Morning Market Report, Aug 25, 2008

The market is up 101 following the lead in the US with Financials bouncing (Banks fell 6% last week) and Resources underperforming on the back of weaker metal prices. Oil price down 5.7% on Friday and Woodside one of the few stocks not up today. Gold price also fell $5 and the gold sector is also down. VIX Volatility index down 5.10% to 18.81. Lowest level since 6^th June – correlates to better market sentiment. Oil price down $6.75 to $114.48. Still up 0.9% on the week. Retailers and consumer stocks doing well on the back of the fall in the oil price. Harvey Norman has results on Friday and is up 5%. Telstra Ex dividend 14c but is only down 6c.

Statistic of the Day – There are 1432 days until the London Olympics.

Good lead from Wall Street – the Dow Jones closed up 197 – Up 202 at best. Down 3 at worst. Major indices up Friday but down for the week – Dow down 0.3% last week, the Nasdaq lost 1.5%, and the S&P 500 down 0.5%. Oil price still up 0.9% on the week despite falling $6.75 or 5.6% to $114.48. Two of the market’s greatest concerns – high oil prices and the health of the financial sector – moderated on Friday. Warren Buffett made a comment that Fannie and Freddie were looking for private investment. He also made positive comments about the prices of US stocks and the continuing strength in the US dollar (two essential ingredients for his success) and Ben Bernanke said inflation is likely to moderate with falling oil and rising USD. Said FY09 economic growth should be “tepid.” The NASDAQ closed up 1.44%.

Both BHP and RIO down 1.9% in ADR form on Friday.
Metals all down on Friday – Nickel down 3%, Zinc down 2.7% and Copper down 2.61%. Aluminium down 2.14%.
Oil price down $6.75 or 5.6% to $114.48 – the biggest drop in percentage terms since December 2004 – on the back of a strong US$ and the BP restoring shipments on a Caspan Sea pipeline through Turkey.
Gold down $5.50 to $829.50
US Bonds down with the 10 year yield up to 3.87% from 3.83%.

Busy week ahead with results from the likes of Woolworths, Rio Tinto, Goodman Fielder, Harvey Norman, Woodside Petroleum and Toll Holdings.

Results today

AEO – Austereo – RESULTS IN LINE– Announce a 5.1% rise in FY net profit to $48.8m, slightly above UBS Warburg’s $48.6m expectations. Analysts’ on average predicted $48.6m. GSJB Were labeled it as “strong”. Declare a 6c dividend, also slightly above expectations. No specific guidance. Down 2.2%.
AOE – Arrow Energy– Post a 109% increase in net profit to $37.2m. CEO Nick Davies expects another record year in 2009. Down 0.6%.
CGF – Challenger Financial Services– Announce a FY net loss of $44.2m compared to the $255m profit last year. Underlying net profit (before significant items) came in at $26m, below GSJB Were expectations of $29m and consensus of $30m. Up 4.8%.
RHC – Ramsay Health Care – Announce a FY net profit of $92.2m, down 15% from last year. Well below the $104m analysts’ expectations. Up 5.5%.
SPT – Spotless Group – Released a FY net profit (after significant items) of $57.1m; GSJB Were expected $57.6m. 2H EBIT came in at $60.7m, well ahead of $44.4m in the 1H. Declared an unchanged final dividend of 10.5c. Up 12.4%.
GFF – Goodman Fielder – down 6.2% – despite announcing a better-than-expected net profit, $220.7m compared to $205.2m analysts’ had expected. It was their outlook that has done the damage. They see little improvement in their underlying earnings this fiscal year. Down 3.6%.
TSE – Transfield Services – Announced an underlying net profit before significant items of $106m, slightly ahead of the $104.6m analysts’ expectations. Up 6.7%.

Other announcements

Rubicon America (RAT) has provided an update on their CRE loan warehouse facility agreement. Has agreed to vary the terms with Credit Suisse. Up 1.4%.
Centro Properties (CNP) says it is unlikely to find a new equity injection by the end of the year. Down 9%.
Retail sector up on the back of the 5.6% fall in the oil price on Friday – Billabong (BBG) up 2.3%, Harvey Norman (HVN – announces results on Friday) up 4.9% and David Jones (DJS) up 4.2%.
JB Hi-Fi (JBH) underperforming the retail sector after announcing it is not in takeover discussions with Woolworths (WOW) despite media speculation. The stock is up 14.3% in the past 2 months compared to the 17.7% fall in the overall market. Up 1.4%.
Westfield (WDC) up nearly 5% ahead of its FY result on Wednesday. Up 5.1%.
Credit Suisse expects Suncorp-Metway (SUN) to announce a FY net profit of $532m with a final dividend of 55c. They will be keeping a close eye on further clarity on margin outlook. Up 1.3%.
Brokers liked the look of Goodman Group’s (GMG) result on Friday. Macquarie Equities say it’s a BUY, GSJB Were a BUY and JP Morgan expects it to OUTPERFORM. Up 4.6%.
Billabong (BBG) also in the good books of brokers after their promising result on Friday. Macquarie Equities maintain their OUTPERFORM, Citigroup say BUY and JP Morgan also expects the stock to OUTPERFORM the market with a 1250c target price.
Great Southern Plantations are expected to make public a massive corporate restructure as early as today. GTP unchanged at 70c.
Brambles suspended its buy-back program last week and is thought to be looking at buying a small US pallet group, IFCO. BXB up 0.7%.
Virgin Blue shares to face further downward pressure this week as Toll Holding shareholders who gained a slice of Virgin Blue were allowed to start selling last Friday – and they did – VBA dropped 19% in a day. There are 648m shares now in the hands of Toll shareholders. VBA up 5.2%.
Medal Tally statistic of the Day – On a medals per capita basis the Bahamas won the Olympics with Australia 5^th and Great Britain 21^st.

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