Morning Market Report, Jun 02, 2008

The market is down 17. BHP taking the lead and contributing 18 points to the index on its own. Financials down 1.5% and Resources up 1.4%. SFE Futures were up 15 this morning.

Dow down 7. Up 43 at best. Down 29 at worst. S&P 500 up 2 and NASDAQ up 14. Dow up 1.27% for the week. NASDAQ up 3.19% for the week. Consumer spending up a measly 0.2% in April. Not a great sign for the US economy. Weakest number since January. Personal income growth up just 0.2% as well. Again….not a great sign for the economy. University of Michigan consumer sentiment index fell to a 28 year low of 59.8 (down from 62.6). It was the fourth fall on the trot. Petrol prices the US are touching $4 a gallon. But in France it is $10 a gallon and in Turkey $11. Oil price up a touch. No quick fix says the US Treasury Secretary visiting the Middle East. Resources down – BHP and RIO down 2% in the UK. Financials down. Tech stocks up with Dell up 5.7% on results. Mortgage insurers down more than the rest. Gold up. Uranium up. Credit Suisse banker gets 10 years for insider trading.

It is June – tax loss selling best done at the start of the month. For the month – Dow down 1.4%, S&P 500 up 1.1%, NASDAQ up 4.6%, Oil price up 12.4%, Commodity index up 3.2%.

Both BHP and RIO down in ADR form on Friday, 1.64% and 0.05% respectively. BHP up 147c to 4497c. RIO up 345c to 14145c.
Metals mostly up on Friday – Copper up 0.6%, Zinc up 1% and Aluminium 1.7%. Nickel down 0.5%. Zinifex up 2c to 952c.
Oil price up 65c to $127.35 – According to OPEC President Chakib Khelil, the weak U.S. dollar, market speculation and the subprime crisis are the causes for the spiraling price of oil. He said the cartel will make no new decision on production levels until its Sept. 9 meeting in Vienna. Woodside up 167c to 6667c.
Gold up $10.10. Newcrest down 23c to 3161c.
US Bonds up with the 10 year yield down to 4.06%.

Arrow Energy up 20% and up from $3 to $4 in the last week on the back of the Santos deal with Petronas. This morning they have formed an alliance with Shell – Shell to buy 10% of Arrow International (a subsidiary company) for $132. Shell to buy 30% of AOE coal seam gas assets in Queensland for $644m. It is the third acquisition of LNG assets in Australia in a month and continues to light the fire under the gas sector with the obvious implication that Australia has assets that are worth a strategic premium on top of current equity valuations. AOE up 20% in early trading.

RBA expected to leave rates on hold at 12-year high of 7.25% after tomorrow’s monthly meeting. Markets pricing in an 85% chance of rate rise before year end.
Australia’s manufacturing sector down for the 5^th month running –due to slower world growth and higher domestic interest rates curbing demand.
Retail sales numbers down 0.2% in April and much weaker than the 0.2% rise expected. Suggest interest rates don’t need to rise. A$ fallen a touch.
A swathe of positive research on Origin this morning after they rejected the upped bid from BG Group on Friday. ORG up 18c to 1578c.
Credit Suisse downgrades Babcock & Brown earnings by 10% and 6% and have cut their target price to 1880c from 2000c. They retain an OUTPERFORM recommendation. BNB flirting with the 1190c technical resistance level. Now 1200c, down 46c.
BHP Billiton (BHP) has formerly submitted proposals to the European Commission for clearance to take over RIO as RIO continue to reject the $180bn takeover bid. BHP down 152c 4500c.
Virgin Blue (VBA) is said to be losing money – UBS has said it has forecast a FY09 net loss of $40m, rather the $60m profit previously forecast – down 4c to 65c.
Sonic Healthcare (SHL) has agreed to buy Germany’s Labour 28 group to build its European pathology business – acquisition will be EPS accretive immediately and will be funded by Sonic’s existing syndicated senior debt facility. SHL up 5c to 1445c.
Just Group (JST) have formerly rejected the March Solomon-Lew backed Premier Investments $2.20 cash bid – independent expert has valued the company at between $4.78 and $5.28 per share. JST down 1c to 389c.
Strike Resources (SRK) announces a 68.5% interest in the Peruvian Ore Projects. SRK down 15c to 243c.
Centro Properties Group (CNP) has won the extension on its financing obligations to Dec. 15. CNP down 0.5c to 37.5c.
Beach Petroleum (BPT) in a trading halt this morning as it raises capital through a $190m placement to fully fund three previously announced Egyptian acquisitions in highly prospective basins.