downside momentum in September and October 2008.

S&P ASX 200 Seasonal Chart2

While hindsight is a wonderful thing, the seasonal patterns here were known well in advance, in fact since January this year. So what can you do when the seasonal patterns turn negative or, more importantly, if the expected rally fails to materialise? This is when you could consider using Contracts for Difference (CFDs) to protect your portfolio or profit during these periods of market weakness.

Contracts for Difference (CFDs)

One of the key advantages of Contracts for Difference is the ability to short sell easily and efficiently. If you currently own shares you can short sell a CFD on the index to protect the value of your shares. Even though your shares go down in value, the value of the CFD increases. A portfolio of $100,000 worth of shares could have been hedged by selling 20 contracts of the XJO index.

During the recent fall the Aussie market peaked just above the 5000 point level on the ASX 200 and fell to 4300, for a drop of 14%. Assuming your portfolio lost 14% then it is now worth $86,000. By selling 20 contracts short on the index at 5000 and if you were to cover them at 4300 you would make a profit of $700 per contract or $14,000 on the CFD position. This completely offsets any loss in value on your share portfolio and while the gain on the CFDs is taxable, there are no capital gains tax implications that would be incurred if you sold your shares.

Alternatively you can short sell individual shares using CFDs to profit from falling prices. While the seasonal patterns may be looking up for July, if the expected rally fails to materialise now might be a good time to sharpen up your skills and add CFDs to your portfolio as protection against any future drops.

By Jeff Cartridge
Education Manager

Risk Disclaimer
Be aware that CFDs are leveraged products which carry a high level of risk to your capital, as it is possible to incur losses that exceed your initial investment. Therefore CFDs may not be suitable for your level of acceptable investment risk. Before proceeding with CFD trading, ensure you fully understand the risks involved, otherwise seek independent financial advice.

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Stock Market Analysis: Overseas Markets Continue Lower; RSPT Deal Will Help Miners Today

Friday, July 2nd, 2010

Stock Market Analysis

Overseas Markets Continue Lower; RSPT Deal Will Help Miners Today

Overseas markets continue to trade lower, with the U.S. giving a negative lead.  Commodities traded lower around 3% across the board.  The big news on the ASX is that a deal has been done on the RSPT miners tax.  The ASX will get some lift from the RSPT deal but we will likely follow overseas markets more broadly.

The SPI Futures is above the key level of 4300, the ASX is set to open marginally higher as the SPI closed up 26 points (or 0.6%) at 4,240.  Key levels today are 4300 and 4150. Expect our market to trade flat to lower again today given the negative leads from overseas. A deal on the proposed RSPT tax has been done, but commodities were sharply lower overnight sending miners and energy lower on markets.

US Markets

The U.S. markets were lower for a fourth day due to poor home sales and manufacturing data, and the apprehension over tomorrow’s unemployment report, also the U.S. have a shortened week next week.  The available data is pointing towards slowing growth in the near term and there are renewed concerns of a double dip recession.  There has been a move out of riskier assets as reports showed manufacturing growth slowed in China, Europe and the U.S. In the last half of the year the key sectors that were down over 10 per cent included: Materials, Energy, IT, Telecom and Healthcare. Overnight the Financial sector fell 0.9 per cent, while the Energy sector fell 0.4%, miners also weighed on the markets.

The Dow was down 41 points, or 0.4 per cent, to 9,732 (down 4.5% for Qtr), while in the broader market the S&P 500 index down 3 points, or 0.3 per cent, to 1,027 (down 5.9% for Qtr) and the tech-heavy Nasdaq ended lower 8 points or 0.4 per cent at 2,101 (down 6.3% for Qtr).  The significant pullback in the past quarter has led some analyts to look for value. The stocks in the U.S. are the cheapest relative to bonds in the past three decades, also forecast earnings yield are said to be running at 8.8% for the index. Fidelity say that the S&P500 is “cheap” based on a earnings growth (PEG) basis (with the PEG ratio at 0.78, as PEG of 1 suggests fair value).

European Markets

In Europe investor concerns were heightened as Spain’s credit rating is downgraded by Moody’s.  In the London FTSE 100 index down 111 points, or 2.3 per cent, to 4,805 points (down 13.5% for Qtr), . The German DAX pulls back 109 points, or 1.8 per cent, to 5,857 points (down 3.7% for Qtr).

Asian Markets

The key news in Asia continues to point to a slowing economic recovery. The Chinese markets have fallen to a 14-month low on concerns their fiscal tightening will stunt their economic growth
and the worst than expected PMI manufacturing data.  In Japan the Nikkei index of the Tokyo Stock Exchange down 2.1% to end at 9,191 (down 3.6% for Qtr). The benchmark Hang Seng Index was down 0.6% at 20,129 (down 5.6% for Qtr) and China was down 1.0%  at 2,374 (down 22% for Qtr).

