A retreat from cyclical sectors pushed the Australian share market towards a second day of losses as gold stocks hit their lowest point since November 2008 and Asian markets struggled for traction.
At lunchtime the ASX 200 was seven points or 0.1% lower at 5184 as gains in consumer staples +1.5%, telecoms +1.5% and property trusts +1.1% were swamped by falls in resource stocks and industrials. The gold sector tumbled 5.5% as the metal wallowed below US$1,400 an ounce this morning. Metals & mining fell 1.6%, industrials 0.6% and financials were unchanged.
An acceleration in the Japanese economy was not enough to fuel gains on the Nikkei amid speculation about the extent of recent gains. A report this morning showed GDP growth of 0.9% over the first quarter, up from a rate of 0.3% in the previous quarter and ahead of expectations. The Nikkei was lately down 1.08%. Shanghai edged up 0.28% and Hong Kong's Hang Seng put on 0.18%. Dow futures were recently up two points or less than 0.1%.
"The market, particularly in Japan, looks overbought and needs a pullback," Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors, told Bloomberg. "We're not going to see a full reversal at this stage. The effects of aggressive monetary stimulus in Japan is just starting to gain traction."
Spot gold bounced $6.20 this morning to US$1,397.20 an ounce. Crude oil futures gave back 32 cents at US$94.07 a barrel. The dollar was buying $US99.06.
I suggested this morning that the big banks would have to rally for our market to make any headway. That obviously hasn't happened, so down we go. A brutal morning for the goldies - our market's capacity to front-run the gold price is fascinating. The GFC low in gold stocks is now just a few hundred sector index points or one bad session away. Still, these are great trading conditions for scalpers and bottom feeders. I think I've been busier this week than any time since the GFC. It goes against the grain for many here and flies in the face of classical TA but there are opportunities if you study the price action and time your entries. Seven trades completed so far today in GRY, ASL x 3, EVN and BGS. Still holding SRM, GFF and VAH.
