Morning Market Report, May 12, 2008

The market is up 39 on Westpac’s proposed merger with St George. Financials up 1.6% on the Westpac news. NAB, CBA and ANZ have added 33 points to the index this morning. Resources flat despite record oil prices.

Dow down 120. Down 5 at its best and down 152 at its worst. Dow down 2.39% on the week – compares to the ASX 200 up 1.23%. Oil price hitting another record of $126.20. AIG results worse than expected (World’s biggest insurer). Share price down 8.8%. Citigroup down 2.8%. March Trade Deficit better than expected.

BHP up 1.41% in ADR form on Friday, RIO down 1.57%. BHP down 34c to 4616c. RIO down 56c to 14596c.
Metals mostly down on Friday – Nickel down 2.9%, Copper down 2.5% and Zinc down 3%. Aluminium up 0.3%. Zinifex down 7c to 1040c.
Oil price up $2.17 to $125.94 – up $10 for the week after on concerns that a confrontation between the US and Venezuela could cut exports from the country. Woodside up 32c to 5975c.
Gold up $3.70 to $885.80. Newcrest up 33c to 3109c.
US Bonds up with the 10 year yield down to 3.77%.

The big story today is Westpac’s proposed merger with St George bank. Gail Kelly, in her first month as MD of Westpac (having previously been the MD of St George) has made a bid for St George Bank.

Main points so far:

No terms announced.
All scrip offer.
No agreement from St George.
Westpac taking advantage of its relative price performance – it is on a higher PE and has outperformed St George by 29% in the last year.
Some talk about Suncorp-Metway being bid for as well. Westpac was thought to have engaged advises to look at a bid for SUN. SUN up 5%.
A counterbid for St George from ANZ not out of the question.
SGB and WBC in a trading halt.
SGB expected to open at a 20% premium ($32) unless WBC announce a knockout agreed bid – expected to have to pay a 30-35% premium or around $35. SGB now 2665c.

Other News:

Private hospital operators and health care stocks tumble – Tomorrow’s budget will see Australia’s federal Labor government raise income thresholds for public healthcare surcharge, to $100,000 for singles, $150,000 for households. S&P/ASX 200 Health Care index down this morning– Ramsay Health (RHC) down 7.4%. Healthscope (HSP) down 5.4%. Sonic (SHL) drops 0.8%. Sigma Pharma (SIP) down 1.6%. API (API) sheds 2.4%. Primary (PRY) drops 1.8%. Health insurer NIB Holdings (NHF) declines 17%. One broker says it is an over reaction.
Bluescope Steel Ltd. (BSL) says it’s on target for stronger 2H underlying profit growth result. BSL down 13c to 1087c.
Leighton Holdings have announced another $128m of contracts. LEI down 48c to 4950c.
Oil Search have announced a Kurdistan production sharing contract. OSH up 3c to 577c.
AGL Energy Ltd (AGK) confirm FY08 earnings guidance – expects FY08 net profit to be in range $330m-$360m, in line with forecasts. AGK up 31c to 1354c.
Connect East (CEU), the owner and operator of the $2.5bn motorway EastLink, will open on the 21^st June, five months before the intended deadline. CEU up 4.5c to 135c.
Origin Energy (ORG) – New Zealand’s Takeover Panel has granted BG Group exemption from having to make firm decisions about an offer for Contact Energy 51% owned by Origin – it would have 1 month after a takeover of Origin to make a cash offer for Contact Energy. ORG up 5c to 1462c.
AWB (AWB) falls 3.3% this morning – Bureau of Meteorology said Friday that an emergence of an eastern Australian drought in the months to come could harm outlook for AWB.