Morning Market Report, Jun 04, 2008

Our market is having a better day – up 22 after a 390 or 6.5% fall in the last 12 days. The SFE Futures suggested a 25 point fall this morning. Financials up 0.9%, Resources up 0.3%.

Dow down 101. Up 51 at its best, down 161 at its worst. 9 out of 10 sectors down. Financials struggled – S&P500 Diversified Financials Index slumped to the lowest levels since March 17^th. Lehmans led the movements in the market overnight. The Wall Street Journal reported that Lehmans might need to raise substantial additional capital. Later in the afternoon rumours circulated that Lehmans was borrowing emergency funds from the Fed’s discount window. Lehmans at the lowest level since August 2003 on concerns it may post its first ever quarterly loss. Housebuilders up on the back of better than expected results from Toll Brothers and suggestions overseas funds are coming in to buy up US housing blocks at the bottom of the market. In economic news, May factory orders up 1.1% (consensus was -0.1%) – suggests that 2^nd Q GDP may be better than expected and Fed Chairman – Bernanke – made some supportive comments re the economy, saying the economy could grow without boosting inflation. He used the words “well positioned” and said policy makers were “attentive”.

Both BHP and RIO down in ADR form overnight, 2.59% and 1.8% respectively.
Metals mostly down – Zinc down 1.3%, Copper down 0.3% and Aluminium 0.2%. Nickel up 1.4%.
Oil price down $3.42 or 2.8% to $124.33 after Federal Reserve Chairman Ben Bernanke indicated more interest rate cuts are unlikely.
Gold down $7.40.
Bonds up with the 10 year yield down to 3.89%.

Our market shrugging off the credit crunch worries in the US overnight. All the banks are up despite the 0.6% fall in the US financial sector.

March Q GDP numbers out this morning. Stronger than expected. Up 0.6% QonQ (some expected 0.0% – consensus +0.2%) and up 3.6% YonY (consensus up 2.8%). It puts back the chances of a rate cut and has prompted brokers to predict more rate rises this year. The A$ is up. Some brokers say the strong number will have to be revised next month and is “puzzling”. Either way…no rate cuts anytime soon.

Making the news today….

Incitec Pivot hitting a record high and up 7% on no news but a generally positive tone in the sector after rains across some states and a Macquarie OUTPERFORM recommendation post the Dyno Nobel acquisition. IPL up 7.57% to 19110c.
Babcock & Brown Infrastructure Group (BBI) has agreed to terms with its lenders to refinance a $518m debt facility that was set to mature in August. BBI up 7c to 109c. Babcock & Brown Power has done the same thing as BBI and announced the refinancing of a $2.7bn debt facility and an intention to refinance another $360m by the end of August. BBP up 9c to 136.5c.
ABB Grain falls 10% post its institutional placement which was increased from $170m to $190m. ABB down 11% to 960c.
Macquarie Group (MQG) up after completing their $600 million convertible preference share offering. MQG up 114c to 5120c.
The National Australia Bank (NAB) announced they have completed the acquisition of US based Great Western Bank. NAB up 17c to 2954c.
G.U.D Holdings (GUD) announced the sale of the Victa lawnmower business for $23m – above book value. GUD up 12c to 882c.
Staples Inc has upped its takeover target for Corporate Express’ (CXP) parent Corporate Express NV, representing a 116% premium to the share price before the bid. GSJB Were believe this is a positive for CXP. CXP up 10c to 562c.
Commander Communications (CDR) announced yet another profit warning for FY08. CDR down 1c to 11.5c.
Oil Search (OSH) will refinance US$400m through a 5-year revolving facility to fund general corporate purposes and development costs. OSH down 5c to 631c.
Tap Oil (TAP) said gas production from Varanus Island, off the coast of WA, has been suspended following an explosion. TAP up 15.8% in the past quarter. TAP down 8c to 191.5c.
Crown (CWN) has officially abandoned its JV project to develop a site on the Las Vegas strip. CWN down 9c to 1033c.
AXA Asia Pacific Holdings (AXA) announced it will acquire Challenger Financial Services Group’s (CGF) financial planning business in exchange for AXA’s closed annuity portfolio and $100m cash. CGF trading on a 2007 PER of 5.4x. AXA up 8c to 525c.
CSR ex dividend 9c – down 12c to 273c.