Commodities Overview

Oil prices dropped  .7 per cent in the past quarter,  the first losing quarter since 2008.  The benchmark for crude NYMEX for July delivery was down US$2.68 to settle at US$72.95 a barrel.  Copper prices finished lower for the first  quarter, below the key $US3.00 a pound, Copper for July delivery down 2.5 cents to settle at $US 2.877 a pound. Gold slumped the most since February, with August gold down $US39.20 to settle at $US1,206.30 an ounce.

Key News International Drivers Today

US – Unemployment report due out  Friday – expect more job loses.

ECB – banks had some relief as the ECB says it is only rolling over one-third of the expected $US540 billion of debt which falls due 1 July.

EU – Markets fall on continuing debt concerns

CHINA – Chinese markets have fallen to 14-month lows, as the PMI manufacturing data came in worst than expected.

Markets Overview

Overseas Markets Continue Lower; RSPT Deal Will Help Miners Today

SP500: down 0.3% at 1,037 – Below 200 day Moving Average
DOW  down 0.4% at 9,732 – Below Key Support Level
NASDAQ: down 0.4% at 2,101

Dollar Index: Lower at 84.51 on higher Euro
A$ higher at 84.35

FTSE: down 2.3% at 4,805 – Financials & Miners Weigh
DAX down 1.8% at 5,587 – Breaks 6,000 level

CHINA: down 1.0% at 2,374 – Slowing Growth Concerns
HSI  Closed

Oil:  down 4.0% ($72.05)
Economic Growth Concerns

Gold: down 3.2% at ($1,204.50)
Commodities Lower

SPI: Above key Level 4300 ASX
SPI up 0.6% at 4,240

ASX News Today

The SPI Futures is above the key level of 4300 the ASX is set to open marginally higher as the SPI closed up 26 points (or 0.6%) at 4,240.  Key levels today are 4300 and 4150. Expect our market to trade flat to lower again today, given the negative leads from overseas. A deal on the proposed RSPT tax has been done, but commodities were sharply lower overnight sending miners and energy lower on markets overnight.

Resource Super-Profits Tax (RSPT) Deal

The government has given ground to the miners to the tune of $1.9 billion, but miners will pay more tax. The deal is:

* the headline tax rate will be reduced to 30% (from the original 40% rate)
* the trigger point at which the tax cuts in will be the bond rate plus 7 per cent
* existing projects will get concessions
* the tax will be applied to the point of extraction
* the tax gets a new name to “Minerals Resource Rent Tax”
* will only apply to iron ore and coal projects.
* oil and gas projects will fall under the existing Petroleum Resource Rent Tax.

This should give miners some support today.

In other news:

AUD – higher at 84.35

LEI – signs $597million four year deal with India to build road network.

MOS – Mosaic gets $123 million takeover offer from AGL.  Shares soared 67%.

MTS – Metcash will buy the Franklins chain of 85 supermarkets in NSW from South African retailer Pick n Pay for $215 million
RSPT – government backs down on RSPT headline tax rate is to be 30% (compared with original 40%)

Economic Reports out today:  Deal on RSPT tax

Market volatility will continue near term, some speculative accumulation is underway. We the suggest trading strategy is to tighten stops. Be prepared to take profits and open/hold short positions.  We expect to have flat to lower leads from the U.S. ahead of their employment report and the shortened week next week.

Market Summary

ASX – to open flat
US & UK/Europe – Broadly Lower…

US ADRs – Broadly Lower!!!…

BHP up 0.7%  & RIO up 1.5%; AWC up 0.8%
ANZ down 1.7% & NAB down 0.6%
NEM down 4.5%, JHX up 2.4%, NWS down 1.4%

Commodities Stock Index down 0.9%
Gold Stocks Index down 4.5%
Oil Stocks Index down 0.2%

By Michael Hevern
Head of Research

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Stock Market Analysis: Overseas Markets End Poor Quarter; ASX Set to Trade Lower

Thursday, July 1st, 2010

Stock Market Analysis

Overseas Markets End Poor Quarter; ASX Set to Trade Lower

Markets finished the quarter sharply lower in all markets with China beign the poorest performer, giving a negative lead for the ASX. The key triggers for the late selloff in the U.S. included the Moody’s rumored downgrade of Spain’s credit rating and apprehension ahead of key employment data due Friday. In Europe banks saw some respite as the ECB backed off on the need to pay $US545 billion in government debt by 1 July.

The SPI Futures is below the key level of 4500 the ASX is set to open sharply lower as the SPI closed down 30 points (or 0.9%) at 4,232. Key levels today are 4350 and 4150. Expect our market to trade lower again today, with negative leads from overseas. The proposed RSPT tax will continue to be in focus, but miners and energy still weighed on markets overnight.

US Markets

Sectors were all lower in the U.S overnight, their is investor apprehension ahead of key employment data due Friday and they also have a short week next week. In the last half of the year the key sectors that were down over 10 per cent including: Materials, Energy, IT, Telecom and Healthcare. The sellers stepped in during the last hour of trading.

