Morning Market Report, Jun 03, 2008

The market is down 36. Down 45 at its worst and down 10 at its best. Much better than the 65 point fall the SFE Futures had predicted.

Dow Jones closed down 134 – Down 211 at worst. Financials the weak spot after The Bradford & Bingley Building Society in the UK fell 24% as it was forced to sell a 23% stake to private equity to raise capital. It also had a profit warning. Hit an all time low. HBOS down 10% and Alliance & Leicester down 5% in the UK in sympathy. The S&P Rating agency downgraded a host of financial stocks. Amazingly enough on such a bad day Resources were up. BHP and RIO up in the US and UK. In economic news, ISM May Manufacturing Index was up 2.1% to 49.6 from 48.6 in April and ahead of the 47.9 expected although it was the 4th month below 50 suggesting economic contraction and Construction activity fell 0.4% in April for the 6th fall in 7 months but ahead of the 0.6% fall expected. Private residential construction fell for the 26th consecutive month. The number of foreclosed homes owned by the banks in the US hit 660,000 in April up from 493,000 in January and 231,000 in January 2007. One in seven homes in the US has been foreclosed upon and is being sold below market value with obvious consequences for property values. As Treasury Secretary Henry Paulson says… There is no quick fix.

BHP and RIO up in ADR form overnight, 1.43% and 0.57% respectively. BHP down 11c to 4538c. RIO up 59c to 14229c.
Metals mostly down – Copper down 0.1%, Nickel down 0.5%, Zinc down 2.0% and Aluminium flat. Zinifex down 18c to 935c.
Oil price up 40c to $127.75.
Gold up $5.60 to $892.90.
US Bonds up with the 10 year yield down to 3.96%.

Financials struggling on renewed credit market concerns after Standard & Poor’s cut ratings on several Wall Street brokers overnight and after the trouble at the Bradford & Bingley Building Society in the UK. Babcock & Brown and Macquarie Group crunched. Babcock & Brown broke technical support at 1190c this morning (down from 1660c in a month) and Macquarie flirting with $50 (down from $67 in a month). Macquarie Group down 250c or 4.7% to 5076c, Babcock & Brown (BNB) down 61c to 1143c.

Major Banks struggling as the Treasurer reiterates the four pillars policy will stay. CBA down 52c to 4143c, NAB down 87c to 2956c, WBC down 64c to 2203c, ANZ down 44c to 2046c.
Western Areas (WSA) released more drilling results yesterday which extends the depth of their Spotted Quoll resource – all very positive and suggesting they could possibly double the resource. WSA unchanged at 1023c.
Fortescue (FMG) storming ahead yet again (up 5% two days on the trot). According to the chairman of China Iron & Steel, Zhang Xiaogang, talks between China and Australia on finalizing iron ore prices for this year are “likely to end soon”. Iron ore sector’s long term prospects likely to be confirmed by the price set. FMG up 74c to 1198c.
ABB Grain (ABB) in a trading halt pending a $170m institutional placement. ABB unchanged at 1080c.
Metcash (MTS) result – FY NPAT up 25% to $197.4m – toppish end of the range – consensus $195.4m. MTS up 9c to 417c.
Centro Properties Group (CNP) announced late yesterday that it has won more time – until December 15 – to repay around $2.8bn in debt as it continues to explore asset sales opportunities. CNP down 1c to 35c.
Westpac Bank (WBC) has raised $917m through a private placement increase of its existing 2011 and 2012 bonds. WBC down 64c to 2203c.
Gold stocks up on a rise in the gold price and on presentations made at the Gold Rush Conference held by Macquarie. Newcrest up 200c or 6.2% to 3360c.
Santos up again as brokers up their recommendations and as the gas sector remains buoyed by the continued international interest in Australian assets. Arrow Energy up another 5%. STO up 31c to 2208c.
Arana Therapeutics (AAH) has entered into a collaborative agreement to develop next generation anti-cancer antibodies with Germany-based greenovation Biotech GmbH. AAH up 1c to 103c.
Industrea (IDL) has signed a $5.72m contract with Zhengzhou Coal Group to provide directional drilling equipment and coal degasification systems to the Chinese company. IDL up 1c to 58c.
ING Industrial Fund (IIF) announced plans to develop two new industrial facilities in Victoria for total costs of $49.5m, reflecting an initial yield of 8.8%. IFF down 1c to 199c.