Morning Market Report, May 26, 2008

The market is down 55 on the back of Wall St’s fall on Friday and the Futures down 65 this morning. Resources down 1.2% and financials down 0.8%.

Dow down 145. Down 166 at its worst. Dow Jones down 3.91% on the week – worst week since February – still up 6.3% from its low on March 10th. Focus has moved from credit crisis to high inflation, a bottoming of interest rates and a drop in consumer spending and its economic impact. US Market closed for the Memorial Day holiday tonight. Oil price up again. Airline stocks smashed this week – UAL down 46%, Continental Airlines down 27%. Resources down. Tech stocks outperformed – Nasdaq down 0.81% (outperforming the 1.16% fall on the Dow). Mortgage insurers down again – MBIA down 8.33%. Ambac down 5.01%. Financials down – JP Morgan down 1.70%, Citigroup down 2.76%. Merrill Lynch, Lehman Bros and Goldman Sachs down 2.56%, 6.21% and 2.57%. Housebuilders down. Energy sector down. Uranium stocks mixed. Gold stocks down. Existing Home sales fell 1% to an all time low and has fallen in 8 of the last 9 months. The median home price fell 8% year on year to $202,300 – 2nd biggest price fall on record. Bonds up in a flight to quality. The talk is that Fed Governors are trying to pass the message softly that interest rate cuts are now off the agenda. Next FOMC Meeting on June 24-25th expected to hold rates at 4 year low of 2.0%.

Both BHP and RIO down in ADR form on Friday, 3.03% and 3.89% respectively. BHP down 94c to 4655c. RIO down 291c to 14661c.
Metals all up on Friday – Nickel up 2.5%, Zinc up 1.9% and Copper 0.7%. Aluminium up 0.2%. Zinifex down 10c to 1018c.
Oil price up $1.54 to $131.58 and is up 30% so far in 2008. Woodside down 211c to 6534c.
Gold up $7.50 to $925.80. Newcrest down 14c to 3392c.
US Bonds up with the 10 year yield down to 3.85%.

Murchison Metals (MMX) has entered a trading halt and has said it will make an announcement about a significant transaction within the next two days – gave no further information. Speculation that Sinosteel Corp. is interested Murchison, with the Chinese steelmaker taking a 2.4% stake in the miner. Midwest (MIS) also in trading halt. The unconfirmed thought is that MMX buys 5% of MIS from hedge funds – this would follow MMX unsuccessful bid for MIS – it already holds 4.9%, taking MMX’s stake in MIS to 10%, creating a blocking stake. MMX would like to be included in production plans of MIS/Sinosteel.

St. George Bank (SGB) up 1.1% – still speculation about rival bidder coming over the top of Westpac (WBC)– exclusivity period runs out tomorrow – they could reveal merger plans as early as today, including expected synergies and costs. WBC’s offer of 1.31 shares for each of St George’s values SGB at $29.55. WBC down 0.4% this morning.
Westpac (WBC), who bought RAMS Home Loans last year, NAB (NAB), and possibly Challenger Financial (CGF – Packer owns a 20%) have all been rumoured as possible buyers for Wizard Hone Loans which is expected to be put up for sale with an announcement later this week. WBC up 5c to 2256c. NAB down 33c to 3216c. CGF down 11c to 193c.
Fortescue Metals (FMG) – Sinosteel reported to be in talks with Harbinger about buying 8% of its 16% stake in Fortescue Metals. FMG up 29c to 985c.
Qantas’ (QAN) CFO confirms 40%-plus increase in pretax profit this year, despite record high oil prices. QAN down 5c to 330c.
United Group (UGL) has won $270m in resources, infrastructure and extension projects. Includes 5 year contract with Melbourne Water worth $100m. UGL up 7c to 1350c.
Macarthur Coal (MCC) – Merrills says a full takeover by India’s ArcelorMittal is likely – expects full bid at $20 per share. Also says competing bids unlikely. MCC down 16c to 1969c.
Insurance Australia (IAG) – resignation of CEO could give QBE a fresh opportunity for a new takeover tilt at IAG – market welcomes announcement with IAG shares up 2.2% in early trading.
ING Industrial Fund (IIF) has purchased the Chatswood Business Park for $29m. ING Industrial Fund also raises $58m from non core asset sales. IFF flat at 205c.
Sims Group (SGM) said its SA Recycling JV with Adams Steel has bought California-based Pacific Coast Recycling (PCR) from Mitsui & Co for an undisclosed sum. SGM down 31c to 3469c.
Great Southern (GTP) half year results show a net loss after tax of $49.1m –GTP down 1c to 147.5c.