The Dow down 96 points, or 1.0 per cent, to 9,774 (down 4.5% for Qtr), while in the broader market the S&P 500 index down 10 points, or 1.0 per cent, to 1,030 (down 5.9% for Qtr) and the tech-heavy Nasdaq ended lower 26 points or 1.2 per cent at 2,109 (down 6.3% for Qtr).  With the significant pullback in the past quarter has led analyts to look for value and the stocks in the U.S. are the cheapest relative to bonds in the past three decades, also forecast earnings yield are said to be running at 8.8% for the index.

European Markets

In European, investor concerns were heightened as UK consumer confidence dropped to a 6 month low falling to -19 in June, after government’s emergency budget on 22 June cut $US128 billion in government spending, equal to 5.7% of its GDP and in Germany’s unemployment falls for a 12th month to 7.7 per cent.  EU banks had some relief as the ECB says it is only rolling over one-third of the expected $US540 billion of debt which falls due 1 July.  In the London FTSE 100 index up 3 points, or 0.1 per cent, to 4,916 points (down 13.5% for Qtr). The German DAX continues to outperform up 13 points, or 0.2 per cent, to 5,965 points (down 3.7% for Qtr).

Asian Markets

The key news in Asia continues to point to a slowing economic recovery. The Chinese markets have fallen to 14-month lows on concerns their fiscal tightening will stunt their economic growth.  The market is 30% off last years highs bringing their price-earnings ratio to 18, the lowest in a decade.  With such a pullback analysts are starting to look for value and Morgan Stanley suggests that the 19 June decision to end the yuan’s two-year peg to the US dollar will help curbs their inflation and asset bubbles, and that China is a buying opportunity.  China’s market rose 65% in the year after they last eased their exchange rate policy back in 2005.   In Japan the Nikkei index of the Tokyo Stock Exchange down 1.9% to end at 9,382 (down 3.6% for Qtr). The benchmark Hang Seng Index was down 0.6% at 20,129 (down 5.6% for Qtr). ,  and China was down 1.2%  at 2,398 (down 22% for Qtr).

Commodities Overview

Oil prices dropped 9.7 per cent in the past quarter, the first losing quarter since 2008.  The benchmark crude NYMEX for July delivery down US$0.31 to settle at US$75.63 a barrel.  Copper prices finished lower for the first  quarter in five, below the key $US3.00 a pound, Copper for July delivery up 2.0 cents to settle at $US 2.94 a pound. Gold closed higher, with August gold up $US3.50 to settle at $US1,245.50 an ounce.

Key News International Drivers Today

US – employment report due Friday

ECB – banks had some relief as the ECB says it is only rolling over one-third of the expected $US540 billion of debt which falls due 1 July.

EU – Germany’s unemployment falls for a 12th month to 7.7 per cent

UK consumer confidence dropped to a 6 month low falling to -19 in June

CHINA – Chinese markets have fallen to 14-month lows

G20 – meeting agrees to cut deficits in half by 2013 government deficits, and to stabilise their debt-to-output ratios by 2016.

Markets Overview

Overseas Markets End Poor Quarter; ASX Set to Trade Lower

SP500: down 2.0% at 1,030 – Below 200 day Moving Average  (down 5.9% for Qtr)
DOW  down 1.0% at 9,774 – Below Key Support Level    (down 4.5% for Qtr)
NASDAQ: down 1.2% at 2,135  (down 6.3% for Qtr)

Dollar Index: Higher at 86.05 on lower Euro
A$ lower at 83.98

FTSE: up 0.1% at 4,917 – Financials & Miners Weigh  (down 13.5% for Qtr)
DAX up 0.3% at 5,938 – Breaks 6,000 level  (down 5.6% for Qtr)

CHINA: down 1.3% at 2,398 – Slowing Growth Concerns  (down 5.6% for Qtr)
HSI  down 0.6% at 20,129 (down 5.6% for Qtr)

Oil:  down 2.3% ($75.94)  (down 5.6% for Qtr)

Good Week Ahead of Hurricane Season

Gold: up 0.3% at ($1,242.40)  (down 5.6% for Qtr)
Commodities Lower

SPI: Below key Level 4500 ASX
SPI down 0.7% at 4,232  (down 12% for Qtr)

ASX News Today

The SPI Futures is below the key level of 4500 the ASX is set to open sharply lower as the SPI closed down 30 points (or 0.9%) at 4,232.  Key levels today are 4350 and 4150. Expect our market to trade lower again today, with negative leads from overseas. The proposed RSPT tax will continue to be in focus, but miners and energy still weighed on markets overnight.

AUD – higher at 83.98

AAX - bad news continues as Ausenco the mining service provider saya it will book a $6.8 million after-tax, non-cash impairment charge in its 1H10 accounts, following a review of its energy business.

CDU – Cudeco rallied ahead of a long-awaited upgrade to resource at Rocklands copper project, which company expects within a week.

