ASX are having a few problems with the market indices, so no one really knows what the market is doing at the moment, but we know, the ASX 200 is up 34 at midday.

The Dow Jones closed 50 points lower – It moved in a 131 point range, was down 104 at one stage and finished lower on low (“very light”) volumes. The Fed added $10bn to reserves. Fed funds rate at 5.5% is above the 5.25% target rate raising liquidity concerns. A report said the commercial paper market had fallen for the third straight week… biggest fall since 2000. Lehman Brothers downgraded broking houses and banks saying they are likely to suffer reduced earnings as a result of rising credit costs. Merrill Lynch downgraded earlier this week. KKR having trouble with the banks finding $24bn for an acquisition. Freddie Mac released lower-than-expected earnings results down 45% and maintained their bearish outlook for the property market saying it is likely to remain depressed. Sears Holdings results down 40% in the 2nd Q. Wal-Mart downgraded to a SELL In economic news, the Commerce Department said 2Q GDP increased by 4.0%, in line with expectations and up from the initial GDP estimate of +3.4% a month ago. The significant element to the number was that business investment, not consumer spending, was the main driver of growth. The S&P 500 lost 2.4% on Wednesday and made up some of the lost ground yesterday by putting on 2.2%. Worth mentioning, according to the Bespoke Investment Group, a back-to-back gain and loss of 2% or more has occurred only 35 times since 1945. The NASDAQ finished slightly higher.

Resources performing strongly… BHP up 35c to 3810c and RIO announced they have obtained Canadian Competition Act clearance for their proposed acquisitions of Alcan, the stock is up 158c to 9268c. Metals mostly up overnight, Nickel up 1.8%, Aluminium up 0.1% and Copper up 1.8%. Zinc down 1.2%. Zinifex down 22c to 1678c. Oil price down 15c to $73.37 on the back of traders taking advantage of recent increase in the price. Woodside up 83c to 4440c. Gold down $1.50. Newcrest down 20c to 2425c.

It is the Labor Day holiday in the US on Monday (1st Monday in September). Markets closed. It is a “working man’s holiday”, has been since 1882. It is seen as the symbolic end of summer in the US. Bernanke gives a speech tonight… we are looking for any indication on interest rates. Anything less than a rate cut at the next FOMC meeting on 18th September will be seen as disappointing. Last day of reporting season today. It is amazing that a couple of months ago the market was having a panic about the rising 10 year bond yield in the US and Europe. The US 10 year bond yield is now 4.5% (down from 5.3%). If its falls to 4.4% it will be a two year low. In other words, we were worrying about nothing and in fact are moving into a lower not higher interest rate environment. The US cut interest rates in 1998 on fears of a recession. When they did the market rallied hard. Two years later the bear market began. Some strategists are seeing this market as something similar. The US are about to cut rates to avoid recession and the equity markets will enjoy the honeymoon… at least initially.

End of the results season today… Hooray.

  • Harvey Norman (HVN) up 27c or 5.4% to 528c after announcing net profit up 77% to $407.3m, up from $229.6m last year. The result was given a boost from the $72.7m sale of their Rebel Sport stake to private equity and $28.69m from the FlexiGroup IPO. Revenue up to $1.33bn from $1.1bn last year and declared a 6c dividend, up from 4c last year. HVN has been an exceptional performer this year, up 31.5% compared to an 8.1% rise in the overall market.
  • Sims Group (SGM) down 75c to 2725c after they released a record 29% rise in FY07 NPAT to $254.4m, up from $196.6m last year. The result was slightly better than the $251.m analysts expected and in line with the $250-$255m the company forecast.
  • Consolidated Minerals (CSM) has received yet another takeover offer, this time from Ukrainian company Palmary who are offering 395c share. CSM already has two bids of the table from Territory Resources (TTS) and the Pallinghurst consortium. CSM now up 34c to 405c.
  • Amcor (AMC) announced they have decided to sell their Australasian food, can and aerosol business to Impress Group for $150m. AMC up 8c to 758c.
  • Bank of Queensland (BOQ) down 6c to 1819c – they have made a $592m cash and shares offer for Home Building Society. They are going to offer Home shareholders 0.844 new BOQ shares and 280c in cash. The board of Home has unanimously recommended the deal.
  • Australian World Exploration (AWE) have appointed Bruce Phillips as their new Managing Director.
  • The VIX volatility index was up 5.25% to 25.06.

Next week: US Holiday on Monday. RBA Board meeting. US Beige Book. Bank of England interest rate decision.

In the Marcus Today newsletter later today will be lists of the highest and lowest PE’s in the ASX 200 and the highest gross yielding stocks along with how far they are from their one year highs.

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