Morning Market Report, May 08, 2008

The market is up 35 in a remarkable turnaround from an initial fall of 78 points in reaction to the Dow. The SFE Futures this morning were down 74.

The turnaround has been led by the Banks after the Commonwealth Bank (CBA) who have made some comments this morning. The CEO’s presentation to a Macquarie conference says economic conditions remain sound and that CBA has no current plans to raise additional capital. Also says portfolio quality remains strong, capital position very strong, margin lending book in good shape, strong capital ratios at upper end of target ranges, and retains significant organic growth potential. CBA up 100c to 4290c.

The rest of the banks have followed them up.

The CBA was down 1.4% and is now up 3.6%.

The NAB was down 2.0% and is now up 2.9%.

The ANZ was down 5.3% and is now down 0.2%.

The Westpac was down 1.2% and is now up 2.6%.

Macquarie Group was down 3.0% and is now up 0.4%.

Babcock & Brown was down 3.6% and is now up 2.1%.

Dow down 206. Up 16 at its best and down 226 at its worst. The S&P 500 dropped below the technically significant 1400 level. Financials down 3.7%. Fannie Mae down 5.71% on a Q1 loss, a slashed dividend and a $6bn capital raising. Oil price hits another record. Up $1.63 to $123.53 despite the Department of Energy announcing a larger than expected increase in oil stockpiles. Resources down. News Corp results out after hours. Bit below expectations. Price up 0.3% in after hours trade. Consumer borrowing rose 7.2% in February, the highest rate in 4 months and double the previous month. March Pending Home Sales fell 1.0% in line with expectations. Treasury Secretary Henry Paulson said that the worst of the credit crisis has passed – “There’s progress. I think we’re closer to the end of this than to the beginning”.

Both BHP and RIO down in ADR form overnight, 4.74% and 4.25% respectively. BHP down 90c to 4439c. RIO down 256c to 14270c.
Metals all down overnight – Nickel and Zinc down 1.2%, Copper down 1.1% and Aluminium down 1.8%. Zinifex down 1c to 1049c.
Oil price up $1.74 to $123.56 after the Energy Department’s Energy Information Administration announced a unexpected fall in inventories. Woodside up 31c to 5956c.
Gold down $6.50 to $871.20. Newcrest up 16c to 3015c.
US Bonds up with the 10 year yield down to 3.84%.

Boral down 4% on a profit warning this morning. Against a consensus range of $234m to $256m they expect full-year 2008 earnings at the lower end of market forecasts due to a deterioration in market conditions in the US.

Jobs numbers have come in higher than expected suggesting a higher chance of a rate rise. The A$ is up on the back of it.
David Jones (DJS) posts a 3.8% growth in 3Q sales to $453.3m – reaffirms guidance of 8%-13% underlying profit in 2H. GSJBWere said the results were soft given their forecast of 4.6% rise in total sales and 2.5% growth in like-for-like growth. DJS down 2c 358c.
News Corp (NWS) 3Q profit more than tripled to US$2.69bn from $871m in 3Q 2007. 3Q operating income of $1.4bn, up 16% from 3Q 2007. Strong television and big gains from an asset swap offset losses in film division. NWS up 34c to 2064c. The problem with News Corp of course is that if the A$ goes up the A$ price of News Corp goes down…something that has muted NWS performance since January 2007.
Sims Group Ltd (SGM) says 4Q profit likely to be ahead of the 3Q profit of $75.7m, which was up 62% on the 2Q, with its takeover of US firm Metal Management. SGM up 12c to 3704c.
Zinifex Ltd (ZFX) – Zinifex has gained more than 90% share of Allegiance Mining as Chinese nickel refiner Jinchuan Group, who owned 10.4% of Allegiance, and had been blocking Zinifex’s previous offers. Allegiance was tempted by the sweetened $852.5m offer. ZFX flat.
Paladin up 4.7% or 22c to 493c as Merrill Lynch initiates coverage with a BUY. At the same time Goldman Sachs JB Were downgrade to a SELL.
Spotless Group Ltd (SPT) is considering their takeover position after Programmed maintenance Services Ltd forecast below consensus earnings expectations of yearly EBIT of $53.5m.
BHP Billiton (BHP) – As part of a four hour meeting with investors last night in London, designed to hose down recent criticisms of BHP’s oil division, Marius Kloppers asserted that Chinese investors would eventually take a stake in BHP as part of their global search for high quality companies.