Morning Market Report, May 01, 2008

The market is down 43. The SFE Futures predicted a 30 point fall in the market this morning. Lots of red today, all sectors down bar the Telcos. WBC leading the way up after posting a solid interim results.

Dow index closed down 12. Finished near its low. Up 179 at its best after the Department of Commerce released it’s higher than expected (advance) GDP figures for the 1Q. The main story overnight was the Federal Reserve cutting interest rates by 25bps. Fed’s comments re inflation same as on 18 March – core inflation is easing but energy and commodities are putting upward pressure on inflation. The Fed still believes that inflation will moderate in the coming quarters. Advance quarter GDP up 0.6%, topping consensus 0.5%. The figure suggests the economy isn’t deteriorating as much as expected. ADP employment report (non farm private employment) tops estimates, up 10,000 jobs in April – good news for the economy. Earnings reports mostly positive with Colgate-Palmolive, General Motors, Kellogg, Kraft, and Procter & Gamble, all topping expectations. Time Warner and Starbucks Corp came in below expectations. Financials down 1% on the back of Citigroup’s dilutive capital raising and subsequent 4% fall in share price. April was a good month for the US market — S&P up 4.8% after five consecutive down months, the largest positive monthly move since December 2003. Commodities are up 5.8% for the month and oil rocketed 13.1%.

Both BHP and RIO up in ADR form on Friday, 1.59% and 0.12% respectively. BHP down 25c to 4202c. RIO down 138c to 13470c.
Metals mostly down – Both Nickel and Zinc down 0.4%, Aluminium down 2% and Copper up 0.1%. Zinifex down 12c to 998c.
Oil price down $1.97 to $113.70 after the Energy Department’s Energy Information Administration said crude oil inventories increased by 3.8m barrels, more than double what the increase analysts’ had expected. Woodside down 25c to 5565c. They have held their AGM today.
Gold down $11.70 to $865.10. Newcrest down 41c to 2849c.
US Bonds up with the 10 year yield down to 3.73 from 3.82%.

Westpac’s (WBC) interim result is out — in line with expectations. No nasty surprises, which was the markets main concern. One broker described the result as “solid”. Cash profit in line with expectations – up 10% (but down from 11% growth last year) due to an increase in business and consumer lending. Net profit up 34% to $2.2bn helped by numerous one-offs. Impairment charges were slightly ahead of expectations – up 87% to $433m. Non-interest income increased 28% to $2.3bn. Net interest income up 12% to $3.5bn. Cautious outlook.

Fortescue Metals (FMG) has released its March 2008 Q report and cash flow statement. Company remains on track for the first shipment of ore in mid-May. According to The AFR this morning, Chinese state-owned Baosteel is interested in acquiring a significant stake despite having already having negotiated a 16.5% stake in FMG earlier in the year. FMG has apparently been in informal talks with China Investment Corp. as well.

In other news:

Westpac Banking Corp (WBC) met analyst’s forecasts with a 10% rise in 1H core profit. Growth in business and consumer lending. Forecasts slower loan growth, rising bad debts and higher funding costs. WBC up 11c to 2460c.
BHP Billiton (BHP) approved an expansion project at Worsley Alumina (of which it owns 86%) in WA for estimated $1.9bn, BHP said they would lift capacity at the refinery to 4.6m tones per year from 3.5m. BHP down 25c to 4202c.
Gloucester Coal (GCL) doing well after announcing it had discovered a significant new coking coal discovery in the Gloucester Basin of NSW, about 2.5km from its coal plant. GCL up 4% to 1023c.
Allco Finance (AFG) has maturity of debt facility of $250m extended to May 30. AFG repaid $67.5min senior debt on Wednesday. Write downs and costs may result in $1.58bn in FY losses. AFG up 2c to 107c.
Fortescue Metals (FMG) – speculated that China’s Baosteel is interested in acquiring a significant stake in FMG. China’s $200bn sovereign wealth fund in informal talks with FMG. FMG down 3c to 738c.
AGL Energy Limited (AGK) has finalized its agreement to sell its wholly owned Chilean gas distribution business (GasValpo) for $US90m. AGK down 35c to 1215c.
Goodman Group (GMG) has announced that the Goodman Australia Industrial Fund (GAIF) has invested a $970m trust portfolio of the Goodman Group. GMG up 1c to 453c.
QBE Insurance Group (QBE) has completed the $US146m acquisition of the North Pointe Holdings Corporation in the US after receiving regulatory and shareholder approval. QBE up 6c to 2535c.
Leighton (LEI) LEI to construct $330m high-rise building in Brisbane. LEI down 26c to 4683c.
Wotif (WTF) raises cash through issuing 57,000 new ordinary shares at $2 each. WTF down 16c 431c.