COF – Coffer has reaffirmed its earnings guidance for the FY10 but says it will cut jobs as a result of theuncertain economic environment.

DOW – Downer the engineering group is to sell its stake in MB Century Drilling to Mohamed Al Barwani Holding Company LLC and use the funds to repay shareholder loans.

LLC – Lend Lease has signed a project development agreement that formalises its $2.5 billion proposed redevelopment of Brisbane’s Ekka showground.

PPX – PaperlinX confirms that it will pay a scheduled distribution of $3.3655 per security on its Step-up Preference Securities.

QAN – Qantas is facing increased competition at the low-fare end of the market but business travel is picking up.

RIO -  will spend $450 million to acquire shares in Canada-based miner Ivanhoe, to ensure Ivanhoe has funds to develop their jointly held Oyu Tolgoi copper and gold project in Mongolia.

UPGRADES – Deutsche Bank expects commodity price weakness to continue into third quarter but upgrades forecasts for 2011 and 2012, leading to earnings
upgrade, these include “buy” for Macarthur Coal (MCC), Extract Resources (EXT), Western Areas (WSA)

Economic Reports out today:

New PM & Wayne Swan – watch out for more on RSPT tax
RBA to report its index of commodities
PWC will release the PMI on  manufacturing

Market volatility will continue near term, some speculative accumulation is underway. We the suggest trading strategy is to tighten stops. Be prepared to take profits and open/hold short positions.  We expect to have flat to lower leads from the U.S. ahead of their employment report and the shortened week next week.

Market Summary

ASX – to open lower again
US & UK/Europe – Broadly Lower…
US ADRs – Broadly Lower!!!…

BHP down 2.2%  & RIO down 4.0%; AWC down 2.7%
ANZ down 1.7% & NAB up 0.8%
NEM up 1.0%, JHX down 0.5%, NWS down 1.8%

Commodities Stock Index down 0.7%
Gold Stocks Index down 0.1%
Oil Stocks Index down 0.8%

By Michael Hevern
Head of Research

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Taxing Times: Resources Super Profits Tax (RSPT) Negotiations

Wednesday, June 30th, 2010

Taxing Times: Resources Super Profits Tax (RSPT) Negotiations

One of the first actions by the new Labor government leadership was to adopt a more conciliatory approach to the proposed resource super profits tax (RSPT). The government is eager to approach the big Aussie miners BHP Billiton, Rio Tinto and Xstrata, in order to establish a new process for resolving the proposed RSPT issues.

Under the original RSPT proposal the government has estimated tax takings of $12 billion in the first two years. Most of these takings will come from BHP and RIO and it is estimated the earnings will be hit by 15% for BHP and 25% for RIO.

Any compromise over the proposed tax will impact the federal budget forecasts, with treasurer Wayne Swan quick to reiterate that cuts backs in the RSPT revenue will impact the Budgets in the areas of superannuation, company tax cuts and infrastructure spending commitments.

Miners are fiercely combating the proposed RSPT because it is seen as setting a precedent for overseas governments in relation to their tax environments into the future. The big miners of course are not interested in whether the government can balance its budget, but they have made moves to negotiate over the tax.

BHP’s CEO Marius Kloppers was quick to offer the government an olive branch in suspending their damaging advertising campaign, however at the same time he restated the stance of the big miners that the new tax: should only apply to new projects, should distinguish between the commodities being mined and should be levied close to the extraction point. The big miners are prepared to pay more tax, indicating support for a profit based tax to replace royalties.

RSPT – The Government and Miners Need to Resolve:

The question that needs to be resolved in any negotiations include:

What will the tax rate be? Currently the tax rate will be 40 per cent.

Will the new tax apply to existing projects? Big miners say NO! The government will be keen to see the tax to apply to existing projects because that will encompass the highly profitable Pilbara mines in Western Australia.

What is the threshold rate where the tax will kick in? Miners wants a significant
increase in the threshold at which the levy kicks in ( from 6% up to 15%)

How will the new tax impact on depreciation allowances?

What will happen with write-offs for new capital spending?

How will the tax be applied to assets? Whether at book or market value.

At what point will the tax be levied? Big miners are pushing for the point of extraction, but the government is also considering taxing after any value-adding due to processing has occurred.

Our View – The Proposed RSPT is Hurting Our Mining Sector

Mining activities have been impacted as a result of this new proposed tax. Miners have shelved some projects, banks are re-evaluating extension of credit for projects, foreign investment has been withdrawn due to the ongoing uncertainty over the tax and we have seen weakness in the Aussie dollar.

The government is still under pressure to resolve this issue before the looming federal election, and miners are threatening to resume their advertising campaign in the next two weeks. Fortescue’s CEO Andrew Forrest claims that he was close to resolving the issue with Prime Minister Kevin Rudd before the leadership challenge, so you would expect this to provide a base level for ongoing discussions.

