Morning Market Report, Jun 27, 2008

The market is down 125. The SFE Futures were down 123 points this morning after a shocking night in the US. All aussie sectors down – financials down the most – minus 3.3%. Resources off over 2%.

Dow down 358. Down all session. Closed on its low. Dow has had its worst June since the Great Depression. Goldmans downgrades financials – puts some banks on conviction sell list. Financial sector smashed – down 4.4%. Talk of more bank write downs and capital raisings to come. The Bank Index nearly hit a 10-year low – down 3.9% to 60.20. UK banks also fell. New record high in oil – intraday $140+. OPEC say oil price could go to $170. Libya threaten to cut production. US dollar down on suggestions the Fed can’t raise rates even if they want to. On the back of the lower US dollar, commodity prices were up. Resources stocks down but outperforming. Gold has big rise up $32 – Gold stocks up in the US. General Motors down 10% on a broker downgrade. Research in Motion down 13% on earnings comments. Nike down 9% on profit comments. All 30 Dow companies have experienced losses this month on the back of record high oil prices, high unemployment and the fear of more write downs.

Both BHP and RIO down in ADR form overnight, 2.36% and 1.55% respectively. BHP down 123c to 4272c. RIO down 429c to 13189c.
Metals all up overnight – Zinc up a big 6%, Aluminium up 1.4% and Copper 1.5%. Nickel up 0.5%. Zinifex flat at 820c.
Oil price up a huge $4.99 to $139.91 after OPEC’s president said crude prices could rise well above $150 a barrel this year and Libya said it may cut oil production. Woodside up 124c to 6765c.
Gold up a big $32.80 to $915.10. Newcrest up 263c 2853c.
US Bonds up with the 10 year yield down to 4.03%.

Financials talking a beating – The banks have lost all of yesterday’s gains on the back options expiry and short coverings. The banks average yield is now 9.7%, PE average of 10.5x (down from 14-15x), below historical standards.

St George (SGB) may pressure Westpac to sweeten their 1.31-for-1 share offer in light of Westpac’s descending share price. St George’s share price continues to hold above the terms of the offer. SGB CEO said, “There is plenty of time and options for the board, including myself, to reflect on the state of the proposal relative to the current trajectory of the bank and relative valuation.” SGB down 3.3% to 2794c.

The National Australia Bank (NAB) has been sited by Bloomberg as being interested in putting in a bid for HBOS’ Australian arm, particularly Bankwest – could be worth GBP3.7bn – apparently spoke to HBOS advisers in London earlier in June. NAB down 4.1% to 2694c.
Caltex (CTX) have released their 1H08 profit outlook. FY production will be between 10.4 and 10.6 billion litres. Announced unplanned maintenance to affect profitability – expects 1H EBIT in $270-$300m range – NPAT to be in $175-$195m range. CTX down 3.55% to 1224c.
ABC Learning (ABS) up another 18% in early trading on the back of the announcement yesterday of its sealed its US JV deal and on talk that it might be flogging its entire UK business rather than just its vouchers business.
Newcrest Mining (NCM) flying this morning – up 9% early – after reaffirming 2009 guidance. Says production at Telfer to be down by 20,000-25,000 ounces due to gas shortages out of Varanus Island. Helps when GSJB Were say the recent share price sell off has been overdone and that there is plenty of value to be had.
United Group (UGL) has won $100m in new rail work with 15 contracts to supply 315 iron ore wagons to BHP’s operations in the Pilbara and 10 locomotives to leasing company CFCL Australia. UGL down 19c to 1216c.
Goodman Group (GMG) completed a new debt issue under its euro medium-term note program – priced in at GBP250m. GMG down 18c to 318c.
Nexus Energy (NXS) have finally got a drill for the Crux liquids project and the Crux partners will now go ahead and spend $308m developing the project. NXS down 3.5c to 173c.
SingTel (SGT) announced the acquisition of 3,800,000 shares in Globe Telecom for Pesos 1,210 per share. SGT down 5c to 280c.
PanAust (PNA) announced its first sale of copper-gold concentrate from its Phu Kham site. GSJB Were’s has a 140c target price on the stock, nearly 40% above the current share price. PNA down 2.5c to 104.5c.
Beach Petroleum (BPT) has signed a deal with Tri-Ocean Energy for a 20% stake in a Gulf oil field for US$110m. BPT up 1c to 134c.