Dow Down on worries of financial reform
June 25th, 2010 by Katy Loi
The Dow closed down 146 points overnight as financial stocks lead the decline on worries of financial regulation reform. Also adding to the selling pressure was news that the cost of protection from a Greek default surged to a record. The annual rebalancing of the Russell Investments Indexes which takes effect near the close in tomorrows’ NY trading session added volatility to the market. This just means that investors that mimic the performance of those measures must buy and sell shares to match Russell’s adjustments.
On the world financial front, traders are awaiting this weekend’s G-20 meeting in Toronto, Canada. Bank and financial market regulations are likely to be a main topic of discussion at the meetings. Something to note is that there has been an increase in U.S. Treasury bond prices, to multi-month highs, which suggests investors are moving to a posture of reducing risk. This means continued safe-haven buying interest in gold. The shockingly weak U.S. home sales report this week did help to put some investor uncertainty back into the market place. Also, reports overnight said the head of the Russian gold miner Petropavlovsk has predicted gold prices will reach $2,000.00 an ounce by the end of this year, due to currency market turmoil and strong retail demand for physical gold.
Our market points to an open of down 60 points indicated by SPI futures with the a key topic today being the new PM Julia Gillard and any comments with regards to the proposed Resources Super Profits Tax. With the market lower today, for freed up funds from exercise overnight, it may be prudent to buy stock positions whilst they are lower and selling calls for July to take advantage of time value. On a daily chart, we are sitting right on support on the last up trend since late May. Support can be found at 4448 and 4430. As we may see regulatory risk dampened from possible negotiation of the resources super profits tax, this could see a significant bounce in our miners as offshore investors regain confidence in the Australian equity market.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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