There is a case for both parties to compromise on the tax. This is particularly the case given the continuing uncertainty regarding the global economic outlook as seen overnight. We expect that this RSPT has to be resolved before the next federal election.

By Micheal Hevern
Head of Research

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Stock Market Analysis: Overseas Markets biggest falls since May; ASX to focus on RSPT

Monday, June 28th, 2010

Stock Market Analysis

Overseas Markets biggest fall since May; ASX to focus on the Resource Super-Profits Tax (RSPT)

U.S. stocks ended the week with the biggest fall since May. GDP growth was trimmed but Financials recovered somewhat after Congress passed a “diluted” FinReg bill.

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 3 points (or 0.1%) at 4,414.  Key levels this week are 4550 and 4250. Expect our market to trade flat today. The proposed RSPT tax will continue to be in focus, with the new PM prepared to negotiate with the interested parties, the G-20 meeting report and FinReg in the US will be key this week.

US Markets

U.S. stocks ended the week with the biggest fall since May.  Stocks generally fell 5 to 7 per cent for the week, with energy and high-tech stocks particularly hit hard. The U.S. economy GDP grew at 2.7 per cent annual rate in the first quarter, lower than previously forecast. However the Financials sector saw some bargain hunting on Friday up 2.7% after Congress passed a “diluted” FinReg bill, designed to curtail risk taking and increase capital reserve requirements. The bill limits rather than prohibits the ability of federally insured banks to trade derivatives and invest in hedge funds and/or private equity funds.

The Dow is down 9 points, or 0.1 per cent, to 10,143 (down 3.0% for week), while in the broader market the S&P 500 index up 3 points, or 0.3 per cent, to 1,076 (down 3.7% for week) and the tech-heavy Nasdaq ended 0.3 per cent higher at 2,223 (down 4.0% for week).

European Markets

European shares again slumped Friday night, as German car makers were downgraded causing the Automakers index falling 2.6 per cent. Spanish utilities weighed when the government said it would suspend any increase in electricity prices. Adding to BP’s worries is a forecast of a hurricane to enter the Gulf, further hampering any cleanup efforts. BP fell to 14 year lows down another 6.4%. The Euro managed to rise to $US1.2375. The G20 meeting was in Toronto this weekend, the security bill alone was over $900 million. G20 members are looking to endorse targets to tackle government deficits.

In the U.K. stocks fells for a fourth day with energy and miners weighing around 3.5%. In the London FTSE 100 index fell 53 points (down 4.0% for the week), or 1.05 per cent, to 5,046 points. The German DAX down 45 points, or 0.7 per cent, to 6,070 points (down 2.7% for the week), while in France, the CAC 40 fell 33 points or 0.9 per cent, to 3,522 points.

Asian Markets

Asian markets traded lower Friday. At the G-20 China is expected to push for a bigger role in reshaping the global economy, post the GFC. In Japan the Nikkei index of the Tokyo Stock Exchange down 1.9% to end at 9,737. The benchmark Hang Seng Index was down 0.2% at 20,691  (up 2.1% for week), and China was down 0.5%  at 2,552  (up 1.8% for week).

Commodities Overview

Oil prices jumped 3% above US$77 a barrel Friday night on hurricane concerns in the Gulf. The benchmark for crude NYMEX for July delivery up 2.6 per cent to settle at US$79.91 a barrel.  Copper prices finished above the key $US3.00 a pound, Copper for July delivery up 4 cents to settle at $US 3.009 a pound. Gold closed higher, with August gold up 0.2% to settle at $US1,256 an ounce.

Key International News Drivers Today

G20 – meeting was in Toronto this weekend. The security bill alone was over $900million. Members are looking to endorse targets to tackle government deficits.

CHINA – At the G-20 China is expected to push for a bigger riole in reshaping the global economy, post the GFC.

GDP -  U.S. GDP for their first quarter 2.7% (lower than previously calculated).

BP – shares fall to 14 year lows as a result of the oil spill in the Gulf of Mexico.

YUAN – China to end its two-year yuan peg to the US dollar.  China has signaled a “more flexible yuan” currency policy, which will allow its currency appreciate in an orderly manner against the US dollar. The yuan has been pegged at 6.83 against the US dollar since mid-2008.  It will not be a one-off revaluation.

OIL – Goldman Sach’s cuts its oil price forecast last week to $US87 for the next few months (vs previous $US96).

