The ASX 200 this morning dropped below 4200 for the first time in two months as resource stocks suffered another horror session and Asian markets sagged.
At lunchtime the ASX 200 was down 75 points or 1.8% at 4190 as all sectors except the defensive utilities succumbed to worries over slowing growth in China and Greece's inability to form a government. Resource stocks, industrials and small caps once again fell hardest. The gold sector fell 3.8%, metals & mining 3.2%, materials 2.9%, industrials 2.6%, energy 2.5% and the Small Ordinaries 2.1%.
"Markets seem to have again fallen hostage to Greek political dynamics," Barclays Capital analysts told Australian clients in a note quoted on MarketWatch. "To arrest market fears, proactive measures are needed. Unfortunately, they seem nowhere in sight. This suggests that risky assets are likely to trade erratically at best, with a bias to under-perform."
Most Asian markets fared better than Australia's mining-heavy bourse. Japan's Nikkei fell 0.9%, Shanghai 0.63% and Hong Kong's Hang Seng 2.27%. Dow futures were recently up 15 points or 0.1%.
Data out this morning showed consumers took little confidence from the Reserve Bank's jumbo-sized 50 basis points cut to the cash rate this month. The WBC-MI consumer sentiment inched up just 0.8%, reversing just half of April's 1.6% drop, which came on the back of a 5% fall in March.
"This is a disappointing result," Westpac chief economist Bill Evans told Fairfax. "There might have been a degree of disappointment amongst households that the standard variable mortgage rate was reduced by 'only' an average of 37 basis points. Secondly, increasingly disturbing news around Europe and specifically Greece is likely to have unnerved households."
Crude oil futures retreated another 14 cents this morning to US$92.97 a barrel. Spot gold was $3.70 softer at US$1,540.10 an ounce. The dollar was buying 99.35 US cents.
The first sniff of capitulation selling this morning? After another hiding (-2.1%) the Small Ordinaries has nearly wiped out its gains for the calendar year. Wouldn't surprise to see a short, sharp rally on global markets in the next few days, if only to burn the shorts. That's how the market works: flog the longs until they capitulate and start buying shorts, then burn them in the other direction. As a natural swing trader I had a busy morning catching bounces in the likes of RRL, PEN, WHC, FAS, AGO and DML. Only mis-step so far is PDN, which can't take a trick.
