The market is finishing off the week in a positive mood – up 116 or 2.0% – having been up 153 at its peak. The Futures suggested a 77 point rise in the market this morning. Yesterday the ASX 200 recovered a 170 point loss to close up 31.

The Dow Jones closed up 207 – It moved in a big 453 point range and finished higher for the fourth time in five sessions on the back of better-than-expected earnings results and a four hour conference call in which bond insurer MBIA (up 11%) said it expects to keep its AAA credit rating and sees no reason for its 80% share price fall. The Dow initially fell as much as 1.6% after a poor results lead from Yahoo! and a higher-than-expected 375,000 Americans filed for unemployment benefits for the first time this week, a 27 month high. It then rebounded led by financials and retailers.

Target put on 13% after Deutsche Bank upped its recommendation on the retailing sector, saying they stand to benefit in the next 6 months from the US governments stimulus package and interest rate cuts. Bond insurers did well, Ambac Financial Group closed up 9% after Citigroup said the company should be able to fight off competition from Warren Buffett’s Berkshire Hathaway, which has recently entered the municipal bond-insurance market.

Lots of economic news overnight, the Commerce Department said consumer spending was up 0.2% in December, the slowest pace in 6 months, but double what economists had expected and the National Association of Purchasing Management-Chicago’s business barometer fell to 51.5 from 56.4 last month. According to interest rate futures, there is a 68% chance the Fed will cut interest rates when it next meets on March 18 by 50bp to 2.5%. The NASDAQ closed up 1.7% despite Google’s 4Q profit result missing analysts’ expectations.

Google is down 7% in after hours trade on late results that missed forecasts. NASDAQ Futures looking a bit shabby down 0.9%. The Dow Futures are up 20 at the moment.

BHP OPPORTUNITY – A 7.6% rise in RIO yesterday against BHP up 2.6% reflects the optimism that BHP will up its bid to 3.5 to 1 when it reports results next Wednesday and that that will get RIO to the negotiating table and expedite the merger. Good for both stocks if true. The other thought is that this is BHP’s big opportunity to help its share price along ahead of what could be the biggest scrip bid in history. It is in its interests to get its share price up. So TRADING BUY as well as long term buy on both RIO and BHP is this week’s call. Resources all up led by BHP up 123c to 3828c. RIO is unchanged at 12303c.

Metals all up overnight, Copper up 2.6%, Nickel up 0.5% and Aluminium 2.6%. Zinc stocks flying on a 7% rise in the zinc price overnight on ‘short-covering’ as supply looks likely to be impacted in the short term by Chinese power problems and production disruption….something that is likely to be short lived. Copper also up as Chinese producer Jiangxi copper shuts down 43% of its production capacity. Zinifex up 57c to 1085c. Oil price down 67c to $91.67 after profit takers took advantage of the recent rally in the oil price. Woodside up 134c to 4769c. Gold up $2.10. Newcrest up 22c to 3515c.

JANUARY – Worst month in Australia since October 1987 and worst January since 1876. Australia’s performance (down 11.3%) a lot worse than the Dow down 4.6%.

  • ERA up on its interim results – Profit up 74%, final dividend 20c, expects 08 sales similar to 07, mine expansion ahead of schedule and more importantly for the sector a single comment that the uranium price outlook is positive (no embellishment on that). The price ERA has achieved is through contract and the eternal criticism of the stock is that they are selling at contract prices well below spot. Share price up 4.7% first thing. Paladin up 5.9% in sympathy.
  • Suncorp-Metway (SUN) have provided the market with an ‘Integration and Insurance Update’ which is OK. Price up 2.7% (the market is up 2.2%). They say the company is on track with its Promina acquisition and upped its annual synergy target to $325m from $225m. CEO John Mulcahy said SUN expects to claim costs associated with the recent storms in Sydney and Melbourne and floods in Lismore to total $280m, above the company’s normal provisioning of $100m for 6 months. Merrill Lynch described the briefing something of a “judgement day” and said the results on Feb 29 will be “critical drivers” of the share price.
  • MountGibson could be the next takeover target after its biggest shareholder, Russia’s Gazmetall Holdings, sold its 19.7% stake to subsidiary of Chinese steel company Shougang Concord International Enterprise Co. MGX’s other major shareholder is another Hong Kong company, APAC Resources, which owns a 20.28% stake. If both companies are acting together, then under Australian law, they must announce their takeover intentions. MGX not doing much today, up 4c to 265c.
  • Its Gail Kelly’s first day as CEO at Westpac (WBC) today after moving from St. Georges Bank (SGB). ABN AMRO say the bank is its top pick and that the initial focus will be on streamlining the cost base. They say Buy with a 3146c target price.
  • Talk is that Valad Property (VPG) will be bid for by Lend Lease (LLC), Stockland (SGP) and private equity group Blackstone. VPG’s, who has $20bn in assets under management, has fallen 60% in the last quarter.
  • No third time lucky – According to the AFR, Zinifex (ZFX) and Oxiana (OXR) discussed the possibility of the merger for the third time in 18 months but could not come to an agreement that satisfied both parties. ZFX’s share price has been hit the hardest of the two, down 47% in the last couple of months.
  • ABN AMRO have upped their recommendation on Alumina (AWC) to BUY from HOLD after announcing yesterday underlying earnings of $405.6, disappointing but in line with expectations. The stock fell 4.7% yesterday and is down another 1.9% at the moment. ABN AMRO also cut their target price to 642c from 655c and say “we believe the stock looks cheap trading at a 22% discount to our net present value”. JP Morgan have downgraded to UNDERWEIGHT with a 59% earnings downgrade on the expectation of a lower alumina price and a higher A$. They have a 400c target price. The stock is a victim of a rising A$ and the prospect of an RBA rate rise next week in the face of US rate cuts isn’t helping.
  • Credit Suisse expects Bradken (BKN) to announce a 1H profit of $23m next week with the key drivers of earnings including “mining volumes (iron ore and coal) and the resultant impact that mining volumes have in the demand for rail freight wagons”. They maintain their OUTPERFORM recommendation and 1200c target price. BKN had a profits warning at the end of last year.

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