Markets Overview

U.S. Markets were Flat; ASX will Focus on G-20 Reports &; RSPT Progress

SP500: up 0.3% at 1,076 – Below 200 day Moving Average  (down 3.7% for week)
DOW  down 0.1% at 10,143 – Above 10,000   (down 3.0% for week)
NASDAQ: up 0.3% at 2,223 (down 4.0% for week)

Dollar Index: lower at 85.13 on Higher Euro
A$ higher at 87.48

FTSE: down 1.05% at 5,046 – Financials & Miners Weigh (down 4.0% for week)
DAX down 0.7% at 6,070 – Off Highs but Still in Outperforming  (down 2.7% for week)

CHINA: down 0.5% at 2,552 – Currency Allowed to Revalue (up 1.8% for week)
HSI  down 0.2% at 20,691 (up 2.1% for week)

Oil:  up 2.6% ($79.91) (up 3.5% for week)
Good Week Ahead of Start of  Hurricane Season

Gold: down 0.2% at ($1,256) (up 2.7% for week)
Commodities Higher

SPI: Below key Level 4500 ASX (down 3.7% for week)
SPI down 0.1% at 4,414

ASX News Today

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 3 points (or 0.1%) at 4,414.  Key levels this week are 4550 and 4250. Expect our market to trade flat today.  The proposed RSPT tax will continue to be in focus, with the new PM prepared to negotiate with the interested parties, the G-20 meeting report and FinReg in the US will be key this week.

AUD – higher at 87.48

AAX – A subsidiary Ausenco the engineering and project management group has won an $8 million contract

AGK – AGL plans to fast track its Macarthur wind farm project following changes to the Renewable Energy Target scheme approved by the Senate on Wednesday.

EXT – Extract is moving its base to London as it seeks to develop the world’s second biggest uranium mine, expecting production in 2014.

FGL – China’s BrightFoods is reported to be interested is selected wine assets, primarily those in NSW.

GFF – Goodman Fielder says NZ’s removal of building depreciation for tax purposes will result in a non-cash write down in deferred tax assets by $13 million.

IRN – in a trading halt, Indophil Resources is seeking a buyer for its stake in the Tampakan copper-gold project in the Philippines after China’s Zijin Mining Group abandoned a $545 million takeover bid for the company.

M&A – activity has been crushed since the proposed RSPT was announced with M&A this quarter at totaling $879million (versus deals worth $9.1billion last year) according to a Bloomberg Survey.

MCC – Chairman calls on New Prime Minister Julia Gillard to remove revenue from a proposed tax on resources from budget forward estimates.

MOS – Mosaic Oil has sold its PNG subsidiary for $12.7 million in cash to an unidentified party described as a major international oil and gas company.

MQG – Macquarie says market conditions are adversely affecting some of its business activity levels for FY11.  This prompted concerns that it may be the next to downgrade earnings. Shares dived 4.7%.

PPT – Perpetual the Funds manager expects the Australian share market to continue on its uncertain trajectory for the
next six to 12 months. Suggesting the ASX200 will trade between 4300 to 5000 for the next year.

RIO – Rio Tinto Ltd has formally opened a high-tech operations center in Perth that remotely controls the mining giant’s vast network of mines, rail systems, infrastructure facilities and port operations in WA’s Pilbara.

RSPT – any compromise reducing the RSPT tax take will constrict government spending budget.

SSN – Samson Oil & Gas has entered into a binding deal to sell 24,166 acres of its 40,240 acre holdings in Wyoming, for up to $91.5 million.

SDL – Sundance shares remain suspended from trading while the company rearranges its corporate governance.

SVW – Seven Group is investing $287.16 million in the IPO which will see the last of China’s big four banks float its shares.  Qatar’s heavy weight investment fund, have stumped up $6.26 billion for the Agricultural Bank of China IPO even before the share sale officially starts.

Economic Reports out today:  New PM – watch out for more commentary on RSPT tax

Market volatility will continue near term, some speculative accumulation may surface in the miners, in anticipation of the resolution of the RSPT. We the suggest trading strategy is to tighten stops. Be prepared to take profits and open/hold short positions.  We are trading into the end of the financial year, so its the last chance to cleanup your portfolios.

Market Summary

ASX – to open flat
US & UK/Europe – Generally Lower…

US ADRs – Mixed!!!…

BHP flat  & RIO down 0.4%; AWC up 2.0%
ANZ down 0.3% & NAB up 0.5%
NEM up 4.6%, JHX up 3.3%, NWS down 1.2%

Commodities Stock Index up 1.2%
Gold Stocks Index up 3.3%
Oil Stocks Index down 0.6%

By Michael Hevern
Head of Research

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Stock Market Analysis: New PM as Markets Weaken

Friday, June 25th, 2010

Weekly Stock Market Analysis

The ASX found resistance at key levels this week and is trading lower as we approach the end of the financial year. The leadership spill in the Labor Government resulted in Australia’s first female Prime Minister, Julia Gillard. The initial reaction from the market was positive, especially after the New PM said that the government was prepared to undertake negotiations over the resource super-profits tax (RSPT). However investors soon refocused on the bad news that continues to come from overseas.

Technically most overseas markets are weak, having found resistance around their 50 day moving averages, and they are now trading below their 200 day moving averages and look to be heading towards their recent lows.

US Markets

The economic data from the U.S. was negative this week. The Fed also dampened investor confidence by saying that the economic growth is likely to weaken near term. Reports on the housing sector confirmed this message with new home sales down 33 percent last month and existing homes sales down 2.2 percent in May. The other concern for investors is the ongoing debate over the new financial regulations to be imposed in the U.S. The U.S. markets are trading below their 50 and 200 day moving average, with the Dow Jones at 10,152 and the S&P 500 Index at 1,074.

