That's not a cut, this is a cut!!!

October 8th, 2008  by Zeyar Htut

Closing Data

	Current	Change	%
Dow Jones	9,447	-508.39	-5.11
NASDAQ	1,755	-108.08	-5.80
S & P 500	996	-60.66	-5.74
FTSE 100	4,605	16	0.35
All Ords	4,598	53.2	1.20
SPI Futures	4435	-253	-5.40
Nikkei	10,156	-317.19	-3.03
Oil	90.18	2.03	2.30
Gold	882	15.8	1.82
Silver	11.38	0.095	0.84
Copper	5734	77	1.36
Aluminum	2245.25	41.25	1.87
Lead	1611.25	-3.75	-0.23
Nickel	14009	-71	-0.50
Tin	16212	2	0.01
Zinc	1528	-2.75	-0.18

That's not a cut, this is a cut!!!

As many of you are already aware Mr Steven's and the RBA cut rates by a whopping 100 points yesterday dropping the cash rate to 6% - the most significant cut in 16 years.  The move was very much unexpected and gave our market some juice rallying 6% from morning lows.  Soon after Westpac was the first major bank to reduce their standard variable rate by 80 points with the other 3 majors following (from next Monday).  This should provide much needed relief reducing loan repayments for everyone.

This morning the local currency softened as money flowed to currencies with higher interest rates – note that AUD rallied to 72.5c after the rate cut.  This may push up the price of petrol at our bowsers and make buying imports more expensive for us.

We will see further cuts by the RBA over the next 6 months in order to stimulate growth with the 90 day bank bill market pricing our cash rate down a further 100 points.  There is also considerable speculation that this rate reduction was a coordinated move with other Central Banks. The Bank of England is likely to cut rates on Thursday with the US Federal Reserve meeting October 28 and 29.

Unfortunately our market represents only 2% of the world's share markets and the rally we had yesterday was a drop in the ocean.  Overnight the Dow Jones locked in its biggest 5 day fall ever down 508.39 points or 5.11% as investors became skeptical that the Fed's rescue plan would succeed.  This is on the eve of the short selling ban in the US being lifted next Thursday (short sellers borrow stocks and sell them on the bet that the stocks will fall in value, so that they can buy them back at a lower price and pocket the difference).

The Australian Sharemarket is set to fall with Futures down 266 points or 5.67% this morning following Wall Street.  Commodity prices bounced overnight but gains on our big miners would be limited as BHP fell 1.3% equivalent to $29.46 in our local currency and Woodside down 5.5% in New York.  Expect the gold miners Lihir, Sino, and Newcrest to strengthen on the back of spot gold prices rising $28.80 to $886.25 an ounce.

Our latest investor update "Nothing much surprises me these days –except this" written by Peter Spann is available on our website.

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Important information

The information relating to the Leveraged Equities Share Protection Plan has been prepared without taking into account your investment objectives, financial situation, or needs. Before making an investment decision you should consider the appropriateness of the advice having regard to these matters, obtain a copy of and consider the relevant Product Disclosure Statement ("PDS”) for that product.  If you require assistance in relation to your personal investment situation please contact a Freeman Fox Stockbroker on 1800 000 369.

Quote of the day: "If pro is the opposite of con, is progress the opposite of congress??" Brittany C.

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