Australia: Investors rush for safety

14.57 AEDT, Thursday 1 November 2012

Investors rush for safety
By Ben Taylor (Sales Trader, CMC Markets)

We have seen broad local based selling today with no sector spared as the market comes to terms with Hurricane Sandy, US earnings disappointments and Euro Finance Minister’s calls for deeper budget cuts to Greece after the Greek Budget Estimates.

There is a preference for defensives and lower risk assets as investors rushed into bonds overnight and healthcare stocks outperform locally. Miners and energy plays today are retreating despite positive moves on overnight commodity markets as traders prefer safe havens ahead of the jobs number on Friday and next week’s US elections.

Traders continue to weigh up the damage bill and lost revenues versus potential economic growth from restocking and rebuilding in New York. The expected net result is negative but we are trying to figure out by how much. Despite the lack of power and disruption to transport there appears to be no interruption to the US elections scheduled for next Tuesday.

The Greek government budget estimate revealed an untenable position with the 2013 deficit expected to blow out to 5.2% of GDP while the debt to GDP ratio has been forecast at 189.1%. The market is asking serious questions about how long the bailout funding will last.

Today we saw the release of both the Chinese manufacturing PMI numbers. While the official number rose to 50.2 the HSBC equivalent came in higher at 49.5 but still showed a contraction. The data helps to reveal a Chinese growth bottoming with a pick up expected as Government sponsored projects continue to come online.

ENDS

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