European Markets

The week started positively for the European markets after Spain agreed to publish the banks “stress test” results in the next couple of weeks, but investors quickly turned their minds back to ongoing sovereign debt issues, which again weighed on the markets. Overnight renewed concerns over the solvency of Greece hit the markets and prompted the European Union (EU) and International Monetary Fund (IMF) to agree to $US155 billion in loans to Greece at below market rates. This move means the Greek government does not need to borrow money on the bond market.

The G-20 meeting is to be held this weekend and the focus there will be on whether the unified approach can continue, in relation to the measures necessary to support the ongoing recovery. In the U.K. the FTSE is lower at 5,199, Germany and the French CAC are trading below their 50 day moving averages.

Asian Markets

The key story in Asia this week has been China saying it will end its two-year yuan peg to the US dollar. China has signaled a “more flexible yuan” currency policy, which will allow its currency to appreciate in an orderly manner against the US dollar, it will not be a one-off revaluation. China traded flat for the week at 2,555 and Japan’s Nikkei index has weakened below 10,000, while in Hong Kong the market is still trading above 20,000 at 20,733.

Commodities

Gold has backed off its record highs overnight trading at $US1,245.60 and crude oil has also been trading around $US77.

Resource super profits tax

In Australia the resources super profits tax (RSPT) continues to be in focus. The week started off with BHP, Fortescue and Xstrata all still adament that they have not been consulted by the government about the tax. However, one of the first tasks on the agenda for Australia’s new Prime Minister Julia Gillard will be to open up negotiations with the mining industry over the proposed resources super-profits tax (RSPT). Time will tell how this is resolved.

Our View

The ASX 200 has found resistance around 4600, as the confluence of the 50 and 200 day moving averages has provided a barrier to the recent up move.

The key pivot level is still around 4,500 and the key levels for our index next week are 4550 and 4250. Remember that we are trading into the end of the financial year, and this will likely weigh on our markets, as investors take the opportunity to clean up their portfolios.

By Michael Hevern
Head of Research

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Stock Market Analysis: Overseas Markets Drifted Lower

Friday, June 25th, 2010

Stock Market Analysis

Overseas Markets Drifted Lower; ASX to Trade Lower

U.S. stocks continued their slide overnight, as the investors were worried about the impacts of financial reforms and that the G-20 meeting will no longer offer a unified approach to resolving the GFC aftermath. Our markets are likely to close the week lower.

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 59 points (or 1.3%) at 4,428. Key levels today are 4550 and 4350. Expect our market to trade lower today, remember there will be increased activity this morning due to options exercises. The proposed RSPT tax will continue to be in focus, with the new PM prepared to negotiate with the interested parties, this saw the key mining stocks rise yesterday, however in London overnight they were sold off again. The G-20 meeting will be in focus over the weekend, there are concerns that the “unified” approach towards the resolution to the GFC is start to fracture.

US Markets

The US markets traded lower falling for a fourth day on continuing concerns over the poor performance of the housing sector and comments from the Fed warning of slowing growth.  Trade volume were light however all sectors suffered. The Department of Commerce reported that orders for “big-ticket” items fell in May, on slumping aircraft orders. The Dow was down 145 points, or 1.4 per cent, to 10,152, while in the broader market the S&P 500 index lost 18 points, or 1.7 per cent, to 1,074, and the tech-heavy Nasdaq ended 1.6 per cent lower at 2,217.

European Markets

European shares slumped overnight, ahead of the G-20 meeting.  Renewed concerns over the solvency of Greece hit the markets and prompted the EU and IMF to agree to $US155 billion in loans to Greece at below market rates. This move means the Greek government does not need to borrow money on the bond market.  This prompted a rise in the Euro to above $US1.23.

In the U.K. the London FTSE 100 index fell 78 points, or 1.5 per cent, to 5,100 points. The German DAX down 89 points, or 1.4 per cent, to 6,115 points, while in France, the CAC 40 fell 83 points or 2.4 per cent, to 3,555 points.

Asian Markets

Asian markets were flat yesterday. In Japan the Nikkei index of the Tokyo Stock Exchange up 0.2% to end at 9,928. The benchmark Hang Seng Index was up 0.2% at 20,733, and China was down 0.1%  at 2567.

Oil prices held just below US$77 a barrel overnight. The benchmark crude NYMEX for July delivery up US$0.16 to settle at US$76.51 a barrel. Copper prices finished above the key $US3.00 a pound, Copper for July delivery up 7 cents to settle at $US 3.0055 a pound. Gold closed higher, with August gold up $US11.10 to settle at $US1,245.90 an ounce.

Key News Drivers Today

G20 – meeting to be held in Toronto this week. Key issues will be the Chinese currency revaluation and the cut backs in stimulus spending and their impact on global growth.

