Foolish Preview: Dow falls again, and loyalty war rachets up


The Dow Jones closed down 1% and the Nasdaq and S&P 500 indices both closed 1.1% lower overnight, as US stocks continued to be weighed down by pessimism in the face of continued uncertainty in Europe, and fears of slowing growth in China.

Greek and French elections and an unpopular government in Germany have all raised fears of European defaults that would have flow-on effects for the European and global banking system, as well as potentially plunging the euro-zone into recession.

Meanwhile, even though China’s growth remains robust by developed-world standards, any slowing from previously strong numbers is a concern as that country has been providing a demand buffer against slowing GDP growth in the rest of the world. If China’s growth moderates, the flow-on impacts for a sluggish West could be significant.

The US company news has something of a soap opera feel to it, as Yahoo’s (Nasdaq: YHOO) now ex-CEO resigned after an error was exposed in his CV, Jamie Dimon, CEO of investment bank JP Morgan (NYSE: JPM) continues his mea culpa over a US$2 billion trading loss and Mark Zuckerburg gets ready for Facebook’s impending IPO.

The overnight falls mark the fourth decline in five sessions on Wall Street. The ASX SPI futures had fallen 34 points just after 6:30am AEST, suggesting significant falls for the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) and the All Ordinaries (Index: ^AORD) (ASX: XAO) when trade commences this morning.

In Australian company news, there will be plenty of attention on the mining sector, with Alacer Gold (ASX: ASR), Paladin Energy (ASX: PDN) and Perseus Mining (ASX: PRU) all due to release quarterly results.

The mating dance also continues to be played out between DuluxGroup (ASX: DLX) and Alesco (ASX: ALS). Dulux is playing it cool, making sure it doesn’t appear too desperate, while Alesco assures the market that Dulux’s bid is both low and opportunistic. Like all good courting rituals, this one is following the tried and true path, with both players acting the part faithfully. Mirroring politics, the studied indifference and confected shock are clearly offered for the media and onlookers – the real decisions will be made – Paul Newman-style – when both parties see the colour of the money.

Home loans are in the news again today, with Business Spectator this morning reporting that Westpac (ASX: WBC) is cutting some of its fixed-rate home loans, in a sign the bank expects rates to either go or stay lower than it had previously – and possibly with an aim to tempt more lenders to sign up for fixed rates.

The Australian Financial Review is reporting that Woolworths (ASX: WOW) is responding to Wesfarmers (ASX: WES) subsidiary Coles’ recent loyalty card push by offering a range of groceries discounts of between 20% – 40% for Everyday Rewards card holders. The grocery wars still have a way to go.

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Scott Phillips is an investment analyst with The Motley Fool. You can follow him on Twitter @TMFGilla. Take Stock is The Motley Fool Australia’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

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