Morning Market Report, Apr 23, 2008

The market is up 16, doing well considering Wall Street dropped over 100 points overnight. The SFE Futures suggested a 17 point fall this morning.

Dow Jones closed down 104. Down all session and down 169 at its worst. Biggest loss in a week. The main issue was the poor 1Q earnings. Lot of big results and share price falls on results including: DuPont down 4%, McDonalds down 0.55%, T&T up 0.16% and Texas Instruments down 5.79%. NASDAQ underperformed – lost 1.6% with bearish signs for the large cap tech stocks and Semiconductors down with SOX losing 3.3% after Texas Instruments results. Yahoo! results after hours are nothing to write home about. They are under offer from Microsoft and Yahoo! is down 0.81% after hours whilst Microsoft is up 0.63%. Does little to convince the market that Microsoft needs to raise its takeover bid. In economic news, March existing home sales fell 2% to seasonally adjust annual rate of 4.93m. Seventh drop in eight months but a touch better than expectations. Median price of homes down from a year ago. Economists were expecting a 2.2% decline to 4.92m. Eight out of ten sectors down. Consumer discretionary down 1.7% and materials (resources) 1.4% down. Only energy and telecom up, both rising 0.2%.

Both BHP and RIO slightly down in ADR form overnight, 0.6% and 0.55% respectively.
Metals all up overnight – Zinc up 2.2%, Copper up 2.1% and Nickel 1.6%. Aluminium up 1.5%.
Oil price up $1.69 to $119.17 on concerns about production disruptions in Nigeria. Qantas just hit a 19 month low – fuel surcharges or downgrades on the way.
Gold up $7.60 to $925.20.
Bonds up with the 10 year yield down to 3.69% from 3.72%.

Big day on the news front today…lots going on.

The main story is ANZ Banking Group’s (ANZ) 1H result. The numbers are a touch better than expected (profit down 14%) but the main message is “No surprises”. Overall probably quite good for the ANZ and the sector – in an environment of fear a “no disaster” result is good. The 2nd half is expected to see an improvement so there is an argument that this is possibly as bad as its going to get. ANZ up 46c to 2160c. Citigroup says they thought they were disappointing and see no reason to buy at the moment. Personal opinion is that they are all a long term buy it’s just a question of when you time it in the short term. No rush yet it seems. The CBA told us yesterday the credit crisis could last for another 18 months. Ho hum.

CPI numbers are out – higher than expected with CPI up 1.3% in the March Q and up 4.2% year on year. That compares to market expectations for 1.2% and 4.0%. Not thought likely to change the RBA’s on hold stance.

BHP quarterly production numbers are OK but not that price sensitive this morning. Contained no nasty surprises – generally OK and in line with what the market was expecting. Not much broker research to go by as just about every investment banker is advising them or RIO on the RIO bid. According to The Financial Times, BHP’s CEO Marius Kloppers last night used RIO’s flat 3Q production numbers last week as ammunition to attack Rio’s past and recent underperformance along with its growth prospects. BHP having a good day, up 46c to 4398c, RIO up 123c to 14354c.

Zinifex (ZFX) released their 3Q production numbers – Irrelevant really as they are under offer from Oxiana. GSJB Were say the result was a bit weaker than expected. ZFX down 5c to 1023c.
Perilya’s (PEM) 3Q production report has been described as positive, with Were’s saying it was the first time in a number of quarters that it had surpassed their expectations. PEM up 2c to 114c.
Santos announced their 1Q production numbers – down 6% from last year due to the Mutineer-Exeter floating production facility being shut down for electrical repairs. STO down 13c to 1651c.
Telstra (TLS) has appointed John Mullen and John Stewart (current MD and CEO of NAB) as non-executive directors. TLS unchanged at 457c.
Wesfarmers had an analyst presentation yesterday – the stock is in a trading halt until Monday, last traded at 3697c. The main take seems to be the COO of the Coles division saying the turnaround will take longer than expected. Keeping expectations realistic.
ABC Learning up 45% yesterday and down 19% today. Reaction to their US deal not that flash – good deal but still plenty of work for the company to do in the long term. Now 160c having closed yesterday at 198c. ABN AMRO has upgraded to a BUY with a 250c target price saying the deal “significantly de-risks” the company.
Newcrest down 3% in a pretty muted reaction to their production numbers and lowered production guidance yesterday. The comment from the Patersons analyst this morning is that they were unlikely to hit even the lowered production forecasts. Liked the PNG acquisition though. NCM down 105c to 3115c. Credit Suisse has an OUTPERFORM recommendation and a $45 target price. The truth is the stock is highly geared to the gold price and is now an unhedged exposure to that. So guess the gold price and Newcrest will follow, even if they do consistently disappoint on expectations.