BP – shares again fall to 13 year lows as a result of the oil spill in the Gulf of Mexico.

YUAN – China to end its two-year yuan peg to the US dollar.  China has signaled a “more flexible yuan” currency policy, which will allow its currency appreciate in an orderly manner against the US dollar. The yuan has been pegged at 6.83 against the US dollar since mid-2008.  It will not be a one-off revaluation.

OIL – Goldman Sach’s cuts its oil price forecast to $US87 for the next few months (vs previous $US96).

Markets Overview

U.S. Markets Cointinue to Weaken Technically; ASX to Trade Lower

SP500: down 1.7% at 1,074 – Below 200 day Moving Average

DOW  down 1.4% at 10,152 – Above 10,000

NASDAQ: down 1.6% at 2,217

Dollar Index: lower at 85.74 on Higher Euro

A$ lower at 86.68 FTSE: down 1.5% at 5,100 – Financials & Miners Weigh

DAX down 0.7% at 6,115 -Off Highs but Still in Outperforming

HSI  down .% at 20,733

Oil:  up 0.2% ($76.51)

U.S. Inventories Up

Gold: up 0.7% at ($1,245.90)

Commodities Lower

SPI: Below key Level 4500 ASX

SPI down 1.3% at 4,428

ASX News Today

The SPI Futures is below the key level of 4500 the ASX is set to open lower as the SPI closed down 59 points (or 1.3%) at 4,428. Key levels today are 4550 and 4350. Expect our market to trade lower today, remember there will be increased activity this morning due to options exercises. The proposed RSPT tax will continue to be in focus, with the new PM prepared to negotiate with the interested parties, this saw the key mining stocks rise yesterday, however in London overnight they were sold off again. The G-20 meeting will be in focus over the weekend, there are concerns that the “unified” approach towards the resoluion to the GFC is start to fracture.

AUD – lower at 86.68

AGK – AGL plans to fast track its Macarthur wind farm project following changes to the Renewable Energy Target scheme approved by the Senate on Wednesday.

GFF – Goodman Fielder says NZ’s removal of building depreciation for tax purposes will result in a non-cash write down in deferred tax assets by $13 million.

MQG – Macquarie says market conditions are adversely affecting some of its business activity levels for FY11.  This prompted concerns that it may be the next to downgrade earnings. Shares dived 4.7%.

RIV – A Chinese steel company is poised to take an 8% stake in Riversdale Mining, as part of a deal that will also see it help to fund a key coal project.

RSPT – New PM’s comments on the mining tax will impact BHP, FMG, RIO shares today.

SDL – Sundance shares remain suspended from trading while the company rearranges its corporate governance.

SVW – Seven Group is investing $287.16 million in the IPO which will see the last of China’s big four banks float its shares. Qatar’s heavy weight investment fund, have stumped up $6.26 billion for the Agricultural Bank of China IPO even before the share sale officially starts.

Economic Reports out today:

New PM – watch out for more commentary on RSPT tax

Market volatility will continue near term, some speculative accumulation is underway.

We the suggest trading strategy is to tighten stops. Be prepared to take profits and open/hold short positions, remember there will be increased activity this morning due to options exercises and we are trading into the end of the financial year.

Market Summary

ASX – to open  lower

US & UK/Europe – Negative leads…

US ADRs – Broadly Lower!!!…Commodities Stock Index down 2.4%
Gold Stocks Index down 0.6%
Oil Stocks Index down 2.5%

By Michael Hevern

Head of Research

BHP down 2.3% & RIO down 4.1%; AWC down 4.2%
ANZ down 3.2% & NAB down 1.1%
NEM down 0.2%, JHX down 0.9%, NWS down 4.9%

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Stock Market Analysis: Gillard to Negotiate on Resource Super-Profits Tax

Thursday, June 24th, 2010

New PM: The Government will now Negotiate on Resource Super-Profits Tax

One of the first tasks on the agenda for Australia’s new Prime Minister Julia Gillard will be to open up negotiations with the mining industry over the proposed resources super-profits tax (RSPT).

The ongoing controversy between industry and the government over the RSPT, was a key issue in the instigation of the leadership spill. Under Kevin Rudd’s leadership the government had refused to negotiate over the tax.

In her first press conference as Prime Minister, Julia Gillard said that the government will pull the advertising pushing the government’s case and asked that the Mining industry to reciprocate.

BHP was quick to respond, suspending their advertising campaign over the proposed new tax and saying that they were “encouraged by the comments of new Prime Minister Julia Gillard, that her government will open the doors for negotiation with the objective of achieving consensus”.

This marks a new direction for the proposed super-profits tax. The mining industry has welcomed the new initiatives, citing the positives from the full engagement of all interested parties in the discussions over the new RSPT tax.

The mining index jumped higher on the market open today and has managed to hold on to its gains up 1.6% in the last trading.

By Michael Hevern
Head of Research

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