Morning Market Report, May 19, 2008

The market is up 25 with resources leading the way on record high oil prices, base metals up and gold reaching $904.60 overnight.

Dow down 5. Down 99 at its worst. Up 9 at its best. Up 1.89% on the week. NASDAQ up 3.41% on the week. Lowest consumer sentiment number since Jimmy Carter was President. The University of Michigan consumer sentiment index hit its lowest level since 1980 at 59.5 in May (consensus of 62 and last year’s average of 85). Higher oil prices taking its toll on the consumer. Government fiscal stimulus package cheques have just begun to land on consumer doormats. Big jump in housing construction – up 8.2% in April. Biggest jump in 2 years – dismissed as a solid indicator because it was boosted by volatile apartment sector gains (up 36%). Oil price hit a new peak at $127.82 despite the Saudis upping production by 300,000 bpd last week to meet demand. Up $2.17 to $126.29. Energy sector up 2.5%. Treasury Secretary Henry Paulson said financial markets are “considerably calmer” and predicted an economic recovery in the second half.

Both BHP and RIO up in ADR form on Friday, 1.69% and 1.54% respectively. BHP up 51c to 4921c. RIO up 136c to 15671c.
Metals all up on Friday – Zinc up 2%, Copper up 1.5% and Aluminium 0.9%. Nickel up 0.2%. Zinifex up 4c to 1076c.
Oil price closed in record territory – up $2.25 to $126.50 despite news that Saudi Arabia had upped its oil output by 300,000 barrels a day. Woodside up 210c to 6529c.
Gold up $19.90 to $899.90. Newcrest up 101c to 3254c.
US Bonds down with the 10 year yield up to 3.84%.

The AFR reported this morning that HSBC might be looking to buy ANZ Bank – ANZ’s foray into China and CEO Mike Smith being a former HSBC executive has apparently put the bank on HSBC’c radar – the move would face heavy scrutiny from Australian regulators. ANZ decline to comment. 4 pillars policy rules out any serious hope of a bid.

QBE Insurance Group Ltd. (QBE) has increased its $7.6bn merger proposal for IAG – raised bid to 0.145 QBE shares and 90 cents for each IAG share – values IAG at $4.60 per share – an $8.7bn deal. IAG has indicated that the final proposal falls well short of expectations. QBE on a PE of 10.5x and a yield of 5.0%. IAG post the bid is on 25.5x and a 4.9% yield. QBE up 17c to 2572c.
Westpac (WBC) wont rule out increasing the 1.31-for-1 share offer for St George if it faces a rival bid. “Westpac considers that it has made a full and fair offer, which is compelling both in terms of its price and terms…However, Westpac reserves the right to review its offer if it considers that circumstances warrant this.” CBA, NAB and AMP all declined to rule out a counter bid. SGB up today, Westpac down. WBC down 44c to 2442c.
Spotless Group (SPT) has extended its offer for Programmed Maintenance Services to the 13^th June. SPT down 4c to 351c.
Sundance Resources (SDL) up nearly 6% on back of maiden iron ore resource at its Mbalam project in Cameroon. SDL up 1c to 26.5c.
James Hardie (JHX) tipped by Goldman Sachs to report FY08 net profit on Thursday to be up at $184.3m verses consensus of $180.7m, but down 20% on last year. JXH down 2c to 583c.
Brambles Ltd (BXB) 10 month sales result on the London Exchange showed a 13% rise in sales – US demand for grocery products up. BXB up 9c to 900c.
Rio Tinto (RIO) strengthens copper resources, upgrading mineral resources to 637m tonnes at 0.48% copper at Kennecott Utah Copper Bingham Canyon Mine. RIO up 135c to 15670c.
Base metals up on Chinese government announcement of more than 4.7 million houses in provinces of Sichuan, Gansu, and Shaanxi destroyed by the recent earthquake needing to be rebuilt.
BHP’s CEO Marius Kloppers won’t rule out adding cash to its all-scrip $135bn bid for RIO as rumours still circulate regarding a Chinese mob looking to buy a stake in BHP.
Lincoln Minerals (LML – uranium, gold, iron ore) doing well after Indian metals group Mineral Enterprises upped its stake in the company to 19.99% from 4.7%. LML up 2.5c to 22c.