Morning Market Report, May 06, 2008

Market down 27, financials down 1.7% and resources up 0.9% with oil hitting all time inter-day record and closing $3.65 at $119 per barrel. SFE Futures predicted a 3 point fall in the market this morning.

Dow down 88. It was down 118 at its low. Down all day. Volume on the NYSE was the lowest this year. UK market was closed. France and Germany up 0.13%. Main issue was a 15.0% fall in Yahoo! in response to Microsoft withdrawing its bid at the weekend. No rate cuts – a new high on the oil price highlighted the inflation issue and suggests the Fed will not be cutting rates again in a hurry. Profit taking after an 11.2% bounce in the Dow Jones since March 17th. The Dow is now just 7.8% off last years record high. It was down 17.1% at its worst. Financials down 1.5% with comments that the sector has been overbought in the rally.

Materials (resources) up 1.5% with Energy up 1.0%. Countrywide Financial down 10.37% to $5.36 on analyst talk that the company was worth zero to $2 and that the Bank of America should withdraw or lower its $7 bid made in January. Bank of America down 2.06%. Ambac Financial (bond insurer) down 8.92% on comments from Warren Buffett that some bond insurers don’t deserve their AAA rating. Inflation concerns return after the Oil price hit a new record of $120.21. As the market falls all the bear market pattern returns. Some pertinent comments made overnight – Merrill Lynch said the market was going into a “long soft patch”. Greenspan spoke to Bloomberg News and labeled the US economy as being in a recession but an “awfully pale recession.”

Both BHP and RIO up in ADR form overnight, 1.11% and 3.97% respectively. BHP up 53c to 4465c. RIO up 148c to 14043c.
Metals unchanged – London closed for Bank Holiday. Zinifex up 7c to 998c.
Oil price closed in record territory – up $3.58 to $119.94 – on the back of overseas supply concerns and a weaker US dollar. Woodside up 93c to 6015c.
Gold up $16.10 to $874.10. Newcrest up 93c to 2923c.
US Bonds down with the 10 year yield up to 3.86%.

St George Bank Ltd (SGB) posted 1H results today – Described as “solid” but a bit below expectations (for explainable reasons) and with marginally reduced earnings growth guidance to 8% from 8-10%. They aren’t going to set the world alight but aren’t going to sink the ship either. 1H net profit fell 10% to $514m, down from $572m a year ago. Cash profit rises 6.2% to $603 million – below analysts’ expectation of $631.3m thanks to a mark to market on the mortgage book. SGB down 88c to 2686c.

RBA Meeting today – a 7% chance of a 25bp interest rate rise.

As expected, QBE Insurance Group (QBE) has extended its offer for smaller rival Insurance Australia Group (IAG) for the second time until May 19 and also announced it has agreed to acquire some of its distributions channels. QBE down 38c to 2519c and IAG down 1c to 435c.
BHP Billiton (BHP) is still in discussions with European Union competition officials before it submits its planned takeover of Rio Tinto and insists there are no problems with the submission. BHP up 37c to 4449c, RIO up 133c to 14028c.
Talk is that Macquarie Group (MQG) is planning to meet with domestic and international debt investors next week ahead of a potential auto-backed loan issue. MQG down 132c to 6398c.
Coeur D’Alene Mines (CXC) announced that its Cerro Bayo Mine in Chile had resumed operations after a temporary suspension to upgrade the mine’s electrical infrastructure. CXC down 2c to 330.
ABN AMRO is conducting its Australia Beverage conference. CCL down 1c to 827c. FGL down 1c to 510c. LNN down 2c to 827c.
APN News & Media (APN) say they have no material debt maturities until 2010.
Atlas Iron (AGO) has hit an all time high this morning after giving a presentation at a resources conference in Sydney. A little unexpected considering the presentation contained no new announcement to explain the price rise. AGO up 6.2% to 406c.
JP Morgan has upped their recommendation on Bluescope Steel (BSL) to OVERWEIGHT from NEUTRAL after lifting their profit expectations on the company. They have a 1280c target price, over 20% above the 1051c current share price.