Morning Market Report, Jun 26, 2008

The market is up 76. Strong start partly blamed on options expiry, short covering and bargain hunters taking advantage of others doing tax loss selling over the last few days.

Financials add 41 points to the ASX 200. Resources add 6. Fortescue Metals up another 2.1%.

Dow up 4 (0.04%). Up 117 at best. Down 18 at worst. S&P500 up 0.58%. Nasdaq outperformed – up 1.39%.

FOMC LEFT RATES UNCHANGED. Bond yields fell after the Rate decision suggesting the statement has delayed the chances of an interest rate rise. Financials up initially on Fed decision – were up a huge 3.4% at their peak – but turned down after the Fed’s statement saying the credit markets remain fragile and inflation risks remain to the upside. Energy sector drops with higher than expected crude stockpiles. Tech stocks outperform. Resources stocks down. May durable orders flat and in-line with expectations – no real impact. May home sales fell 2.5% – marginally slower falling rate than the 2.7% expected – good news but housing market recession still evident.

Both BHP and RIO down in ADR form overnight, 2.3% and 2.1% respectively. BHP up 13c to 4385c. RIO down 50c to 13600c.
Metals mostly down overnight – both Aluminium and Zinc down 1.4%, Copper down 0.4% and Nickel up 0.9%. Zinifex flat at 820c.
Oil price down $2.57 to $133.92 after the Energy Department said inventories came in higher-than-expected for the week. Woodside up 7c to 6645c.
Gold down $9.30 to $882.30. Newcrest down 48c to 2512c.
US Bonds down with the 10 year yield up to 4.10%.

Banks leading with gains of +3% as the UBS Financial Services conference sees no real problem in the sector with presentations from CBA, SGB, WBC, BEN. Early rally in stocks which have experienced recent selling pressure – Babcock & Brown was up 8% (good presentation yesterday reiterating profit guidance), Macquarie Infrastructure up 5.1% and Futuris which lost 27% yesterday is up 24% after the CEO resigned.

Lots of research expected on Wesfarmers today after the announcement yesterday that the Varanus Island gas explosion will impact them to the tune of $20m profit a month. WES fell 4% or 154c to 3729c yesterday. Up 1.5% today.
Lots of research on Futuris after their profit warning yesterday. FCL fell 27% yesterday. The CEO of Futuris has stepped down this morning and the price has jumped 24% in early trading.
Bendigo & Adelaide Bank present at the UBS Conference today – say credit quality is good. No exposure to security lending. Future credit environment remains challenging. BEN up 4.2%.
The CBA have a presentation out for the UBS conference also – no plans to raise capital – cost pressures continue. Domestic credit growth slowing. No major problems. Similar message from Westpac and St George. CBA up 5%.
Poseidon Nickel (POS – Andrew Forrest the chairman) have secured US$50m of funding. Harbinger Capital says POS has the same growth opportunities as Fortescue. POS up 18.24%.
Federal Government looking at preparing a new foreign investment regime aimed limiting state owned corporations from taking control of Australian companies.
UBS boosts its earnings forecasts for RIO – FY08/09/10 EPS raised by 6%, 6.5% and 5.5% – on back of the 85% increase in iron ore price settlement with Baosteel. BHP says it’s not enough to compensate for the freight advantage of Australian ore.
BHP’s and Indonesia’s Antam, receive strong support for its nickel JV from the government’s investment chief.
Westpac (WBC) expects to increase the amount to be raised from its planned issue of stapled securities to circa $950m by boosting the Tier 1 capital position. They have presented at the UBS conference as well and say they have had a robust start to 2008. Cash earnings up 10%. Revenue up 12%. WBC up 4%.
ABC Learning (ABS) up 14% with the management not commenting on the speculation that it’s received bids for the entirety of its UK business. ABS has its UK vouches business up for sale, expected to close after June 30.
News Corp up 3% with talk that they have bounced off technical support at 1700c and are on the way to 1855c.
Newcrest down 2% as Merrill Lynch shades earnings forecasts but retains a BUY.
Kagara Zinc (KZL) had a further nickel intersection at Lounge Lizard, the red dome intersection at 63.45m @3.14 gpt gold. KZL up 4%.
Challenger Intl (CGF) up on the jump in the Challenger Infrastructure yesterday after one of its shareholders called for the fund to be wound up. CGF hold 33% of CIF. CGF up 7.5%.